Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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6/07/2006 FinCEN’S SAR By the Numbers Report Notes Increases in Securities Industry Filings

The Financial Crimes Enforcement has released Issue 6 of the SAR Activity Review – By the Numbers, providing a statistical summary of Suspicious Activity Reports filed in 2005, who filed them, and, to a limited degree, what they were about.  Predictably enough, the number of filings continues to increase, though there is no way of determining if part of this was due to increased defensive filing. Depository institutions filed more SARs than in 2004 about mortgage and consumer loan fraud, but there were fewer filings related to computer intrusion in 2005 than 2004.  Money services businesses filed twice as many SARs in 2005 compared to 2004 regarding customers who reduced cash transactions below the $10,000 threshold to avoid having
Currency Transaction Reports filed.  Casino-filed SARs regarding unusual use of counter checks or markets tripled in 2005 over 2004.  Securities and futures industry filers had an overall increase in filings of 22% in 2005 over 2004, but this included a 232% increase in filings for market manipulation, and a 110% increase in filings for securities fraud.

    A mutual fund is repeatedly used as a temporary resting place for funds from multiple sources without a clear business (including investment) purpose.  In instances where suspicious activity may involve another mutual fund, another financial institution, or an agent of the mutual fund, information sharing is permitted, provided that a party with whom or which information is shared is not the subject of the filing.  Parties may share information so that a single SAR-SF is filed by one of them which is as complete as possible (procedures also allow for joint filings), and to avoid duplicative reporting.  An amendment to 31 CFR 103.16, on suspicious activity reporting by insurance companies, clarifies than an insurance company that issues variable products funded by separate accounts that meet the definition of a mutual fund is to file SARs under the new mutual fund rule, 31 CFR 103.15.  The new rules are effective October 31, 2006 and will be discussed in a forthcoming issue of the Monitor. 

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