Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkMedium
A broker-dealer firm's compliance department is conducting an internal audit of its Anti-Money Laundering (AML) program. During the audit, they identify a pattern of unusual cash deposits and withdrawals from a client account that does not align with the client's stated business or financial profile. The firm's AML officer determines that these transactions are potentially indicative of illicit activity. What specific regulatory filing is required in this situation?
- ABank Secrecy Act (BSA) Report
- BSuspicious Activity Report (SAR)
- CCustomer Identification Program (CIP) Report
- DCurrency Transaction Report (CTR)
Show answer & explanationAnswer & explanation
Correct answer: B. Suspicious Activity Report (SAR)
A Suspicious Activity Report (SAR) is required when a financial institution detects a transaction or pattern of transactions that involves at least $5,000 and the institution knows, suspects, or has reason to suspect that the transaction(s) are involved in illegal activity.
Why the other options are wrong
- A. The BSA is the overarching law; a SAR is a specific report under the BSA.
- C. A CIP is a program to verify customer identity, not a report for suspicious transactions.
- D. A CTR is filed for single cash transactions exceeding $10,000, regardless of suspicion.
Suspicious Activity Report (SAR)
A SAR is a report filed by financial institutions with the Financial Crimes Enforcement Network (FinCEN) when they suspect a transaction or series of transactions of $5,000 or more (or any amount if suspicion exists) may be involved in illegal activities like money laundering or terrorist financing.
- Filed with FinCEN
- Triggered by suspicious activity (e.g., money laundering)
- Threshold is generally $5,000 (or any amount if suspicious)
- Confidential filing, client must not be informed
Memory trick: suspicious activity, 'SAR' is what you 'ARE' required to file.