There are often connecting dots between criminal activity and financial transactions:
Chhaya Pandya is Assistant General Manager (Accounts) at Ahmedabad-based Gujarat State Cooperative Bank and has been working with the apex level state cooperative bank for the last 30 years. During her banking career, she has handled advances, investment and banking divisions and reported CRT, STR & other statutory returns to the Income Tax Department and regulators from time to time. She has contributed in the preparation for implementation of various policies for KYC, deposits, ALM, risk management policy and compliance in the bank. Currently, she is handling all types of audits and compliance including statutory audit, internal audit as well as tax audit. She also has been involved in the preparation of financials and other (MIS) reports. And as a special task, she handles monitoring on the timely and accurately submission of all types of statutory returns to the regulators.
Timely filing of SAR, or Suspicious Activity Reports, help users to identify and respond promptly to potential criminal activities. Chhaya Pandya says the bank files on an average 4 statutory reports every month. She says late filing of SARs can be particularly detrimental when terrorist financing is suspected, where asset seizures are possible, or when significant fraud threatens the viability of a depository institution. For faster process, the bank managements should be encouraged to contact law enforcement agencies directly to ensure immediate attention to the matter.”
RISK MANAGEMENT, TECHNOLOGY
On a micro level, it is beneficial for banks and financial institutions to establish comprehensive procedures for SAR preparation, reviews, and approvals, she says, adding: “It is important for financial institutions to establish strong overall risk management practices, effective policies and procedures, strong management information systems, appropriate staffing and senior management over-sight, comprehensive training and periodic independent testing. Financial institutions should design AML programs on a risk-basis and arrange training on recognizing suspicious activity, so as to maintain an effective AML compliance program, as well as protect the institution from potential abuse by criminals.”
The bank uses CBS solution from Tata Consultancy Services. Its IT team consists of 32 persons, and 4 employees are allotted for SAR functions.
According to Chhaya, there are certain suspicious activities, which are easy to catch and certain which are difficult to catch. Financial connections to crime, terrorism, drug trafficking, money laundering, bank fraud and other financial crimes are common patterns of suspicious activity, says she.
Elaborating, she says: “There are often connecting dots between criminal activity and the financial transactions. Further, incomplete, incorrect, illogical, or disorganized narratives can make analysis difficult and adversely affect users’ decisions and they do not describe suspect relationships or do not explain the nature of ongoing suspicious activity, which can reduce the effectiveness of searches. If the information contained in tables, spreadsheets and similar attachments is not punched into the database, then it becomes difficult to catch suspicious activity pattern.”
Chhaya says there are certain steps that can help to achieve higher targets and make better plans for complete and appropriate SAR information: Collect, organize and maintain data/information through research and analysis to gather as much information as possible about the potentially suspicious activity. Generally, the guidance indicates that the filing institution should consider all pertinent information it has received through the account opening process and due diligence efforts.
She says: “One should prepare a complete and sufficient SAR, the narrative should provide extensive tips on what information to collect and how to organize it effectively. SAR should be complete as fully as possible. With the suspected activity, SAR supporting documentation should be described in the SAR narrative and should refer to all documents or records that assist a financial institution in making the determination that certain activity requires a SAR filing. Documentation may include transaction records, new account information, tape recordings, e-mail messages, and correspondence, account opening information for all suspects, account statements for all affected product types, photocopies (front and back) of all applicable financial instruments associated with the suspicious movement of funds, including monetary instruments and deposit receipts. Our in-house IT team generates SARs.”