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Question

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

A compliance officer at a broker-dealer observes a client conducting several wire transfers totaling $6,500 that lack any apparent economic rationale or legitimate business purpose. Under Bank Secrecy Act (BSA) regulations and FINRA rules, what is the firm's required obligation regarding this activity?

  1. A
    File a Currency Transaction Report (CTR) with FinCEN within 15 calendar days because the transactions aggregate to more than $5,000.
  2. File a Suspicious Activity Report (SAR) with FinCEN within 30 calendar days of discovery and refrain from disclosing the filing to the client.Answer
  3. C
    File a Suspicious Activity Report (SAR) only if the suspicious transactions involve physical paper currency exceeding $10,000.
  4. D
    Submit a notification to the Internal Revenue Service (IRS) within 10 business days and provide a written notice of inquiry to the client.

Answer

The broker-dealer must file a Suspicious Activity Report (SAR) with FinCEN within 30 calendar days of detection and keep the report strictly confidential from the customer.
Under the Bank Secrecy Act (BSA) and FINRA regulations, broker-dealers must file a Suspicious Activity Report (SAR) with FinCEN whenever a transaction (or series of transactions) involves or aggregates to at least $5,000 and the firm knows, suspects, or has reason to suspect that the transaction has no business or apparent lawful purpose. The filing deadline is 30 calendar days after the date of initial detection. Furthermore, federal law strictly forbids notifying the customer or any unauthorized party that a SAR has been prepared or filed.

Step-by-Step Solution

1
Determine the type of transaction and reporting mechanism required under BSA regulations.
Wire transfers lacking legitimate business purpose represent suspicious activity rather than standard cash currency processing.
Suspicious activity across wire or electronic transfers requires a Suspicious Activity Report (SAR), whereas Currency Transaction Reports (CTRs) only apply to physical currency deposits/withdrawals exceeding $10,000.
2
Evaluate the monetary threshold for filing a SAR.
The aggregate total of 6,500exceedsthe6,500 exceeds the 5,000 statutory minimum threshold for broker-dealers.
Broker-dealers are required to report suspicious activity if it involves or aggregates to at least $5,000 in funds or assets.
3
Identify the mandatory filing timeframe and confidentiality obligations.
The SAR must be filed within 30 calendar days of initial discovery, and the customer must never be informed.
FinCEN rules mandate a 30-day filing timeline from detection and strictly prohibit disclosure of a SAR to the subject under anti-tipping provisions.

Key Concept

Suspicious Activity Report (SAR) Thresholds and Disclosure Rules
Estimated Time:1m 30s
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Topics

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