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Spike in Suspicious Activity Reports: US Financial Institutions Battle Rising Fraud

Fraud, Bribery & CorruptionSpike in Suspicious Activity Reports: US Financial Institutions Battle Rising Fraud

U.S. financial institutions have seen a significant surge in the filing of Suspicious Activity Reports (SARs) due to a rise in fraud during the pandemic. A recent report by Thomson Reuters Regulatory Intelligence highlights key trends in these filings, drawing from public data released by the U.S. Treasury Department’s anti-money laundering (AML) unit, FinCEN.

The report reveals that in 2022, financial institutions in the U.S. filed over 3.6 million SARs, marking a 57% increase from pre-pandemic levels in 2019. Notably, the report indicates that the pace of SAR filings is expected to continue its upward trajectory in 2023.

The rise in SAR filings spans various categories, with a significant uptick in areas like human exploitation, elder fraud, and government-related benefit scams. Vulnerable populations, including migrants and the elderly, have become more susceptible to these forms of exploitation.

While some attribute the increase in SAR filings to enhanced technology detecting suspicious activities and regulatory warnings emphasizing the importance of reporting, the report points out that the escalation in actual fraud reported by agencies like the FBI closely aligns with the spike in SAR filings.

The report also acknowledges the potential influence of “defensive” SAR filings – those submitted by financial institutions seeking regulatory protection even when they aren’t fully convinced of criminal ties. However, the report emphasizes that the surge in SAR numbers reflects more than this factor.

In addition to pandemic-related factors, the data highlights a rise in check fraud and payment-related fraud. The report also identifies seasonal trends, with January and February showing lower filing volumes compared to busier periods in late spring and late summer.

The report, which covers data from January 2014 to the end of Q1 2023 from the FinCEN SARs database, provides a benchmark for risk, compliance, and anti-fraud efforts within financial institutions. It offers useful insights for identifying and reporting suspicious transactions, aiding budgeting, planning, and presentations to senior management and boards of directors. Failing to report suspicious activity can lead to penalties and hamper law enforcement’s efforts to combat illegal activity.

By FCCT Editorial Team

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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