Answer:
The fact that a financial institution gets a "hit" (positive response) from the OFAC list does not require the institution to automatically file a SAR. My advice when there is a hit is for the institution to obtain any information it may have about the particular customer and to make an independent determination whether or not the customer is engaging in activity that otherwise meets the criteria for reporting under the SAR rule (i.e., amounts to at least $5,000; represents a potential violation of federal criminal law, the BSA or money laundering statutes, or has no legitimate explanation). If so, filing of the SAR is warranted.
However, there may be enough information to determine that the financial activity in question would not require reporting. Certainly this is the case where the institution determined a transaction wasbarred under OFAC rules and never completed.
OFAC rules are designed to prevent activity that is both potentially criminal (e.g., transactions with a person on the "specially designated national" list) or is contrary to our national interests (e.g., financial activity with certain identified countries). Not all of this activity will be illegal (e.g., the unwitting recipient in the US of funds coming from an account located in an OFAC blocked country). For this reason, the institution should examine the circumstances surrounding the OFAC hit, file a SAR where there is a sufficient basis to do so, but not automatically file a SAR when the only information available is that the customer was on the OFAC list.
First published on BankersOnline.com 2/17/03
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