Suspicious Activity Report (SAR)

Suspicious Activity Report (SAR)

The concept of a Suspicious Activity Report (SAR), as outlined in Section 43 of the German Anti-Money Laundering Act (GwG) and detailed in Chapter 10 of BaFin’s Interpretation and Application Guidance, is a cornerstone in combating money laundering and terrorist financing. This vital mechanism alerts authorities to potential financial crimes, safeguarding the integrity of financial systems.

Suspicious Activity Report (SAR) with Transaction: A SAR with a transaction is filed when there are indications that assets involved in a business relationship or a transaction are derived from a criminal offence or are linked to terrorist financing. This type of report is crucial for tracking specific financial movements that could be masking illicit activities.

Suspicious Transaction Report (STR) without Transaction: STRs without a transaction come into play when there are suspicions about a business relationship or intended transaction that may not involve the movement of assets but still raise red flags. These include cases where the contracting party fails to disclose beneficial ownership, as required under the GwG.

Reasons for a Suspicious Activity Report (SAR): The reasons for filing an SAR are diverse, ranging from transactions with no apparent economic or legal purpose, to complex or unusually large transactions that don’t align with a customer’s known profile. Other triggers include dealings with politically exposed persons or matches with sanction lists, and any activities that suggest the potential for money laundering or terrorist financing.

The Reporting Process and Obligations: Section 43 of the GwG, coupled with Chapter 10 of BaFin’s guidance, lays out the procedural and organizational framework for reporting. This includes mandatory electronic submission through the „goAML“ system, stringent internal processes for handling and documenting suspicions, and compliance with the prohibition on tipping off involved parties.

Consequences and Compliance: Failing to report a suspicious activity can lead to significant legal consequences, underscoring the importance of compliance. Once a report is filed, transactions must be delayed until clearance is received, ensuring that potential criminal activities are halted in their tracks.

Understanding and adhering to the requirements for SARs under the German GwG and BaFin’s guidance is essential for all obligated entities. By staying vigilant and compliant, these entities play a pivotal role in deterring financial crimes and maintaining the integrity of financial systems.

Section 43 of the German GwG

Section 43 of the German Anti-Money Laundering Act (GwG) outlines the reporting obligations of obliged entities regarding suspicious activities and assets. This section can be summarized as follows:

  1. Reporting Obligation:
    • Obliged entities must report to the German Financial Intelligence Unit (FIU) without delay if there are facts indicating:
      1. An asset in a business relationship, brokerage, or transaction originates from a crime that could be a predicate offense for money laundering.
      2. A business transaction, other transaction, or asset is related to terrorist financing.
      3. The contracting party failed to disclose whether they are conducting business on behalf of a beneficial owner, as required under section 11 (6), sentence 3.
  2. Exemptions:
    • Entities under section 2 (1) nos. 10 and 12 are exempt from reporting if the matter relates to information received during legal advice or representation. However, the reporting obligation remains if:
      • The legal representation is used for money laundering, terrorist financing, or other criminal offenses.
      • A case referred to in subsection (6) applies.
  3. Senior Management Reporting:
    • A member of the senior management of an obliged entity must file a report with the German FIU if:
      1. The entity operates an establishment in Germany.
      2. The reportable matter is related to the activity of the German establishment.
  4. Criminal Complaint Information:
    • If a matter reported also includes information necessary for a criminal complaint under section 261 (9) sentence 1 of the Criminal Code, the report is also considered voluntary self-incrimination as per that section.
    • The reporting obligation does not affect the report’s voluntary nature under section 261 (9) sentence 1 of the Criminal Code.
  5. FIU’s Power to Define Transaction Types:
    • The FIU, in agreement with supervisory authorities, can define types of transactions that must always be reported.
  6. Statutory Instruments:
    • In consultation with the Federal Ministry of Justice and Consumer Protection, the Federal Ministry of Finance may issue statutory instruments, not requiring Bundesrat consent, to determine matters related to acquisition transactions under the Real Estate Transfer Tax Act that must always be reported by entities under section 2 (1) nos. 10 and 12.

