suspicious activity report check cashers and pawn … · rmf consulting group presented by: robert...

RMF Consulting Group

Presented by:Presented by: Robert Frimet, CAMSRobert Frimet, CAMS

SSuspicioususpicious AActivityctivity

RReporteport

Check Cashers and Check Cashers and

Pawn ShopsPawn Shops


2

Presentation ObjectivesPresentation Objectives

•• Demonstrate the importance of filing SARsDemonstrate the importance of filing SARs

•• Illustrate how to identify suspicious activitiesIllustrate how to identify suspicious activities

•• Identify the traits of a quality SAR Identify the traits of a quality SAR

•• Define SAR recordkeeping requirementsDefine SAR recordkeeping requirements


3

Money LaunderingMoney Laundering

•• Engaging in financial transactions to Engaging in financial transactions to

disguise:disguise:

–– OriginOrigin

–– True natureTrue nature

–– Ownership of illicit fundsOwnership of illicit funds

•• $1$1 to to $2$2 trillion laundered worldwide trillion laundered worldwide

annuallyannually

•• Terrorists/ tax evaders / criminals use Terrorists/ tax evaders / criminals use

large cash payments to large cash payments to ““launderlaunder”” money money

from illegal activitiesfrom illegal activities


4

StatisticsStatistics

•• Since the October 1, 2002, money services business filers have Since the October 1, 2002, money services business filers have submitted 1,165,804 SARs.submitted 1,165,804 SARs.

•• The number of SARs filed by money services businesses during theThe number of SARs filed by money services businesses during thefirst six months of 2006 increased 52% from the same period in first six months of 2006 increased 52% from the same period in 2005.2005.

•• Money services business filers identified money transfers as theMoney services business filers identified money transfers as themost common type of financial service involved in suspicious most common type of financial service involved in suspicious activity.activity.

•• During the first six months of 2006, suspicious activity During the first six months of 2006, suspicious activity characterized as characterized as ““Same individual's) using multiple locations over a Same individual's) using multiple locations over a short period time periodshort period time period”” increased 138% from the same period in increased 138% from the same period in 2005.2005.

•• In the first six months of 2006, suspicious activity characterizIn the first six months of 2006, suspicious activity characterized as ed as ““Comes in frequently and purchases less than $3,000Comes in frequently and purchases less than $3,000”” increased increased 94% from the same period in 2005.94% from the same period in 2005.


SSuspicious uspicious AActivity ctivity RReports eports

((SARSARs)s)


6

MMoney oney SServices ervices BBusinesses (usinesses (MSBsMSBs) )

Required to File SARs:Required to File SARs:•• Issuers of travelerIssuers of traveler’’s checks or money orderss checks or money orders

•• Sellers / redeemers of travelerSellers / redeemers of traveler’’s checks or money orders s checks or money orders

•• Money transmittersMoney transmitters

•• Currency exchangersCurrency exchangers

•• Check cashers only (voluntary)Check cashers only (voluntary)

•• Pawn Brokers (voluntary) Pawn Brokers (voluntary)


7

MSB required to file a SAR when it knows / suspects MSB required to file a SAR when it knows / suspects

that:that:

•• Source of Source of fundsfunds isis derivedderived from illegal activityfrom illegal activity or or conducted to conducted to disguise fundsdisguise funds from illegal activityfrom illegal activity

•• Transaction Transaction designeddesigned to to evade BSA requirementsevade BSA requirements

•• Appears to serveAppears to serve nono known known businessbusiness or apparent or apparent lawful lawful purposepurpose

•• UsesUses the the MSB MSB to to facilitate criminal activityfacilitate criminal activity

•• And is $2,000 and or more.And is $2,000 and or more.

SARSAR


8

SarSar requirements for the Pawn Brokerrequirements for the Pawn Broker

For Pawn Brokers:For Pawn Brokers:

•• A transaction in which it appears the customer A transaction in which it appears the customer

is attempting to cause the 8300 form not to be is attempting to cause the 8300 form not to be

filed, or is trying to cause the filing of a false or filed, or is trying to cause the filing of a false or

incomplete form, or a transaction that appears incomplete form, or a transaction that appears

to be to be ““IllegalIllegal””..


9

Suspicious?Suspicious?


10

Suspicious?Suspicious?


11

What is Suspicious?What is Suspicious?

•• This determination can be subjective This determination can be subjective

•• Requires use of judgmentRequires use of judgment and and knowledge of normal business knowledge of normal business practices practices

•• A suspicious transaction may:A suspicious transaction may:

–– stand out as unusual or stand out as unusual or

–– have no apparent business or have no apparent business or lawful purposelawful purpose


12

SAR Red FlagsSAR Red Flags

An MSB should ask itself:An MSB should ask itself:

•• Is the amount of the transaction unusually large Is the amount of the transaction unusually large

for a typical customer or for the MSB?for a typical customer or for the MSB?

