Suspicious Activity Reports (SARs): A Complete Guide for Banking and AML Compliance

Introduction

For banks, fintechs, and MTOs, detecting suspicious activity isn’t optional—it’s mandatory. Suspicious Activity Reports (SARs) are the backbone of AML compliance, helping authorities identify and investigate potential financial crimes, from money laundering to terrorism financing.

Yet, filing SARs can be confusing due to varying requirements worldwide. Failure to comply can result in steep fines. For example, in January 2025, de Volksbank was fined €2.5 million and €20 million by the Dutch Central Bank for late SAR submissions and inadequate AML risk assessments.

This guide will break down what SARs are, who must file them, common triggers, filing procedures, thresholds, and best practices to improve compliance efficiency.

What is a Suspicious Activity Report (SAR)?

A Suspicious Activity Report (SAR) is a formal document that financial institutions submit when they detect transactions or behaviors that might indicate criminal activity. SARs don’t prove wrongdoing—they flag potentially illicit activity for authorities to investigate.

SARs are submitted to a country’s Financial Intelligence Unit (FIU), a national agency responsible for analyzing suspicious financial activity. Depending on jurisdiction, other related reports may also be required, such as:

• Suspicious Transaction Report (STR): Focuses specifically on suspicious transactions, often used internationally.
• Cash Transaction Report (CTR): Filed when cash transactions exceed a set threshold.
• Threshold Transaction Report (TTR): Mandatory for transactions above specific amounts.
• Unusual Transaction Report (UTR): Flags transactions inconsistent with customer behavior.
• International Funds Transfer Report (IFT): Monitors cross-border fund movements.
• Terrorism Financing Report (TFR): Triggered when funds may be linked to terrorist activity.
• Additional Information File (AIF): Provides extra context when requested by the FIU.

Who Must File SARs?

The responsibility to file SARs falls on a broad spectrum of AML-obliged entities:

• Banks and credit unions
• Fintech companies offering payments, wallets, or lending
• Money services businesses (remittances, currency exchanges)
• Cryptocurrency platforms (exchanges, custodians, DeFi services)
• Casinos and gambling operators

Even unregulated businesses can voluntarily submit SARs, which has helped uncover criminal schemes in sectors like car rentals in Germany and Italy.

What Triggers a SAR?

SARs are required when transactions or behaviors raise red flags that may indicate illicit activity. Common triggers include:

• Unusually large or unexplained transfers, especially cross-border
• Structuring or “smurfing” (splitting transactions to avoid detection)
• Rapid fund movement between unrelated accounts
• Cash deposits or withdrawals inconsistent with customer profiles
• Mismatched identity and transaction patterns
• Transactions involving high-risk jurisdictions or sanctioned entities

Some triggers are objective (e.g., US threshold of $5,000 in suspicious activity), while many rely on professional judgment. Strong internal controls and staff training are essential.

Examples of Suspicious Transactions

• Structuring deposits: Multiple cash deposits just under the $10,000 threshold may indicate attempts to avoid mandatory reporting.
• Crypto-to-cash loops: Rapid conversion of crypto to fiat and withdrawals across accounts could signal layering in money laundering.
• Identity red flags: Accounts opened with legitimate-looking documents that immediately transact with high-risk jurisdictions or show unusual activity.

SAR Filing Process

Filing a SAR involves a structured approach to ensure compliance:

• Detection: Potentially suspicious activity is flagged by automated monitoring or compliance staff.
• Investigation: Analysts review the case, gather transaction history, and collect context.
• Decision: Determine if filing is required based on regulatory thresholds and internal risk rules.
• Filing: Submit the SAR electronically via the relevant authority (e.g., FinCEN’s BSA E-Filing System in the US). Reports must include parties involved, transaction details, and justification.
• Recordkeeping: Maintain all supporting documentation for at least five years.
• Confidentiality: SARs are strictly confidential. Informing a customer that a SAR was filed (“tipping off”) is prohibited.

SAR Thresholds

In the US, SARs must be filed for suspicious activity involving potential criminal activity or cash transactions exceeding $10,000.

FATF Recommendation 20 mandates reporting when there’s reasonable suspicion of criminal proceeds or terrorist financing.

Other countries may not have fixed amounts and require filing based on suspicion alone.

Electronic platforms like goAML, BSA E-Filing, AUSTRAC Online, STRO, and JFIU portals are commonly used for SAR submissions. Non-compliance can lead to fines or legal action.

What Happens After a SAR is Filed?

Once submitted, SARs go to the relevant FIU for analysis. FIUs may combine multiple reports to detect patterns or investigate criminal networks. Institutions usually do not receive feedback after submission. Maintaining strict confidentiality is crucial, as “tipping off” is illegal and can carry severe penalties.

SAR vs STR

Improving SAR Compliance and Detection

• AI-driven transaction monitoring: Detect unusual patterns like structuring, layering, or rapid transfers.
• AI-assisted investigation tools: Automate data gathering, entity linkage, and narrative drafting for SARs.
• Integrated regulatory reporting: Connect directly to FIU portals for timely, accurate submissions and maintain a complete audit trail.

These strategies help reduce operational burdens, improve detection, and minimize penalties.

Conclusion

SARs are essential for MTOs, banks, and fintechs to detect suspicious transactions and prevent financial crime. By combining AI-driven monitoring, automated investigation, and integrated reporting, businesses can meet compliance obligations efficiently, reduce operational risk, and maintain trust with regulators and customers.

FAQs