Referenced in our Newsletter Volume 5, Issue 1 - January 2006

Filing Compliance Link Chart

Recently, there has been a lot of news coverage in the banking and financial markets regarding compliance to suspicious activity filing requirements *. In fact, hundreds of millions of dollars in fines and penalties** have already been imposed on well-known institutions for not properly establishing adequate AML (Anti Money Laundering) programs and failing to comply with money laundering rules including late filings, non-filings, and not keeping the required backup documentation. As these crackdowns continue, many bank executives are re-examining their systems, processes, and procedures to ensure they are in compliance with current filing requirements.

Often, the interpretation of "suspicious activity" is very subjective and somewhat nebulous, consequently, financial institutions have resorted to "defensive filings" where virtually any type of questionable activity is reported - thus, making it more difficult for law enforcement to prioritize and effectively deal with actual money laundering crimes due to the volumes of irrelevant data they are receiving. There are a lot of debates, concerns, and discussions occurring between the financial community and the government in trying to work out how to best deal with the situation. However, in the meantime, due diligence examinations are being conducted to try and identify those organizations that are not playing by the rules and attempting to avoid their filing responsibilities.

There are a number of different approaches for finding non-compliant financial institutions within the Bank Secrecy Act (BSA) data, and most notably, the SAR (Suspicious Activity Reports) database. One method involves checking for consistency of the financial institution's name under the same EIN (Employer Identification Number) which is a nine-digit number assigned by the IRS to business entities (e.g., the equivalent of a social security number for businesses). In many cases, the same bank will file SAR reports but alter the way their name appears on the form.

Sometimes there are simple abbreviations such as Bank, Banks, Bk, as well as Bank of New York, Bank of NY, or Bank NY. Simple variations in spelling result in different aggregate valuations calculated for the number of filings for each bank, which is a basic method for determining if there is compliance. The VisuaLinks Summarize service can quickly determine if there are spelling variations of the name based on the use of a common EIN as is shown in the example below. Too many variations from a single institution will result in a corrective action to ensure more consistent filings.


Filers grouped by NAME and EIN values


In addition, other compliance checks are run to determine "form completion" as submitted by a financial institution. This includes looking for missing fields that are mandatory, such as the EIN, Filer/Branch Address, Contact information, Dates, Narratives etc. There are no situations where this level of detail should ever be left off a form, and it usually indicates that the reporting process at the institution is flawed.

There are other benchmarks that are also used based on the asset size and transaction activity for a financial institution. The following example depicts results generated by the VisuaLinks Summarize service run on two similarly-sized banks. The third column shows the number of unique DCNs (Document Control Numbers - e.g., individual SAR filings) generated for the bank. The fourth and fifth columns show the respective breakdown by month (as an integer) and year - and allow regulators to see the consistency of when the filings were made (as opposed to all at one time).

The first diagram shows the bank regularly makes, on average, approximately 100 filings each and every month. Some months are higher than others, but the behavior is fairly consistent and clearly shows the bank is making a good effort at being compliant. In the second diagram, the numbers are substantially lower, with a minimal number of filings each month. In fact, there are several months missing from the result set indicating there were no filings made during that period. This is a clear indication that this bank has been lax in their reporting effort.


Number of SARs for Bank #1 (compliant reporting) by Month and Year



Number of SARs for Bank #2 (underreporting) by Month and Year


Another approach to exposing filing non-compliance deals with various dates associated with the suspicious activity. There are start dates, end dates, and filing dates contained on every SAR filing and these dates should always be filled in and accurate. One simple test is to look for submissions that are missing any of these dates. It is a quick and simple process that exposes a large number of violators.

Additionally, according to 103.18 of the Bank Secrecy Act, all financial institutions are required to file a SAR within 30 days of the discovery of suspicious activity. This compliance issue can be checked by comparing these dates to see if the institution was timely in submitting its SAR filings. The following diagram shows several examples of a bank filing their SARs outside of the 30 days window (as well as missing dates). These SARs would be reviewed manually and the narrative read in detail and if it was found to be outside of compliance, the fine breakdown is as follows:

Violation Amount <$25,000 = $25,000
Violation Amount between $25,000 - $100,000 = Violation Amount
Violation Amount >$100,000 = $100,000



SAR Filing Dates, Start Dates, and End Dates (several w/30 day gaps)


There are a number of other factors regulators look for when discovering non-compliant filers. Better regulation, content, and timeliness will lead to better law enforcement efforts to help curb the massive amounts of money laundering and financial crimes occurring in our financial institutions.

*For more information on the Patriot Act and 314 filing requirements, please visit these FinCEN (Financial Crimes Enforcement Network) web pages: **Other web sites that provide more detail regarding fines and penalties assessed to financial institutions: A good introduction to filing compliance can be found at: To learn more about the penalties for non-compliance visit: