Suspicious Activity Reports (Part 2)

Part one of this two-part series in the March/April issue focused on law enforcement’s investigation of leads from Suspicious Activity Reports (SARs). In part two, financial service industry CFEs, attorneys, and former law enforcement officers offer inside tips on preparing accurate, complete SARs. – ed.   

Among the myriad of SARs that the Financial Crimes Enforcement Network (FinCEN) receives each year, many are timely and informative enough to put investigators squarely on the trail of a financial criminal. In 2009, FinCEN released a description of one such case.

Two convicted fraudsters just didn’t have the cash to pay court-ordered penalties for preying on elderly investors. So what to do? Pull off another scheme to raise extra money. They began a multi-state advertising campaign to entice victims to buy nonexistent certificates of deposit (CDs).

They assembled a network of offices in several states staffed with hired workers to solicit investors. The fraudsters shuttled victims’ funds through a series of mail drops and ultimately into several shell accounts in a single bank.

However, alert bank staff reviewed transactions related to the accounts, filed a SAR, and notified law enforcement. The bank had become wary when the fraudsters repeatedly moved funds among their various business accounts, seemingly without any legitimate business purpose.

When bank staff carefully prepared a comprehensive SAR, they spelled out critical elements of the suspected crime in a detailed narrative:

• Memo lines on deposited checks referred to the purchase of CDs.
• The businesses’ CD investors were elderly and thus potentially vulnerable.
• The fraudsters withdrew funds from their accounts via checks made out to “cash,” all for amounts below the $10,000 CTR threshold.
• Pending an investigation, the bank froze one of the suspects’ accounts. Although its balance was $400,000, they protested only mildly, and their lawyer took no action.

Following the fraudsters’ arrest, indictment, and conviction for fraud and money laundering, law enforcement and prosecutors said the bank’s well-crafted SAR was instrumental in ending the scheme and jailing its perpetrators.

One defendant, who had led both schemes and refused to account for the rest of the stolen funds, received a 30-year sentence. His accomplice drew a seven-year term.