Difficult economic times can be the breeding ground for increased fraudulent activities. In July 2009, the Financial Crimes Enforcement Network (www.fincen.gov) published its 12th edition of The SAR Activity Review — By the Numbers. SARs (Suspicious Activity Reports) are one key aspect of FinCEN’s efforts related to its responsibility for regulatory administration of the Bank Secrecy Act of 1970. Many different financial industries such as banks, credit unions, insurance companies, check-cashing services, broker/dealers, and casinos are required to complete and file SARs.

According to FinCEN’s press release on the SAR Activity Review, “The report reveals that of the 20 different violation types tracked, seven of the categories relate specifically to fraud and all seven showed an increase in SAR filings during the year. While these categories represent one-third of the possible violation types, they accounted for nearly half of the increase in total SAR filings from 2007 to 2008, with all of the fraud categories seeing double-digit increases in percentage of filings in 2008. These categories are: check fraud, mortgage loan fraud, consumer loan fraud, wire transfer fraud, commercial loan fraud, credit card fraud, and debit card fraud.”

Could any of this apply to you? Are your control and monitoring processes able to identify these examples of common patterns of suspicious activity that FinCEN has identified?

• Unusually large numbers and/or volumes of wire transfers and/or repetitive wire transfer patterns;

• Unusually complex series of transactions indicative of layering activity involving multiple accounts, banks, parties, jurisdictions;

• Unusual mixed deposits of money orders, third-party checks, payroll checks, etc., into a business account;

• Transactions being conducted in bursts of activities within a short period of time, especially in previously dormant accounts;

• Transactions seemingly designed to or attempting to avoid reporting and record-keeping requirements.

These are just examples of “suspicious activities” that require government reporting. I bet there are many other activities that aren’t listed that you could add to this list of things we should keep in mind when designing business processes and their related internal controls. ###