If you’re newly wealthy or just reading about anti-money laundering laws, you may worry about being flagged for “suspicious” banking. Rest assured – unless you’ve actually engaged in illegal acts, you likely have nothing to fear.
Still, it helps put such concerns in context.
Let’s explore what constitutes suspicious financial activity, who gets reported, and how to ethically manage your assets.
The Suspicious Activity Report (SAR) stems from the 1970 Bank Secrecy Act. It legally requires institutions – including banks, credit unions, brokers and more – to file a report within 30-60 days of spotting questionable transactions.
But with penalties incentivizing reports, the bar for suspicion can be quite low. Activities that may raise flags include:
- Parties not appearing to conduct business
- Incongruent transactions (a textile importer working with a food exporter)
- Account volumes inconsistent for that business/location
- Sudden spikes or drops in account balances
- Suspected attempts to avoid $10k reporting requirements
- And many more
Of millions of “high-risk” bank customers, a 2017 Bank Policy Insitute (BPI) study found that only around 6% became the subject of a SAR filing. Of those, enforcement only investigated 0.3%.
Still, the anonymity of SARs means you’ll likely never know if you have one about you. Even for clear false alarms, federal guidance prohibits informing customers.
Imagine your account shows a new pattern of activity – like weekly wire transfers that you immediately withdraw. Even if legitimate, the change could prompt extra scrutiny.
Or take former New York Governor Eliot Spitzer. His downfall began with a SAR about repeated smaller cash transactions – known as “structuring” – adding up to over $10k. While never charged, the scandal torpedoed his career.
The context for why actions appear suspicious matters. If you’re unsure about your company’s status, always consult a financial attorney.
Of course, the overall strategy to avoid a SAR is to keep all operations of your business legitimate and appropriately reported.
As we’ve seen, only a fraction of the vast number of SARs filed each year are ever investigated, and a tiny percentage of those result in convictions. BPI’s study found that roughly 40% of SAR filings were structuring SARs caused by many small deposits.
According to our financial experts, you can smoothly make large purchases via installment financing instead of lump bank transfers. Let’s say you’re buying something for $60,000. If you spend it all at once, you’ll trigger a CTR (Currency Transaction Report) because the transaction is greater than $10,000.
Using financing, however, you can put down an initial $3,000, which won’t require filing. After a few months pass, you can pay it off in installments of up to $10,000 while remaining compliant and reducing the amount of paperwork at hand.
Unless you or your company is engaged in outright illegal acts, SAR filings rarely lead to prosecution. But it’s always wise to avoid undue scrutiny, as the operational and reputational costs can be significant.
Ultimately, with a few prudent moves and the right legal support, you can reliably retain full access to your hard-earned assets.