•• Does the customer make the same or similar Does the customer make the same or similar

transactions more frequently than normal?transactions more frequently than normal?

•• Does the type of transaction seem unusual for Does the type of transaction seem unusual for

the customer or the MSB?the customer or the MSB?


13

SAR Red Flags SAR Red Flags ––Pawn BrokerPawn Broker

An Pawn Broker should ask itself:An Pawn Broker should ask itself:

•• Is the amount of the transaction unusually large Is the amount of the transaction unusually large

for a typical customer (3 Rolex watches)for a typical customer (3 Rolex watches)

•• Does the customer make the similar transactions Does the customer make the similar transactions

more frequently than normal? (pawning more frequently than normal? (pawning

numerous high ticket items regularly) numerous high ticket items regularly)

•• Does the type of transaction seem unusual for Does the type of transaction seem unusual for

the customer or the Pawn Brokerthe customer or the Pawn Broker


14

Customers attempt to evade BSA reporting or recordkeeping Customers attempt to evade BSA reporting or recordkeeping requirements by keeping transactions just below the reporting orrequirements by keeping transactions just below the reporting or

recordkeeping thresholds such as: recordkeeping thresholds such as:

–– Currency exchanges just under Currency exchanges just under $1,000$1,000

–– Cash sales of money orders or travelerCash sales of money orders or traveler’’s checks just under s checks just under $3,000$3,000

–– Pawn redemptions in a combination of cash and checks that Pawn redemptions in a combination of cash and checks that are $10,000 or greater.are $10,000 or greater.

–– Items that have a high propensity to be stolen.Items that have a high propensity to be stolen.

–– Other Examples?????????????????????Other Examples?????????????????????

SAR Red Flags SAR Red Flags --ThresholdsThresholds


15

SAR Red Flags SAR Red Flags –– CustomersCustomers

Customer red flags include:Customer red flags include:

•• Providing insufficient and/or suspicious Providing insufficient and/or suspicious information information

•• Engaging in activity inconsistent with normal Engaging in activity inconsistent with normal business practices and/or customerbusiness practices and/or customer’’s businesss business

•• Engaging in activity that seems unusual or Engaging in activity that seems unusual or illogical for any reason, business or notillogical for any reason, business or not

•• Changing normal business habitsChanging normal business habits


16

SAR Red Flags SAR Red Flags –– EmployeesEmployees

Employee traits that might cause suspicion Employee traits that might cause suspicion

include:include:

•• Living a lifestyle not supported by salary Living a lifestyle not supported by salary

•• Reluctance to take a vacationReluctance to take a vacation

•• Is working when unusually large transactions, Is working when unusually large transactions,

or numbers of transactions take place at the or numbers of transactions take place at the

MSB or Pawn Shop.MSB or Pawn Shop.


17

RedRed Flags reported by banks on pawnFlags reported by banks on pawn

•• Two hundred and fortyTwo hundred and forty--six SARs were reviewed six SARs were reviewed

from the years 1996 through 2002. filed by from the years 1996 through 2002. filed by

banks on pawn brokers The following are banks on pawn brokers The following are

summaries of these types of activities summaries of these types of activities

•• The top five reported violations were: 1) The top five reported violations were: 1)

BSA/Structuring/Money Laundering (52.15%); BSA/Structuring/Money Laundering (52.15%);

2) Other (8.28%); 3) Credit Card Fraud 2) Other (8.28%); 3) Credit Card Fraud

(7.97%); 4) Check Kiting (7.36%); and 5) (7.97%); 4) Check Kiting (7.36%); and 5)

Check Fraud (4.91%). Check Fraud (4.91%).


18

RedRed Flags reported by banks on pawnFlags reported by banks on pawn

•• A number of pawnbrokers conducted unusually large A number of pawnbrokers conducted unusually large

cash deposits and withdrawals, relative to the type of cash deposits and withdrawals, relative to the type of

business, at various alternating bank branches. SARs business, at various alternating bank branches. SARs

were filed on those pawnbrokers exhibiting a high were filed on those pawnbrokers exhibiting a high

frequency of this activity relative to other closely frequency of this activity relative to other closely

located pawnshops.located pawnshops.

•• Numerous pawnbrokers withdrew and/or deposited Numerous pawnbrokers withdrew and/or deposited

cash just falling under the CTR reporting requirements. cash just falling under the CTR reporting requirements.

Some customers did so with unusual frequency within a Some customers did so with unusual frequency within a

short period of time (days) at various bank branches short period of time (days) at various bank branches

within close proximity. within close proximity.


19

SAR SAR –– Essential Elements (MSBEssential Elements (MSB’’s)s)

To be useful to authorities, all SARs should contain To be useful to authorities, all SARs should contain

the the ““5 Ws and the How5 Ws and the How”” of the transaction: of the transaction:

•• WhoWho

•• WhatWhat

•• WhenWhen

•• WhereWhere

•• WhyWhy

•• HowHow


20

SAR Quality SAR Quality –– Who?Who?