BaFin-Interpretation and Application Guidance of the German GwG

Principle

  • Mandatory Reporting: The obligation to report suspicious matters when there is an indication that assets are derived from a criminal offense related to money laundering, are associated with terrorist financing, or when a contracting party fails to disclose information about beneficial ownership.

Preconditions for Reporting

  • Broad Applicability: Applies to all types of transactions, regardless of the amount, and includes non-cash and electronically executed transactions.
  • Ongoing Obligation: Obligation applies to both current and past transactions if suspicious facts are later discovered.
  • Suspicion-Based: Entities are not required to confirm criminal activity but must report when they have facts suggesting the possibility of money laundering or terrorist financing.

Reporting Obligation

  • Independent Obligation: Applies if the contracting party fails to disclose whether they act for a beneficial owner, separate from other reporting requirements.

Organizational Structure for Reporting

  • Internal Processes: Entities must have processes for registering, forwarding, and reporting suspicious activities to the FIU.
  • Documentation: Obliged entities must document and retain reports and assessments, even when not reported to the FIU.

Report Requirements

  • Electronic Reporting: Reports must be submitted electronically using the „goAML“ system.
  • Follow-up Reports: Entities must use the designated function in „goAML“ for follow-up reports.

Consequences of a Report

  • Transaction Delay: A transaction reported as suspicious cannot be executed until approval from the FIU or prosecutor’s office is received, or after a waiting period of three working days.
  • Urgent Case Rule: Transactions can proceed in urgent cases but must be reported immediately afterwards.

Forwarding of Information

  • Confidentiality: Obliged entities cannot notify the contracting party or other third parties of the report or related investigations (known as the „ban on tipping off“).

Termination of Business Relationships

  • Risk Assessment: After reporting, entities should assess the risk level of continuing business relationships.
  • Continued Monitoring: Entities should continue monitoring the reported party, adjusting due diligence as necessary.

Suspicious Activity Report (SAR) with Transaction

The „Suspicious Activity Report (SAR) with Transaction“ is a form designed to report suspicious transactions. The form is organized into several sections, each requiring specific details:

  1. Declarations for the Obligated:
    • Name of the Obligated Party
    • Branch Organization
    • Number (for goAML)
    • File Number
    • FIU File Number
    • Reporting by Authorized Organization
  2. General Declarations for the Facts:
    • Reason of the Message
    • Established Facts
    • Business Area
    • Guessed Pretext
    • Miscellaneous Special Urgency
    • Presentation of the Facts
    • Special Information for the FIU (e.g., recommendations for police surveillance or immediate submission to law enforcement authorities)
  3. Transaction(s) and Goods:
    • Transaction Declarations: Including internal reference number, transaction procedure, amount in Euro, date and place of transaction, announced transaction, purpose of use, and comments.
    • Type of Transaction: Specifies the type of transaction, such as a transfer.
    • Goods: Inquiries if the transaction is related to goods.
  4. Involved:
    • Declarations to 1. Person: Inquiring if an involved person is present.
    • Declarations to 1. Organization: Asking if a participating organization exists.
    • Declarations for the 1. Account: Asking if an involved account is available.
  5. Investments / Remarks:
    • This section is for additional remarks and attachments like copies of legitimation documents, bank statements, commercial register extracts, etc.

Each section contains fields marked with an asterisk (*), indicating required information. The form is essential for documenting and reporting suspicious transactions to relevant authorities, including the Financial Intelligence Unit (FIU).

Download: https://anti-money-laundering.eu/wp-content/uploads/2024/01/Suspicious-Activity-Report-SAR-with-Transaction.pdf

Suspicious Transaction Report (STR) without Transaction

The document titled „Suspicious Activity Report (SAR) without Transaction“ is a form used to report suspicious activities that do not involve a specific transaction. The form is divided into several sections, each requiring specific information:

