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Question

Difficulty: MediumAnti-Money Laundering (AML), KYC, and Sanctions Compliance

A compliance officer at a broker-dealer reviews account activity and identifies a pattern of suspicious securities trades totaling $20,000 that appears to serve no lawful business or investment purpose. Which of the following statements correctly describes the firm's regulatory obligation regarding a Suspicious Activity Report (SAR) under FinCEN and FINRA rules?

  1. The firm must file a SAR with FinCEN within 30 calendar days of initial detection and is strictly prohibited from informing the customer.Answer
  2. B
    The firm must file a SAR within 15 calendar days of initial detection and provide written notice of the filing to the customer.
  3. C
    The firm is required to file a SAR only if the suspicious transactions involved physical cash deposits exceeding $10,000.
  4. D
    The firm must file a SAR directly with FINRA within 15 business days of detection, but may notify the customer if account restrictions are imposed.

Answer

The firm must file a SAR with FinCEN within 30 calendar days of initial detection and is strictly prohibited from informing the customer.
Under FinCEN regulations and FINRA Rule 3310, a broker-dealer must file a Suspicious Activity Report (SAR) for any transaction involving or aggregating at least $5,000 in funds or assets where the firm suspects illegal activity, tax evasion, or lack of commercial purpose. The report must be submitted to FinCEN within 30 calendar days of detecting the suspicious activity, and disclosure to the customer or any unauthorized third party is strictly prohibited under federal law.

Step-by-Step Solution

1
Determine the applicable Anti-Money Laundering (AML) reporting requirement based on suspicious activity.
Identified that suspicious transactions totaling $5,000 or more require a Suspicious Activity Report (SAR).
Under Bank Secrecy Act and FinCEN rules, broker-dealers must report suspicious activity meeting or exceeding the $5,000 threshold.
2
Identify the mandatory filing timeframe and destination agency.
SAR must be filed with FinCEN within 30 calendar days of initial detection of the suspicious pattern.
Federal regulations specify a 30-calendar-day window following detection to complete and submit Form SAR to FinCEN.
3
Evaluate customer disclosure rules regarding SAR filings.
Confirmed that tipping off the customer about a SAR filing is strictly prohibited by law.
Maintaining complete confidentiality prevents subjects of investigation from concealing evidence or evading law enforcement.

Key Concept

Suspicious Activity Report (SAR) Filing Thresholds, Timelines, and Confidentiality Rules
Estimated Time:1m 15s
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Topics

Anti-Money Laundering (AML), KYC, and Sanctions Compliance