Topic: Suspicious Activity Reports (SARs)
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What is our bank’s responsibility when we have reason to believe that an elderly customer’s daughter may be abusing her access to her mother’s account? The daughter also may be violating her fiduciary duties as established in a Department of Veteran Affairs Fiduciary Agreement naming the elderly customer as the beneficiary of veteran benefits and the daughter as the fiduciary of the funds.
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If your bank suspects the financial exploitation of an elderly customer, state law encourages you to report the activity to the Illinois Department of Aging, and federal law may require you to file a suspicious activity report (SAR) if certain conditions are met. Under the law in Illinois, banks are permitted (but not required) to…
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What is the record retention timeframe for forms that bankers complete under Regulation GG to affirm that a business customer is not engaging in an internet gambling business?
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We recommend that you retain all information and documentation collected pursuant to Regulation GG for five years after the account is closed or becomes dormant. While Regulation GG is distinct from any other regulatory framework, and we are not aware of any specific record retention timeframes for Regulation GG, we believe it would be prudent…
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We are working on our policies and procedures on suspected criminal behavior by our employees and officers, which include terminating employment and notifying law enforcement. Are we required to formally report incidents of theft or embezzlement by a bank employee or officer to the FDIC?
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Yes, we recommend reporting incidents of employee or officer crimes to your primary regulators (in your case, the IDFPR and the FDIC), although this is not always strictly required. The FDIC’s SAR rules require banks to report “violations requiring immediate attention, such as when a reportable violation is ongoing” to its FDIC regional office. Even…
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What is our bank’s responsibility for ensuring that funds from lottery ticket sales are deposited in segregated accounts? Some of our customers sell lottery tickets without maintaining segregated accounts at our bank (but we do not know whether they maintain segregated accounts at other institutions).
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The Illinois Lottery Law does not impose requirements on banks to maintain segregated accounts for lottery funds; instead, it places the responsibility on the lottery sales agent. You may wish to remind customers that a failure to maintain segregated accounts for lottery proceeds is a Class 4 felony in Illinois, but you are not required…
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We suspect that a customer is kiting checks. We would like to send him a “warning” letter to see if the activity stops. How should we outline our concerns without accusing the customer of illegal activity?
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First, we note that because you can identify the customer suspected of check kiting, you are required to file a suspicious activity report if the suspected violation or pattern of violations aggregates $5,000 or more. In addition, because you suspect that your customer is engaged in check kiting, you have reasonable cause to place a…
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One of our commercial customers reported several checks as forgeries promptly after receiving its account statement. The customer’s employee had stolen the checks and forged them. Should we file a police report? If the customer receives restitution from its employee, would we be entitled to receive that restitution?
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Since a police report already has been filed regarding the forgeries, the question becomes whether the bank should file a suspicious activity report, which would be required if the total dollar amount of the forgeries exceeds $5,000. Also, under the Uniform Commercial Code (UCC), in most circumstances, you will need to reimburse the customer for…
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One of our business customers has an outside vendor process its payroll for all employees but one. For that employee, the business owner writes paychecks drawn on his personal account, which suggests that the business is circumventing immigration requirements for that employee. Does this suspicion require us to file a SAR, even though the company simply is circumventing IRS requirements?
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Yes, we believe a SAR is required due to your suspicion that the customer is employing an unauthorized alien. SARs are required whenever a bank suspects criminal activity involving or aggregating more than $5,000 in transactions conducted at or through the bank. The employment of an individual who is not authorized to work in the…
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We would like to file a SAR about a customer who is exchanging large amounts of twenty dollar bills for hundred dollar bills, in amounts totaling $16,000 in the last six weeks. We are not certain, but we suspect this behavior is indicative of criminal activity. Can we also bring this issue to the attention of the police? Would there be any privacy issues? We are a state member bank.
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Yes, if your bank has filed a SAR, the SAR rules provide a safe harbor for any disclosures to law enforcement authorities related to a “possible violation.” The safe harbor protects your bank from liability under any state or federal law or regulation, and it applies to disclosures regarding both “suspected” and “known” crimes. As…
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If we believe the customer initiated a false debit card dispute (based on information provided to us by the police), can we offset the customer’s deposit account to recover the final credit we provided under Regulation E? The debit card has no credit or overdraft features.
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We believe that you may set off the customer’s deposit account in the amount of the credit that you provided to the customer under Regulation E. While Regulation Z places some limits on the right of offset for credit cards, those limitations do not apply to debit cards that lack any credit or overdraft features.…