Suspicious Activity Report Form Completion Tips?A Trend Analysis of Frequently Asked Questions Received on FinCEN?s Regulatory Helpline

FinCEN has reviewed recent calls received on its Regulatory Helpline 15 for the most frequently asked questions about suspicious activity reporting. From January to December 2006, FinCEN responded to almost 1,200 calls from industry, government, and other callers requesting suspicious activity reporting guidance. This article addresses the three most frequently asked questions received during that period about completing Suspicious Activity Report forms.

Suspicious Activity Reporting for International Lottery Scams

FinCEN received a number of questions regarding the filing of Suspicious Activity Reports (SARs) in connection with international lottery scams.16 Although there are several variations of the international lottery scam, callers to the Regulatory Helpline have most frequently reported a version involving monetary instruments and overseas wires. Generally, international lottery scam operators will contact individuals via the Internet, telephone, or mail and announce that the individuals have won cash prizes in a foreign lottery. The individuals also are informed that, before they can collect their winnings, they must pay certain fees, taxes, or other expenses. To ?assist? with payment of these miscellaneous fees, the lottery scam operators will mail to the individuals checks or other monetary instruments, with instructions to cash the instruments. The individuals are told that, once the instruments are cashed, the proceeds must immediately be wired to an entity or person located in another country. The lottery scam operators claim that when the proceeds have been received, the lottery scam operators will pay the individuals the supposed winnings. As is the case with most scams of this nature, there is a great sense of urgency expressed by the scam operators and the individuals are exhorted to ?act now? in order to receive, and not forfeit, the winnings.

Financial institutions typically become aware of these scams when the individuals seek to deposit or cash the checks or monetary instruments or wire the proceeds. Callers to the Regulatory Helpline have indicated that in some cases the monetary instruments presented clearly are bogus, e.g., containing obvious spelling errors or poorly created seals. In some instances, financial institutions have declined to negotiate the monetary instruments and advised the customer that the instruments are counterfeit or bogus. In other instances, the monetary instruments presented appear authentic and are cashed for the customer; later, however, the monetary instruments are returned as non-negotiable and either the bank or the customer suffers a monetary loss. Although FinCEN previously has provided guidance regarding the filing of SARs on other types of scams, financial institutions have sought clarification as to whether that previously issued guidance applies equally to international lottery scams. In The SAR Activity Review ? Trends, Tips & Issues, Issue 7 (August 2004), FinCEN advised financial institutions that it was unnecessary to file SARs on ?4-1-9? (advance fee fraud) scams if there was no monetary loss. However, FinCEN also advised financial institutions that they should consider filing a Suspicious Activity Report if there was a monetary loss to the financial institution or if the scam involved other illegal activity. In The SAR Activity Review ? Trends, Tips & Issues, Issue 10 (May 2006), FinCEN reiterated this guidance for ?third party receiver of funds? scams. The preceding guidance, given with regard to ?4-1-9? and third party receiver of funds scams, applies to international lottery scams as well.17

It may be difficult to clearly identify suspects in connection with international lottery and similar scams. Callers to the Regulatory Helpline often indicate they have listed their customers as suspects on related SAR forms; however, generally, the customer should not be considered a suspect unless there is reason to believe that the customer knowingly cashed counterfeit monetary instruments or was otherwise complicit in the scam. In most circumstances, the customer is a victim of the scam, and unaware that participation in foreign lotteries is illegal or that the checks or other monetary instruments that they have received are counterfeit. Additionally, the names (such as the payee name) that appear on such checks or other monetary instruments typically are phony and do not indicate real suspects; however, if a Suspicious Activity Report is completed, it is recommended that the payee name be included in the Suspect/Subject field of the Form.

Date to Use When Correcting a Previously Filed Suspicious Activity Report

Several financial institutions have contacted the Regulatory Helpline seeking clarification of the preparation date to be used when completing a SAR being filed to correct a previously filed report. When correcting a previously filed Suspicious Activity Report, the date of preparation should reflect the date of the current filing, not the date on which the prior report was prepared or filed. For example, a financial institution prepares and files an original SAR on May 15, 2006. The institution later discovers an error that must be corrected. On June 13, 2006, the institution completes a Suspicious Activity Report correcting the previously filed report. The date of preparation on the new report should be June 13, 2006 (not May 15, 2006).
Individual Tax Identification Numbers and Social Security Numbers

Q: Must a financial institution file a SAR if a customer provides an individual tax identification number (ITIN),18 and in the course of its due diligence the institution discovers that the same customer has in the past used a social security number (SSN)?
A: Because an individual cannot have both an ITIN and an SSN, the above situation could be an indicator of identity theft or fraud. The institution should review such circumstances carefully, and a SAR must be filed if applicable thresholds are met and if the institution knows, suspects, or has reason to suspect a possible violation of law or regulations. Financial institutions also voluntarily may file a SAR in instances where applicable thresholds are not met, but where similar suspicions arise.

15 FinCEN?s Regulatory Helpline (800-949-2732) is the primary means for the financial community to obtain regulatory guidance and answers to specific questions relating to the Bank Secrecy Act.
16 The Federal Bureau of Investigation (FBI) recently posted an advisory regarding foreign lottery scams on its website (http://www.fbi.gov/page2/aug06/lotto_scams080906.htm).
17 If counterfeit instruments are received via the U.S. postal system, financial institutions may report that to the U.S. Postal Inspection Service. If contact was initially made via the Internet, a complaint may be filed with the Internet Crime Complaint Center at http://www.ic3.gov. Moreover, individuals who have been victimized by these scams may contact their local FBI office.
18 An ITIN is a nine-digit number issued by the U.S. Internal Revenue Service (IRS) to individuals who are required for U.S. tax purposes to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain, a social security number (SSN). See IRS Discussion of ITINs at http://www.irs.gov/individuals/article/0,,id=96287,00.html.

Excerpted from SAR Activity Review Issue 11, page 35