Saturday, March 22, 2008

Suspicious Activity Reports

Newsweek ran an interesting piece this week that sheds some light on to how Eliot Spitzer got caught in the recent call girl scandal. Under authority of The Patriot Act, the Treasury Department now requires banks to issue "Suspicious Activity Reports" (SARs) to the government based on unusual financial transactions of its customers.

[Under authority of The Patriot Act, the Treasury Department] issued stringent new regulations that required banks themselves to look for unusual transactions (such as odd patterns of cash withdrawals or wire transfers) and submit SARs—Suspicious Activity Reports—to the government. Facing potentially stiff penalties if they didn't comply, banks and other financial institutions installed sophisticated software to detect anomalies among millions of daily transactions. They began ranking the risk levels of their customers—on a scale of zero to 100—based on complex formulas that included the credit rating, assets and profession of the account holder.

Another element of the formulas: whether an account holder was a "politically exposed person." At first focused on potentially crooked foreign officials, the PEP lists expanded to include many U.S. politicians and public officials who were conceivably vulnerable to corruption.
The theme of the article is that laws have unintended consequences and will often be used for purposes not originally intended.

Have you made any large transfers between accounts lately? Perhaps a SAR was issued. Last year there were 1.23 million of them.

2 comments:

Anonymous said...

We're watching you, Mike.

- The Feds

mpv said...

Am I going to have to turn off anonymous comments! ;-)