When your bank tells you that there’s suspicious activity on your account, it generally means that they’re trying to prevent fraud or identity theft. They suspect that someone else has gained access to your funds, and they want to keep you and your money safe.
But a Suspicious Activity Report is something very different—and it can have a number of unfortunate repercussions. What does it mean to file an SAR, and what are the implications?
What is a Suspicious Activity Report?
SARs were first implemented in the U.S. in 1996 as a method of identifying money laundering schemes. Then in 2001, the Patriot Act extended the policy’s reach to include counterterrorism. The result: if you make a purchase over $5,000, or even several in a row that, combined, total that sum, especially if such activity isn’t typical of your buying habits, your account can be flagged as having suspicious activity. The bank then files a report is subsequently filed for further review.
The report goes to the Financial Crimes Enforcement Network (FinCEN), as well as local authorities. They then begin to keep a closer eye on your account and transactions, to try to find other suspicious behavior that may indicate criminal activity.
It can be an effective tool in crime prevention, and has led to a number of arrests over the years. However, it can also cause a number of problems, for you, your bank, and even for the authorities who receive the reports.
Identifying Suspicious Activity
How do you know if an SAR has been filed for one of your bank accounts? It might be helpful to find out, if for no other reason than the opportunity to clear up any misunderstandings that law enforcement may have about your purchases. But you can’t. No one is allowed to know what reports have been filed against whom, and it’s illegal for anyone to tell you. The only way you’ll know is if authorities decide your financial activity is suspicious enough for them to step in and try to put a stop to it.
So what constitutes “suspicious activity”? Well, do you have a mortgage, student loan, or credit card that you’re paying off? An unusually large payment could set off alarm bells and be reported to Homeland Security, who could in turn put a hold on the transaction until they’re satisfied it’s legitimate.
Over the last couple of years, FinCEN has also begun targeting crowdfunding projects from Kickstarter and similar sites. Many of these ventures involve a series of many small transactions over a short period of time, which all together total thousands of dollars, or more. This can be used to conduct criminal activity, but more often than not, it’s just someone trying to make a film, gadget, or piece of art.
Other Problems with Suspicious Activity Reports
Having a transaction halted for weeks at a time can wreak all kinds of havoc in your life. So is it worth it? Once the authorities realize that your unusual payment was due to a sudden windfall, such as an insurance settlement or a bonus at work, the money will be released, and everything will go back to normal. It’s good that they’re being so thorough and diligent, because that will lead to stopping more actual crimes, right?
Unfortunately, it doesn’t quite work as well as that. Banks are often pressured to be over-vigilant and file as many SARs as they can. After all, in theory it’s better to have a few false alarms than to miss a legitimate threat. In practice it means millions of reports are inundating law enforcement agencies every year.
At that volume, it becomes increasingly difficult to sort out which ones are signs of actual crimes and which are innocuous. Sorting through that much paperwork quickly and effectively is virtually impossible, and FinCEN tends to find themselves overwhelmed—not to mention the authorities and law enforcement agencies with which they share these reports.
What can you do about it? Not much. Since there’s no way to know if your account has been flagged until a hold is put on it, there’s not really any way to protect yourself either. Be careful of large amounts of money, but otherwise, simply do business as you normally would, and hope for the best. If a transaction is halted, explain the reason for it as clearly and honestly as possible. As long as you’re not actually committing any crimes, it should all work out eventually. Right?