  1. Declarations for the Obligated:
    • Name of the Obligated Party
    • Branch Organization
    • Number (for goAML)
    • File Number
    • FIU File Number
    • Reporting by Authorized Organization
  2. General Declarations for the Facts:
    • Reason of the Message
    • Established Facts
    • Business Area
    • Guessed Pretext
    • Miscellaneous Special Urgency
    • Presentation of the Facts
    • Special Information for the FIU (e.g., recommendations for police surveillance or immediate submission to law enforcement authorities)
  3. Goods:
    • Inquires if the facts of the case are related to goods.
  4. Involved:
    • Declarations to 1. Person: Inquiring if an involved person is present.
    • Declarations to 1. Organization: Asking if a participating organization exists.
    • Declarations for the 1. Account: Asking if an involved account is available.
  5. Investments / Remarks:
    • This section is for additional remarks and attachments like copies of legitimation documents, bank statements, commercial register extracts, etc.

Each section contains fields marked with an asterisk (*), indicating required information. The form is designed to comprehensively capture information about suspicious activities without a specific transaction, facilitating the documentation and reporting process to relevant authorities such as the Financial Intelligence Unit (FIU).

Download: https://anti-money-laundering.eu/wp-content/uploads/2024/01/Suspicious-Activity-Report-SAR-without-Transaction.pdf

Reasons for a Suspicious Activity Report (SAR)

The document „Reasons for a Suspicious Activity Report (SAR)“ outlines various reasons that may lead to the filing of an SAR. These reasons are categorized into different sections, each with specific codes and descriptions:

  1. Legal Reasons according to Section 43 (1) GwG:
    • Codes A1000 to A4000, covering aspects like money laundering and terrorist financing, including transactions related to these activities, business relationships, and brokerage businesses.
  2. Determined Facts:
    • Codes B1000 to B2401, focusing on customer-related peculiarities such as politically exposed persons, list hits in sanctions lists, and knowledge from criminal investigations against customers. This section also includes various transaction-related peculiarities like economically implausible transactions, unknown sources of funds, use of anonymous payment procedures, and smurfing (splitting and merging amounts below threshold values).
  3. Business Area:
    • Codes C1001 to C1024, detailing abnormalities related to different types of transactions and financial activities, such as credit, securities, insurance, leasing, foreign trade, currency exchange, prepaid cards, credit cards, e-money, and cryptocurrencies. This section also addresses abnormalities in the purchase or sale of high-value items like property, motor vehicles, precious metals, gemstones, jewelry, art objects, and antiques.
  4. Predicate Offenses of Money Laundering:
    • Codes D1001 to D1020, describing various predicate offenses that can lead to money laundering, including corruption crimes in government offices, fraud, tax crimes, benefits fraud, terrorist financing, state security embargo violations, and other unspecified crimes.

This comprehensive classification helps in identifying and reporting suspicious activities in a structured manner, facilitating the detection and prevention of financial crimes.

Download: https://anti-money-laundering.eu/wp-content/uploads/2024/01/Reasons-for-a-Suspicious-Activity-Report-SAR.pdf

goAML

goAML is an application developed by the United Nations Office on Drugs and Crime (UNODC) specifically designed to assist Financial Intelligence Units (FIUs) of Member States in their efforts to combat money laundering and terrorist financing. The key aspects of goAML include:

Purpose: goAML is aimed at addressing the global challenges of money laundering and terrorist financing. These activities pose significant threats to the security and stability of financial systems worldwide, impede economic growth, and undermine governance structures.

Functionality: The application serves as a critical tool for FIUs by providing a platform to receive, process, and analyze reports and information related to suspicious financial activities. These reports are typically submitted by financial institutions and other entities in compliance with national anti-money laundering and counter-terrorist financing (AML/CTF) laws and regulations.

Role in AML/CTF Efforts: goAML plays a vital role in the AML/CTF infrastructure by helping FIUs gather and analyze data that forms the basis for investigating money laundering, terrorist financing, and other serious criminal activities.

Global Adoption: As of now, goAML is utilized by over 60 member states, and its user base is expanding, with many more countries showing interest in adopting this tool.

Support for FIUs: The application enhances the ability of FIUs to perform their duties more efficiently and effectively. By streamlining the process of data collection and analysis, goAML assists in the timely detection and prevention of financial crimes.

Access: https://goaml.fiu.bund.de/Home

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