How do businesses typically report suspicious activities?

Businesses typically report suspicious activities by filing a Suspicious Activity Report (SAR) with regulatory authorities. This process is a critical component of anti-money laundering (AML) regulations and is required under the Bank Secrecy Act (BSA) in the United States. When a financial institution or designated non-financial business suspects that a transaction may involve funds derived from illegal activities or attempts to hide those funds, they must document their findings and submit a SAR to the appropriate regulatory body, such as the Financial Crimes Enforcement Network (FinCEN).

Filing a SAR not only helps in tracking criminal activity but also aids in the enforcement of laws designed to combat money laundering and other financial crimes. It is a legal obligation and also serves to protect the reporting institution from potential liability, demonstrating that they took the necessary steps to report illicit behavior.

Other options, while relevant to overall compliance and risk management, do not specifically focus on the direct reporting of suspicious activities as required by law. Internal audits help assess compliance and detect issues, awareness programs educate employees on recognizing suspicious behavior, and reporting to local law enforcement might not meet the specific legal requirements set forth for financial institutions regarding SARs.