Walker Guidance

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For money services businesses (MSBs) in the U.S. and Canada, understanding when and how to file a Suspicious Activity Report (SAR) is critical to complying with anti-money laundering (AML) regulations. A SAR is not merely a regulatory obligation—it’s a frontline defense in preventing illicit financial activity.

This guide outlines the key SAR triggers, legal thresholds under FinCEN (U.S.) and FINTRAC (Canada), and examples of reportable behavior.

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What Is a Suspicious Activity Report (SAR)?

A SAR is a formal report submitted by financial institutions—including MSBs—when they detect behavior that may indicate money laundering, fraud, terrorist financing, or other financial crime.

• In the U.S., SARs are submitted to the Financial Crimes Enforcement Network (FinCEN).
• In Canada, MSBs file Suspicious Transaction Reports (STRs) to FINTRAC.

While the terminology varies slightly, the legal obligation to report suspicious activity is broadly aligned across both jurisdictions.

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SAR Filing Triggers: What Counts as Suspicious?

MSBs must file a SAR when they have reasonable grounds to suspect that a transaction—or attempted transaction—relates to a criminal offense. You are not expected to prove wrongdoing, but you must act when red flags emerge.

Common SAR Triggers:

1. Structuring Transactions:
   • Multiple transactions under $10,000 intended to avoid reporting thresholds (e.g., $9,900 cash deposits).
2. Unusual Volume or Velocity:
   • Sudden spikes in transaction size or frequency that deviate from customer norms.
3. Mismatch with Customer Profile:
   • Activity that contradicts the customer’s stated business model or financial behavior.
4. Transactions with High-Risk Jurisdictions:
   • Funds sent to or received from countries with known AML/CTF deficiencies.
5. Evasive or Defensive Behavior:
   • Customers who avoid questions about the source of funds or transaction purpose.

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FinCEN vs. FINTRAC: SAR/STR Filing Expectations

🇺🇸 FinCEN (United States)

• SARs must be filed within 30 days of detecting suspicious activity.
• Applies to MSBs, banks, crypto kiosks, and other covered entities.
• Failing to file can lead to civil penalties, including fines of up to $100,000 per violation.

🇨🇦 FINTRAC (Canada)

• Suspicious Transaction Reports (STRs) are filed as soon as practicable.
• Applies to MSBs, virtual currency dealers, and others under PCMLTFA.
• Reports are mandatory even if a transaction does not occur (attempted transactions count).

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Real-World Examples for MSBs

• A new customer initiates a series of $9,950 deposits over 10 days, each at a different agent location.
• A cryptocurrency on-ramp platform notices outbound stablecoin transfers to high-risk wallets.
• A prepaid card issuer observes bulk reloads followed by ATM withdrawals abroad.

In each case, a SAR or STR would likely be required—even without concrete proof of wrongdoing.

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Legal Risk of Non-Compliance

In 2024, TD Bank faced regulatory scrutiny for failure to file timely SARs, leading to fines and significant reputational harm. For startup MSBs, similar failures can jeopardize licenses, trigger audits, or restrict access to banking partners.

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Building SAR Readiness Into Your AML Policy

To meet regulatory expectations and protect your MSB:

Review Regulatory Updates: Stay current on evolving guidance from FinCEN and FINTRAC.

Train Your Team: Ensure front-line staff and compliance officers can recognize red flags.

Document All Decisions: Even when a SAR is not filed, log the rationale.

Use Automated Monitoring Tools: Implement systems that flag anomalies in real time.

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References:

• FinCEN SAR Guidance
• FINTRAC Suspicious Transaction Reporting (Canada)