A Suspicious Activity Report (SAR) is a document filed by financial institutions to report suspicious activity related to potential criminal activities such as money laundering, terrorism financing, or other illicit activities. SARs are required by regulatory authorities such as the Financial Crimes Enforcement Network (FinCEN) in the United States and the Financial Conduct Authority (FCA) in the United Kingdom, among others.
The purpose of SARs is to assist regulatory authorities in detecting and preventing financial crimes by identifying potentially suspicious activities. SARs help regulatory authorities to monitor and investigate financial activities that may be linked to illegal activities such as drug trafficking, human trafficking, terrorism, and other criminal activities. The reports are used to analyse patterns of suspicious activity across different institutions and industries, and to develop strategies to prevent and detect financial crimes.
Financial institutions are required to file SARs when they detect any unusual or suspicious activity, such as transactions that are inconsistent with a customer's profile or transactions that involve large sums of money without an apparent legitimate purpose. SARs must be filed promptly, typically within 30 to 60 days of the initial detection of suspicious activity.
SARs are kept confidential to protect the privacy of individuals and to avoid tipping off potential criminals. Financial institutions that file SARs are also protected by whistleblower laws, which protect employees who report suspected illegal activities from retaliation by their employer. Failing to file a SAR or filing a false SAR can result in significant penalties and fines for financial institutions.