What action should a compliance officer take upon identifying potential money laundering activities?

The appropriate action for a compliance officer upon identifying potential money laundering activities is to file a Suspicious Activity Report (SAR). Filing a SAR is a crucial step because it ensures that the relevant authorities are notified of the suspect activities, enabling them to investigate further. SARs are specifically designed for financial institutions to report any suspicious behavior that may indicate money laundering or other financial crimes.

This process not only helps in complying with regulatory requirements but also contributes to the broader effort of preventing and detecting criminal activity in the financial system. Proper documentation in the form of a SAR can also provide law enforcement with valuable information about the reported activities, which can be critical for ongoing investigations.

While reporting to law enforcement might seem like a direct action, it's generally advised that institutions first file a SAR instead of bypassing this step. Conducting an internal investigation could delay necessary reporting, which is vital in money laundering cases where time-sensitive actions are often needed. Filing a Personnel Action Report is not relevant in this context, as it pertains more to employment-related concerns rather than compliance with anti-money laundering regulations.