SARs Spike May Not be 'Defensive'

After claiming for years that bankers were filing ever more suspicious activity reports in response to regulatory pressure, experts are attributing the latest spike to a dramatic rise in actual financial crime.The number of reports filed by depository institutions last year rose nearly 13% from a year earlier — the largest increase in three years — to 733,529, according to a report to be released next month by the Financial Crimes Enforcement Network. It also was the 12th consecutive year, since FinCen started keeping records in 1996, that SARs hit a new high. "When there are difficult economic times, financial fraud becomes the growth industry," Peter Djinis, a lawyer in Sarasota, Fla., and a former FinCen official told The American Banker. "Financial institutions are clearly paying more attention there. They are now being more liberal in reporting not just active fraud but attempted fraud." Until the financial crisis hit, suspicious activity reports were a top source of complaint from bankers, who called them overly burdensome and of little value to law enforcement officials. After lawmakers criticized regulators in 2004 for failure to enforce anti-laundering laws, the agencies put a new emphasis on SAR reporting. The result was a huge increase in filings.