When to File a SAR/STR

C

A SAR (Suspicious Activity Report) or STR (Suspicious Transaction Report) is a report filed by accountable institutions, such as banks and financial institutions, when they identify suspicious activities that may be indicative of money laundering or other illicit financial activities. These reports are submitted to the appropriate regulatory authorities to help combat financial crimes.

Among the given options, the correct answer is C. an alert is generated by a transaction monitoring system. Let's examine each option to understand why:

A. a customer makes a cash deposit in round dollars: While round dollar deposits could potentially be suspicious in certain circumstances, they alone do not provide enough evidence to justify the filing of a SAR/STR. Many legitimate customers may make cash deposits in round dollars for various reasons, such as convenience or personal preference. However, if other suspicious indicators are present, such as large and frequent round dollar deposits or inconsistent patterns of transactions, it may contribute to the decision to file a SAR/STR. But based on the given information, this option does not provide enough justification for filing a SAR/STR.

B. cash transactions have values which avoid reporting thresholds: Financial institutions are required to report certain cash transactions that meet or exceed specific thresholds set by regulatory authorities. However, the fact that a transaction falls below the reporting threshold does not automatically warrant filing a SAR/STR. It is possible for legitimate transactions to be below the reporting thresholds, and financial institutions may still monitor and assess them for any suspicious patterns or indicators. While transactions designed to avoid reporting thresholds can be an indication of suspicious activity, this option does not provide enough information to conclude that a SAR/STR should be filed.

C. an alert is generated by a transaction monitoring system: This option is the most appropriate and aligned with the best practice for filing a SAR/STR. Financial institutions employ transaction monitoring systems that analyze customer transactions for potential suspicious activity based on predefined rules and algorithms. These systems generate alerts when transactions meet certain criteria, which may indicate money laundering or other illicit activities. When an alert is generated, it triggers a review and investigation by the institution's anti-money laundering (AML) or compliance team. If the investigation determines that the alert is substantiated and raises suspicions of illegal activity, a SAR/STR should be filed.

D. an employee is not clearing alerts in a timely manner: While timely alert resolution is essential for effective AML compliance, the failure of an employee to clear alerts promptly does not, in itself, warrant filing a SAR/STR. This option is more related to internal control and operational efficiency rather than the identification of suspicious activity. However, if the delays in alert clearance lead to the overlooking of potentially suspicious transactions, it may be indicative of a broader issue with the institution's AML processes and may require internal review and corrective measures.

In conclusion, the correct answer is C. an alert is generated by a transaction monitoring system because it aligns with the typical practice of filing a SAR/STR when suspicious activity is identified through the institution's transaction monitoring system.