Suspicious Activity

True or False: A transaction a firm refuses to execute can still give rise to a Suspicious Activity Report.

1. A.False. A report describes a transaction, so an attempt that was never executed leaves nothing to describe.Wrong. The attempt itself is describable and is often the most revealing thing the firm observed.
2. B.True. The obligation reaches attempted transactions, and the attempt is exactly the intent law enforcement wants recorded.Correct. Without this, a customer could shop the same attempt around the industry leaving no trace anywhere.
3. C.False. Declining the business discharges the firm's obligation, since no funds entered the financial system.Wrong. Keeping funds out is the right operational response but it is not a substitute for reporting.
4. D.True, but only where the customer then completes the same transaction at another financial institution.Wrong. The firm has no way to learn that and its obligation cannot depend on another institution's decisions.

Why: The reporting obligation reaches attempted transactions, not only completed ones, and this is one of the most practically important features of the rule. A customer who tries something and is turned away has revealed exactly the intent that law enforcement wants to know about, and the firm that declined the business is often the only institution that saw the attempt. If only completed transactions were reportable, a customer could shop an attempt around the industry indefinitely without leaving a trace anywhere. The firm's refusal is therefore the beginning of its obligation rather than the end of it.

What does screening a customer against the Specially Designated Nationals list actually require of a firm?

1. A.Comparing every customer and transaction against the published list, regardless of size or any suspicion.Correct. The prohibition arises from the identity of the counterparty, so no threshold or suspicion trigger applies.
2. B.Checking customers whose transactions exceed the reporting threshold that triggers a currency report.Wrong. Attaching sanctions screening to a currency threshold would leave every smaller dealing with a prohibited person unexamined.
3. C.Reviewing the list whenever the firm has already decided that a customer's activity is suspicious.Wrong. Suspicion drives the judgment-based reporting obligations, whereas sanctions screening runs unconditionally.
4. D.Confirming at account opening that the customer is not a resident of a country subject to sanctions.Wrong. The list names specific persons and entities, and residence is neither the test nor a substitute for it.

Why: Screening against the SDN list is a mechanical comparison of names against a published list of persons and entities with whom United States persons may not deal. It applies to every customer and every transaction regardless of size, and it does not depend on the firm finding anything suspicious, because the prohibition arises from who the counterparty is rather than from what the transaction looks like. Where a genuine match exists, the firm must block or reject the transaction as the sanctions programme requires and report the action, rather than simply declining the business quietly. This is why sanctions screening sits alongside, and not inside, the judgment-based parts of an anti-money-laundering programme.

What is the fundamental difference between a firm's obligation to file a Currency Transaction Report and its obligation to file a Suspicious Activity Report?

1. A.The currency report is filed with FinCEN while the suspicion report is filed with the firm's designated examining authority.Wrong. Both go to FinCEN, so the recipient is not what separates the two obligations.
2. B.The currency report is mechanical once a currency threshold is crossed; the suspicion report rests on the firm's judgment about the activity.Correct. One is an automatic consequence of an amount and the other is an assessment of meaning, so both can arise from one episode.
3. C.The currency report covers customers while the suspicion report covers the conduct of the firm's own employees.Wrong. Suspicion reports frequently concern customer activity and are not confined to insider conduct.
4. D.The currency report must be filed before the transaction settles; the suspicion report is filed only after an investigation closes.Wrong. Neither report is timed to settlement or to the conclusion of an internal investigation.

Why: A currency transaction report is mechanical: currency transactions are aggregated by customer over a business day, and once the total passes the threshold FinCEN sets, the report is filed whether the activity looks innocent or not. A suspicious activity report rests on judgment, requiring the firm to conclude that a transaction involves funds from illegal activity, is designed to evade reporting requirements, has no business or apparent lawful purpose, or facilitates criminal activity. The two coexist, and the same episode can require both, because a perfectly ordinary large cash deposit generates a currency report while a pattern of deliberately smaller ones generates a suspicion report as well. Filing the mechanical report never discharges the judgment-based one.

Under the information-request provisions of the USA PATRIOT Act, what does FinCEN do when law enforcement is investigating suspected money laundering or terrorist financing?

1. A.It publishes the names of investigation subjects so that institutions may refuse to open accounts for them.Wrong. These requests are confidential rather than published, and they do not prohibit dealing with anyone.
2. B.It transmits subject names to financial institutions, which search their records and report any match back.Correct. One centralised request reaches the whole industry, replacing institution-by-institution subpoenas.
3. C.It obtains a court order compelling each institution to freeze accounts held by the named subjects.Wrong. The mechanism is a records search, and freezing assets is a separate legal process entirely.
4. D.It instructs institutions to file a suspicious activity report on every named subject holding an account.Wrong. A match is reported through the request process itself, and the request does not manufacture suspicion.

Why: FinCEN acts as the single channel between law enforcement and the financial industry: it collects the names of subjects from an investigating agency and transmits them to financial institutions, which search their records for accounts and transactions involving those persons during the period specified. An institution that finds a match reports the match to FinCEN, which routes it back to the requesting agency, and an institution that finds nothing responds accordingly without keeping the names. Centralising the process this way lets one request reach the whole industry at once instead of requiring an agency to subpoena institutions one at a time. The request is a search of existing records and does not by itself require the institution to close an account or file any other report.