This Week in AML
FinCEN has released new Suspicious Activity Report (SAR) data. The data set covers the full years 2014 through 2021. The information looks at SARs filed by all of the required filers and breaks down the information in a number of ways. John and Elliot discuss some interesting nuggets from the release, speculate on how the data may be analyzed, and talk about finding ways to use the information to improve financial crime prevention programs.
FinCEN Releases New SAR Data TRANSCRIPT
Elliot Berman: Hi, John, how are you this week?
John Byrne: Hi, Elliot. How are things?
Elliot Berman: They're okay. So FinCEN released a bunch of historical information, SAR filing data. They did it for a long period of time, so it's all of 2014 through all of 2021. and then. They categorize the data a number of ways. I assume you saw the announcement of that release.
John Byrne: Yeah. And I'm sure others will, you know, slice and dice the data because they sorta just, this isn't a criticism, but they sort of just give it to you, and then you can go through the spreadsheets and maybe come up with some things. A couple of things struck me, and obviously, we have both been doing SAR information reviews for a long time, but I found some of the statistics could be helpful in terms of training and due diligence like categorization. But I think you have to recognize that there are multiple categories for each defined activity because you and I might file the same SAR on the same activity, but we might characterize it differently. You might check a box. I might decide to write a narrative.
And so they, you know, [are] searching the words, that sort of thing. So You got to recognize that I also, so the age-old issue going back to my ABA days was when we started to see a large number of filings in Delaware. The initial question was, why is that? And of course, then, and to some degree still today, credit card operations in there.
So what'll happen is you'll file a SAR on a credit card fraud, and you'll list Delaware. So it doesn't mean that activity is originating recurring in that state. So you have to sort of look at some of the stats. But I do think, you know, we've only both gone through a couple of the categories.
One of the things that is still clear and might be driven to change based on the laws that we've talked about. And that is filings on structure. So, you know, below the CTR threshold, that's still, according to the statistics, the second overall filing category. And I think that that's an area where we've talked about this. Policymakers and regulators may get to a point where you don't have to file extensive detail on that going forward. You can simply send it in. It was an $8,000 transaction or whatever, and let the government folks sort of sorted out.
Elliot Berman: Yes. That's certainly a possibility. It's interesting, so last year, in all the different ways that structuring gets defined, there were about a half a million SARS that fit into the larger structuring bucket.
And that continues, I mean, that is increased every year, across the years that are covered by the eight years that are covered in this data. So, it is going up. The question is, what's the risk profile that goes with, and at this point, it's really just an on-off switch. There isn't any. If they're high risk, you have to figure it out in your investigation, kind of a thing.
John Byrne: Right. And you know, one of the other exhibits breaks it down by year, in addition to the seven-year totals. And just looking at these things quickly. A couple of things struck me—Mass-marketed as a category in 2021.
So mass marketing fraud schemes up to 20,000 last year, 19,000, and you go back to 2018, it was only 9,000. So that's interesting. I'd be curious what experts think about that. And then, of course, you know, the credit card for that, we just alluded to still very high, 140,000 in 2021. And it's been over 120 for the past five years. So that's still is one of the major ways in which frauds are committed.
Elliot Berman: Yeah, you're absolutely right. And, we certainly saw, it's interesting to look at. I mean, again, you can guess what the reasons are, but even though fraud was a very significant issue during the worst part of the pandemic in 2020 and 2021.
The big jump in overall fraud-related SARs was between 2018 and 2019. The biggest single-year jump from one year to the next. So, I think, again, as you said, there'll be people who will do all kinds of analysis, much deeper than I'm capable of doing. But the key here is, there is a lot of information, and the analysis is worthwhile.
But look, trying to find those nuggets that you described earlier, the ones that help us understand how to improve our programs and how to train people, and even systems to watch for the right things, is the trick.
John Byrne: Right. You know, and some of the things sort of confirm what we continue to believe or major challenges, identity theft. You know the total percentage is, you know, maybe four and a half percent, but still, top 10. Right? So credit card, fraud, identity theft, check fraud, sort of the garden variety, things that we're concerned about. I noticed things like elder exploitation, not a lot, but the overall filings, depending on your definition of a lot, 214,000, since that was an identified crime.
So that's still. To those folks that are impacted, that's a big number. You know, there's some really, you know, you could probably spend a bit of time sort of walking through all this. I would just mention a couple of other quick things, and then I want to hear your final thoughts.
We see a lot of ads about reverse mortgage fraud. No filings on reverse mortgage Since 2018, zero on SARS. Now that doesn't mean it's not happening. And there's some identification in some of the footnotes that you'll have to look at, but that sort of jumped out at me and then exchanging cash in small bills for large bills. That's mentioned over 7,600 times in 2021 as a possible source of illegal activity. So I thought that was interesting.
Elliot Berman: Yeah. And that's particularly interesting given that we continue to hear about the ever decreasing amount of cash that's being used in the economy. The point is there still is cash, and if you've got it and you're looking for ways to try to hide that money, you still have to go through some of these kinds of steps you and I have been talking about, and we've seen presentations at conferences for the last 30 years.
John Byrne: Yeah, exactly, exactly. And so little fun trivia. The categorization is 97 separate categories. Suspicion concerning the source of funds is number one. Number 97 chip walking. And the reason I know that term is because we've been able to sit down and interview some of our peers from the gaming industry that talk about that.
So, obviously, there are some broad categories here. There's some relatively new reporting that would sort of explain some of that, you know, minimal gaming with large transactions, that sort of stuff. But the fun relative terms, the fun stuff here to look at and look through. And like I said, I think there'll be some of our colleagues will be working on [this] analysis going forward, and maybe we can do an actual hour-long program at some point and sort of walk through some of these things and try to understand what we learned from all of this.
Elliot Berman: Yes. I think that would be useful once the analysis is done. I'll be curious also to see if there are any analytics to go with the raw data. The nice part is if you want to do your own analysis, all of these are in Excel spreadsheets that are easy to access. And then once you access them, you can go in and put them into edit mode and start, you know, applying whatever analytic tools you have to figure out where it takes you.
So, John, I know you're off to Puerto Rico. So we're actually recording early in the week. So, I'll let you put in the shameless plug for that.
John Byrne: RightSource is one of several sponsors of the Puerto Rican banker's anti-money laundering conference that they've been doing for many, many years. Obviously, for the past two years, because of COVID, we weren't able to. And we'll have some sessions on a number of things like enforcement, regulator panels, the challenges of the marijuana businesses, human trafficking—so another opportunity to connect with peers and colleagues and discuss issues with the private and public sector. So we're looking forward to that.
Elliot Berman: Yeah. So the April webinar in our monthly webinars series is on domestic terrorism. And I'll be, sitting with a panel of experts and talking about this continually emerging and expanding topic—both in the US and abroad. So, please register for that. That's April 28th. It'll live stream at 1:00 PM Eastern time. John, have a safe trip and enjoy the conference. I will talk to you next week.
John Byrne: Take care. Elliot talk soon
Elliot Berman: Bye-bye.