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. If the firm suspects a client is involved in illicit activities, which document must be filed with the Financial Crimes Enforcement Network (FinCEN)?
- ACurrency Transaction Report (CTR)
- BSuspicious Activity Report (SAR)
- CCustomer Identification Program (CIP) Notice
- DBank Secrecy Act (BSA) Compliance Report
Show answer & explanationAnswer & explanation
Correct answer: B. Suspicious Activity Report (SAR)
A Suspicious Activity Report (SAR) must be filed with FinCEN when a financial institution suspects that a transaction or activity involves funds derived from illegal activity or is intended to hide criminal activity.
Why the other options are wrong
- A. A CTR is filed for cash transactions exceeding $10,000, regardless of suspicion.
- C. A CIP Notice informs customers about identity verification requirements, it's not a report for suspicious activity.
- D. The BSA is the overarching law, not a specific report for suspicious activity.
Suspicious Activity Report (SAR)
A Suspicious Activity Report (SAR) is a document that financial institutions, including broker-dealers, are required to file with FinCEN when they suspect a transaction or activity is indicative of money laundering or other illegal financial activities.
- Filed when suspicious activity is detected.
- Reported to FinCEN.
- Must be kept confidential.
Memory trick: SAR for Suspicion, CTR for Cash.