Topic: Suspicious Activity Reports (SARs)
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A customer has been depositing checks with multi-party endorsements for several months. At least one of the four endorsers claims they did not sign these checks. When completing the Suspicious Activity Report (SAR) form, should we mark this activity under category 34 (Fraud), select box z (Other), and write in “endorsement” or should we mark this activity under category 38 (Other Suspicious Activity) and select box f (Forgeries)?
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We believe it would be appropriate to record this activity under both category 34 (Fraud) and category 38 (Other Suspicious Activity), since FinCEN’s SAR Electronic Filing Requirements User Guide states that filers should “use the suspicious activity category Items 32 through 41 to record the type(s) of suspicious activity” and “check all boxes that apply…
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We have an elderly customer who seems to be the victim of a home improvement scam. The scammers want her to wire money to a fake healthcare company. We refused to send the wire, but our customer withdrew a cashier’s check for the same amount from one of our tellers, who was unaware of the situation. I know that we cannot normally stop payment on a cashier’s check, but this is blatant fraud. Our customer is adamant that the transaction is legitimate. Is there any way that we can prevent this fraud from occurring?
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You are correct that your bank cannot stop payment on the cashier’s check without risking liability for the check. We believe that you should instead file a suspicious activity report (SAR) and report the scam as potential elder financial exploitation to the Illinois Department of Aging. As a general rule, once a cashier’s check enters…
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We have an account for a corporation that has been on our records for many years. We recently learned that this corporation (Customer, Inc.) was merged and consolidated into another corporation years ago, and the acquiring corporation subsequently opened a limited liability company (LLC) with a similar name (Customer, LLC). We have maintained the original account and have been accepting checks made payable to the name of the original corporation, the new LLC, and the acquiring corporation. Obviously, some of these checks are wrongly endorsed. Could we request that someone with authority provide us with a statement that would allow this practice to continue without recourse? Additionally, do we need to go through the process of closing and reopening a new account for this customer and conduct Bank Secrecy Act due diligence again? And, could this practice potentially present an issue with filing future Suspicious Activity Reports (SARs)? Finally, is it possible for a tax identification number to remain the same after a merger? We currently only have an Employer Identification Number (EIN) on file from the original corporation and are not sure whether this would be the same for the LLC.
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Yes, we believe it is possible to enter into a written agreement with the new LLC that would protect you from liability for the incorrectly endorsed checks (that have been endorsed in the name of the original corporation, presumably by an individual identified by the original corporation as its authorized signer). However, an agreement between…
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A business customer wrote a check to one of their vendors that was negotiated and cleared their account. One month later, the customer learned that their vendor did not receive the check. Apparently, a fraudster intercepted the check, created a business with the same name as the payee in another state, and used the check to open an account at another bank. The check was not altered. Who holds the liability for this check, can it still be returned, and do we need to credit our customer for the amount? Our customer notified us of this issue within sixty days of discovering it, as required by our account agreement.
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We believe you will need to credit your customer for the check. However, we believe your bank is entitled to demand repayment for the check from the depository bank, since it appears to have breached its warranty to you that the check did not have a missing or unauthorized endorsement. Under the Illinois Uniform Commercial…
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A customer asked to deposit several checks totaling more than $5,000 and then requested that the funds be wired out. The customer claimed to be helping a friend, but we suspect they may be involved in a money mule scheme. Our primary regulator is the FDIC, and we are familiar with the steps for filing a suspicious activity report (SAR) but would like to know who in addition to FinCEN we should contact regarding this matter. Is it appropriate to alert local law enforcement, and is there a hotline we should call? We do not want to provide information we are prohibited from disclosing.
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In addition to FinCEN, we believe it would be appropriate to alert local law enforcement, your local FBI field office, and your FDIC regional office of a suspected money mule scheme. The FDIC’s SAR rules direct banks to file a SAR “with the appropriate federal law enforcement agencies and the Department of Treasury in accordance…
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After filing a suspicious activity report (SAR) on FinCEN’s website, we were contacted by someone asking for supporting documentation related to the SAR. This person has an email address indicating they work for the Department of Homeland Security, and they appear to be knowledgeable about the facts in the SAR, but they asked for the requested information to be sent to their email address rather than through a secure platform. Is this proper procedure for submitting supporting documentation related to a SAR?
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We recommend reviewing your Bank Secrecy Act (BSA) compliance and anti-money laundering program for procedures related to verifying the identity of requestors of supporting documentation before deciding whether and how to submit the requested documentation. While we are not aware of any laws or guidance outlining any specific procedures required for submitting supporting documentation, FinCEN…
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We have begun to detect fraud related to the CARES Act stimulus programs. Often, these customers did not obtain their loans or stimulus through our bank. Apparently, fraudsters are approaching individuals and encouraging them to fraudulently apply for SBA loans, then taking a percentage of the funds. We have worked with the Secret Service and other law enforcement agencies and have been successful in recovering some of this fraud, but we are unsure what the extent of our responsibility is with respect to fraud detection. If we simply file a suspicious activity report (SAR), the fraudulently obtained funds likely will be long gone before the proper authorities have time to act. How should we balance policing these federal stimulus programs with the reputational risk of offending customers with legitimate transactions?
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Your bank might consider reporting suspected fraud involving Paycheck Protection Program (PPP) loans and Economic Injury Disaster loans (EIDLs) to the Small Business Administration, in addition to your current efforts to file SARs and report fraud to law enforcement agencies. When you suspect fraud related to an EIDL, you may contact or submit a complaint…