Money Services Businesses Can Help Fight Money Laundering

Suspicious Activity Reports (SARs) are one of the government’s main weapons in the battle against money laundering and other financial crimes since these reports generate leads that law enforcement agencies use to initiate money laundering investigations. Many individuals launder money to conceal illegal activity, such as drug trafficking, health insurance fraud, tax evasion, and even terrorism. It fuels criminal conduct, allowing drug dealers, smugglers, terrorists, arms dealers, and tax evaders to maintain control over their proceeds and ultimately to provide a legitimate cover for their sources of income. Law enforcement officials estimate that such individuals yearly launder 1 to 2 trillion dollars worldwide through different types of financial institutions and businesses.

One of the types of financial institutions money launderers use are the Money Services Businesses (MSBs) that issue, sell or redeem traveler’s checks or money orders, transmit money, or exchange currency. Since they are targets for money launderers, the Bank Secrecy Act requires MSBs to file suspicious activity reports with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Check cashers and sellers and redeemers of stored value are not required to, but may voluntarily file a SAR.

When to File a SAR

An MSB must file a SAR when it knows or suspects that:

• The funds come from illegal activity or disguise funds from illegal activity;
• The transaction is structured to evade BSA requirements or appears to serve no known business or apparent lawful purpose; or,
• The MSB is being used to facilitate criminal activity.

There are two different dollar thresholds that require a SAR.  They depend on the stage of discovery and the type of transaction involved.  A $2,000 threshold applies if a customer is conducting or attempting to conduct a transaction(s) that aggregates to $2,000 or more.  A threshold of $5,000 applies for transactions identified by issuers of money orders or traveler’s checks from a review of clearance records.  These thresholds are known as the $2,000 front door/$5,000 back door rule.  The $2,000 front door transactions are face-to-face with the customer.  The $5,000 rule applies after the records have been processed at the issuer level, thus the back door.

Examples of Suspicious Activities

• The customer pays for products/services using musty bills having an unusual or chemical-like odor.
• A 16-year-old, riding a bicycle, brings bags of cash to a money transmitter to transfer from New York City to Miami.
• A customer, a retired CPA, frequently sends and receives money transfers of more than $2000 to and from many different people.
• A customer conducting an $11,000 cash transaction attempts to bribe an MSB employee not to file a Currency Transaction Report.

SAR Filing Information

FinCEN Form 109 (PDF), Suspicious Activity Report by Money Services Business, is the proper form an MSB should use to report suspicious activity.  The MSB has 30 calendar days to file a suspicious activity report after becoming aware of a suspicious transaction.  If the situation appears urgent, the MSB should immediately notify the appropriate law enforcement authority and file the appropriate form.  If the MSB suspects that a customer’s transactions may be linked to terrorist activity, the MSB should immediately call the Financial Institutions Hotline at (800) 556-3974.

MSBs must send completed forms to:

Detroit Computing Center
ATTN: SAR-MSB
P.O. Box 33117
Detroit, MI 48232-5980

MSBs can also file the form electronically.  For more information on BSA e-filing, visit FinCEN.gov.

An MSB must maintain a copy of the SAR and its supporting documentation for five years from the date of filing.

Penalties For Noncompliance

Failure to file a suspicious activity report may lead to civil and criminal penalties.  A civil penalty may apply for each willful violation of the reporting requirements.  The amount of the penalty is not to exceed the greater of the amount involved in the transaction (not to exceed $100,000), or $25,000.  Any person who willfully violates the reporting requirements may be subject to criminal penalties, including a fine as great as $250,000 or five years imprisonment. 

MSBs and their employees are prohibited from disclosing to a person involved in the transaction that a suspicious activity report has been filed.  Further, each MSB or MSB employee is protected from civil liability for any SAR that they filed.

Additional Resources

FinCEN Form 109 (PDF) is available at: MSB Web site, IRS.gov, FinCEN Web site, or through the IRS Forms Distribution Center at (800) 829-3676.

The toll-free hotline for answers to questions about filing a SAR is (800) 800-2877.  Also, the MSB Outreach Office offers free MSB guidance material online at the MSB Web site or via the phone at (800) 386-6329.

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