Follow the money. In today’s world, one way to uncover criminal activity is to trace financial transactions. Under the federal Bank Secrecy Act, financial institutions are required to assist government agencies in detecting and preventing money laundering. When a bank suspects a financial transaction involves some form of criminal activity, that information gets turned over to law enforcement in the form of a suspicious activity report.
What Activities Necessitate a Suspicious Activity Report?
Financial institutions must report suspicious activity if it involves $2,000 or more. To do this, the bank will file a “suspicious activity report” with law enforcement, usually within 30 days of the activity. The bank must then keep a copy of the report and any supporting documentation for five years.
But what is suspicious activity? For a financial institution, it is any transaction or pattern of transactions that:
- Involves money from criminal activity; or
- Is designed to evade Bank Secrecy Act requirements;
- Appears to serve no business or legal purpose and for which there is no reasonable explanation; or
- Involves the use of the money services business (“MSB”) to facilitate criminal activity. Examples of MSBs include check cashing, money orders, currency exchangers, and the like.
Examples of Suspicious Activity
When looking for suspicious activity, a bank can consider many factors. For example, a teller may look at whether a customer uses different IDs on different occasions. In other cases, the customer may change the nature of their transaction after they are asked for ID. Additionally, unusually large cash transactions or wire transfers can be flagged – especially if the funds are coming from suspicious sources. Sometimes, the bank may flag when two or more customers seem to be working together to evade Bank Secrecy Act requirements.
However, there are circumstances where innocent activity can be deemed suspicious. For example, if a person sells a car on Craigslist and the purchaser pays them in cash. This large deposit in cash may be seen as suspicious by the bank.
Suspicious Activity Reports May Lead to Account Closure
In general, a bank may close an account for any reason and without notice. If your bank account is closed, this can be very frustrating. Your scheduled payments and checks may bounce. If your rent or utilities are due, you may not be able to pay your bills.
If the bank has suspected illegal activity, this may be a reason to close the account. Unfortunately, there is not much recourse other than to open up another account. In some situations, you may even have to go to an entirely new bank. Depending on the nature of the suspected activity, the funds you had in the now-closed account may be returned, or they may be frozen indefinitely. For some persons, their funds may be subject to asset forfeiture if true criminal activity is suspected.
- Office of the Comptroller of the Currency, Bank Secrecy Act (BSA). Available at: https://www.occ.treas.gov/topics/supervision-and-examination/bsa/index-bsa.html (last accessed Jan. 30, 2024).
- Financial Crimes Enforcement Network, The Bank Secrecy Act. Available at: https://www.fincen.gov/resources/statutes-and-regulations/bank-secrecy-act (last accessed Jan. 30, 2024).
- Alene Laney, “What Happens When the Bank Closes Your Account?,” com (Oct. 8, 2023). Available at: https://time.com/personal-finance/article/what-happens-when-the-bank-closes-your-account/ (last accessed Jan. 30, 2024).
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