To explainTo explain whowho is conducting criminal or suspicious is conducting criminal or suspicious

activity a SAR should include the customeractivity a SAR should include the customer’’s:s:

–– Descriptive informationDescriptive information

–– Employer / occupational informationEmployer / occupational information

–– Relationship to the MSBRelationship to the MSB

–– Length of financial relationshipLength of financial relationship


21

SAR Quality SAR Quality –– What?What?

The SAR should describe The SAR should describe whatwhat instrument the instrument the

customer used in the transaction, such as :customer used in the transaction, such as :

•• Cash deposits/withdrawalsCash deposits/withdrawals

•• Checks (cashiers, bank)Checks (cashiers, bank)

•• Money ordersMoney orders

•• TravelerTraveler’’s checkss checks

•• Wire transfersWire transfers


22

SAR Quality SAR Quality –– When?When?

•• Give the date of the Give the date of the

transaction for a one time transaction for a one time

occurrence occurrence

•• Give the date first Give the date first

detected and a description detected and a description

of activity for a series of of activity for a series of

transactionstransactions

To describe To describe whenwhen the suspicious activity occurred, the suspicious activity occurred,

the SAR should:the SAR should:


23

SAR Quality SAR Quality –– Where?Where?

Every SAR should accurately describe Every SAR should accurately describe wherewhere the the

activity took place by : activity took place by :

•• Naming the branch, department and location(s) Naming the branch, department and location(s)

of the MSB where the transaction occurred of the MSB where the transaction occurred

•• Identifying all account numbers and types of Identifying all account numbers and types of

accounts involvedaccounts involved

•• Indicating involvement of other MSBsIndicating involvement of other MSBs


24

SAR Quality SAR Quality –– Why?Why?

A SAR must explain A SAR must explain whywhy the transaction is the transaction is

suspicious by: suspicious by:

•• Describing its businessDescribing its business

•• Clearly describing why it believes the Clearly describing why it believes the

transaction is suspicioustransaction is suspicious


25

SAR Quality SAR Quality –– How?How?

Lastly, the SAR must explain Lastly, the SAR must explain howhow the suspicious the suspicious

activity occurred by: activity occurred by:

•• Concisely, accurately and logically describing Concisely, accurately and logically describing

how the customer completed the how the customer completed the

transaction(s) andtransaction(s) and

•• Providing an as complete as possible Providing an as complete as possible

explanation of the customerexplanation of the customer’’s source and s source and

application of the transacted fundsapplication of the transacted funds


26

SAR Quality SAR Quality -- RecapRecapEach SAR narrative must:Each SAR narrative must:

•• Describe what is unusual, irregular or suspiciousDescribe what is unusual, irregular or suspicious

•• Describe conduct that raised suspicionDescribe conduct that raised suspicion

•• Explain if transaction was attempted or completedExplain if transaction was attempted or completed

•• Explain who benefited from transactionExplain who benefited from transaction

•• Describe/retain explanation provided by subjectDescribe/retain explanation provided by subject

•• Describe the subjectDescribe the subject

•• Describe and retain any evidenceDescribe and retain any evidence

•• Do Not includeDo Not include any any attachmentsattachments


27

83008300’’ss

•• Mark the box Mark the box SUSPICIOUSSUSPICIOUS

•• Complete the form as you normally would.Complete the form as you normally would.

•• Add comments on last page. (recommendation) Add comments on last page. (recommendation)


28

Voluntary?Voluntary?

Yes, 8300Yes, 8300’’s are s are voluntaryvoluntary when reporting suspicious activitywhen reporting suspicious activity

BUTBUT

Penalties may be imposed on your customer and YOU if Penalties may be imposed on your customer and YOU if the customer attempts to cause you not to file an 8300 the customer attempts to cause you not to file an 8300 by providing misinformation or the pawn shop attempts by providing misinformation or the pawn shop attempts to allow the customer to structure the transactions in to allow the customer to structure the transactions in order to avoid filing of the 8300order to avoid filing of the 8300

Penalties may include:Penalties may include:

Customer: 5 years in prison/$250.000 fineCustomer: 5 years in prison/$250.000 fine

Pawn Shop: 5 years in prison/$500,000 finePawn Shop: 5 years in prison/$500,000 fine


QuestionsQuestions


Presented by: Robert Frimet

Bank Secrecy Act Specialist

Phone: (702) 596-8370

Email: [email protected]

www.checkcashingcompliance.com

www.checkconsultants.com

Presented by: Robert Frimet

Bank Secrecy Act Specialist

Phone: (702) 596-8370

Email: [email protected]@checkconsultants.com

www.checkcashingcompliance.comwww.checkcashingcompliance.com

www.checkconsultants.com

suspicious activity report check cashers and pawn … · rmf consulting group presented by: robert...

Documents