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Question

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

A compliance officer at a broker-dealer identifies a series of wire transfers totaling $7,500 conducted by a retail client to an offshore bank account in a high-risk jurisdiction. The client provides no reasonable business explanation for the activity, leading the firm to suspect potential money laundering. Under Bank Secrecy Act (BSA) regulations administered by FinCEN, within how many calendar days must the broker-dealer file a Suspicious Activity Report (SAR), and what is the minimum transaction threshold that mandates filing?

  1. Within 30 calendar days of initial detection, for suspicious transactions involving $5,000 or moreAnswer
  2. B
    Within 15 calendar days of the transaction date, for cash transactions exceeding $10,000
  3. C
    Within 30 calendar days of the transaction date, for cash transactions exceeding $10,000
  4. D
    Within 15 calendar days of initial detection, for suspicious transactions involving $5,000 or more

Answer

Within 30 calendar days of initial detection, for suspicious transactions involving $5,000 or more
Under Bank Secrecy Act rules enforced by FinCEN, broker-dealers must file a Suspicious Activity Report (SAR) for any transaction (or series of transactions) conducted or attempted by, at, or through the firm involving $5,000 or more where the firm suspects illegal activity, money laundering, or no apparent lawful purpose. The firm must submit the SAR within 30 calendar days of initial detection of the suspicious activity.

Step-by-Step Solution

1
Identify the type of report required for suspicious transactions
The scenario describes unexplained wire transfers to a high-risk jurisdiction, which triggers a Suspicious Activity Report (SAR) rather than a Currency Transaction Report (CTR).
SARs are triggered by suspicious activities regardless of payment method, whereas CTRs specifically govern currency (cash) transactions.
2
Determine the monetary threshold for broker-dealer SAR filings
The minimum threshold for mandatory SAR filing by a broker-dealer is $5,000.
FinCEN regulations mandate SAR reporting for broker-dealers when a transaction involves at least $5,000 and the firm knows, suspects, or has reason to suspect illegal activity or lack of business purpose.
3
Determine the filing timeframe requirement
The firm has 30 calendar days to file the SAR after the initial detection of the suspicious activity.
Treasury regulations allow up to 30 calendar days from the date of initial detection for firms to complete investigation and submit Form SAR to FinCEN.

Key Concept

Suspicious Activity Report (SAR) Filing Thresholds and Timeframes
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Topics

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