What is a Suspicious Transaction/Activity Report (STR/SAR)?
An STR/SAR, also sometimes referred as Subject Matter Report(SMR), is a formal notification filed with the Financial Intelligence Unit (FIU) of a country by financial institutions (or other regulated entities) when they detect a transaction or activity that raises suspicions for money laundering or other illegal activities.
Is STR/SAR obligatory?
Absolutely!
Financial Institutions and other regulated entities have a legal obligation to report suspicious activity in accordace with AML/CFT regulations.
Legal Obligation = Failure to report suspicious transaction or activity can result in significant penalties for the institution.
What Constitutes a Suspicious Transaction or Activity?
It generally refers to transactions that:
Match criminal typology - known patterns used by criminals to launder money or finance illegal activities.
Are inconsistent with a customer’s profile.
Raise concerns about the legitimacy of the funds involved.
How Are Suspicious Transactions Identified?
STR/SAR procedures usually include:
Frontline staff are trained to spot suspicious activity based on red flags and customer profiles.
The frontline employee investigates the transaction to understand its nature and context.
If there are grounds for suspicion, the employee reports the transaction or activity to the AML officer.
The AML officer investigates further and decides whether to file an SAR with the FIU through dedicated channels.
Failure to report suspicious transactions is a breach of AML/CFT laws and can result in legal and financial consequences.
Here's a strong, recent real-world example: The Monetary Authority of Singapore (MAS) recently fined Swiss-Asia Financial Services S$2.5 million (US$1.8 million) for multiple breaches of AML/CFT requirements, including failure to report STRs.
Yes, regulators are taking STR reporting seriously!
Let’s see:
How to ensure accurate STR/SAR Reporting.
Strengthen your defences with the use of technology.
How to Ensure Accurate STR/SAR Reporting
Identifying suspicious activity requires a sharp eye and critical thinking skills. Here are some tips on how to handle suspicious situations:
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