Accountants occupying roles within covered financial institutions face obligations to identify and report suspicious financial activity, including Suspicious Activity Reporting, to the Financial Crimes Enforcement Network. These obligations emerge from the Bank Secrecy Act and related regulations administered by FinCEN. For accounting firms and accountants working within financial institutions, understanding how to recognise suspicious activity and file appropriate Suspicious Activity Reports is a fundamental compliance responsibility that directly affects professional liability, regulatory standing and the integrity of the financial system.
This article addresses practical guidance for accountants on identifying suspicious activity, understanding reporting thresholds, and executing the Suspicious Activity Reporting process in accordance with US law and regulatory expectations.
Legal Framework for Suspicious Activity Reporting
Understanding the specific requirements of Suspicious Activity Reporting is crucial for accountants. They must be familiar with the various types of activities that necessitate filing a Suspicious Activity Report to comply with legal obligations.
The authority for Suspicious Activity Reporting derives from the Bank Secrecy Act, codified at 31 USC 5318(g) and implemented through FinCEN regulations at 31 CFR 1010.320 for general reporting requirements and specific regulations for different categories of financial institutions. For banks, the relevant regulation is 31 CFR 1020.320. For money services businesses, the regulation is 31 CFR 1022.320. For broker dealers in securities, the regulation is 31 CFR 1023.320, and for loan and finance companies, the regulation is 31 CFR 1029.320.
The regulations require covered financial institutions to establish procedures designed to identify and report suspicious activity. These procedures must be reasonably designed to detect and cause reporting of suspicious transactions as required by the regulations. The threshold for reporting requires that an institution file a Suspicious Activity Report if it detects a transaction that the institution knows, suspects, or has reason to suspect involves or aggregates at least five thousand dollars and meets specified criteria.
A well-structured and implemented Suspicious Activity Reporting process enables financial institutions to respond appropriately to suspicious transactions. It is imperative that accountants remain vigilant about potential red flags during their reporting duties.
Defining Suspicious Activity
Accountants must ensure that they are adequately trained in the nuances of Suspicious Activity Reporting to fulfil their compliance obligations effectively. Regular training sessions should cover updates in regulation and best practices in identifying suspicious transactions.
Under 31 USC 5318(g) and implementing regulations, suspicious activity includes transactions that the institution knows, suspects or has reason to suspect may involve money laundering or violate the Bank Secrecy Act. For accountants, recognising the elements that constitute suspicious activity requires understanding the nature and purpose of typical transactions and identifying departures from normal patterns.
In accordance with regulatory guidance, suspicious transactions generally include those where the bank or financial institution knows, suspects or has reason to suspect that the transaction involves potential money laundering or that the transaction is designed to evade BSA reporting requirements. The determination should be based on available facts and circumstances known to the accountant or the institution.
Moreover, the emphasis on Suspicious Activity Reporting highlights the importance of thorough documentation and justification for any reports filed, which can protect both the accountants and their institutions from regulatory scrutiny.
Key Transaction Thresholds
The SAR reporting threshold is five thousand dollars under 31 CFR 1020.320 and related regulations. A Suspicious Activity Report must be filed if a transaction involves or aggregates at least five thousand dollars and the institution know, suspects or has reason to suspect that the transaction meets SAR criteria. It is important to note that the mere presence of a transaction at or near the ten-thousand-dollar Currency Transaction Report threshold does not, by itself, require filing a SAR. Rather, the filing obligation arises only when there is knowledge, suspicion or reason to suspect that unlawful activity is involved.
This distinction is critical. As clarified in recent FinCEN guidance issued in October 2025, a financial institution is not required to file a SAR solely because a transaction or series of transactions occurs at or near the ten-thousand-dollar CTR threshold. Instead, a SAR is required only when the institution knows, suspects or has reason to suspect that the activity is designed to evade BSA reporting requirements or otherwise meets specific SAR criteria.
When determining whether to file a Suspicious Activity Report, accountants should consider the nature of the transactions and any previous behaviour patterns of the client that may raise concerns.
Identifying Suspicious Activity Red Flags
Accountants must develop proficiency in recognising red flags that may indicate suspicious activity. The FFIEC and FinCEN have issued guidance identifying common red flag indicators that should alert accountants to conduct further investigation. The following categories represent common areas of concern in the accounting context.
Accountants must develop proficiency in recognising red flags in the context of Suspicious Activity Reporting that may indicate suspicious activity. The FFIEC and FinCEN have issued guidance identifying common red flag indicators relevant to Suspicious Activity Reporting that should alert accountants to conduct further investigation. The following categories represent common areas of concern in the accounting context.
Structuring and Transaction Patterns
By understanding the implications of Suspicious Activity Reporting, accountants can better navigate their responsibilities and ensure compliance with regulations while safeguarding their clients’ interests.
Structuring, also referred to as smurfing, involves breaking down large transactions into smaller amounts to evade the Currency Transaction Report requirement or to circumvent SAR filing obligations. Under 31 USC 5324 and 31 CFR 1010.100, structuring is specifically prohibited. Patterns that may indicate structuring include deposits or withdrawals structured in amounts just below ten thousand dollars, sometimes as much as 5 times per week, repeated transactions at or below nine thousand nine hundred ninety nine dollars over a short period, deposits made across multiple branches or multiple banks to remain beneath reporting thresholds, or deposits made by multiple individuals on the same day with subsequent consolidation.
The prohibition on structuring applies to persons who conduct or attempt to conduct transactions in any amount at one or more financial institutions, on one or more days, in any manner for the purpose of evading CTR reporting requirements. This includes the breaking down of a single sum of currency exceeding ten thousand dollars into smaller sums, including sums at or below ten thousand dollars.
Cash Transaction Patterns
Furthermore, the role of accountants in Suspicious Activity Reporting is essential in maintaining the integrity of the financial system, as they often act as the first line of defence against financial crime.
Large or unusual cash transactions warrant investigation. Specific red flags in the cash context include sudden and unexplained increases in cash deposits or withdrawals from an account with previously minimal cash activity, deposits of round dollar amounts such as one hundred thousand dollars, nine hundred thousand dollars or one million dollars without clear business justification, customers requesting payment in cash when cheques or wire transfers would be more typical, or requests to have funds held in cash rather than invested or deposited.
Inconsistency with Known Business Activities
The ongoing evolution of regulations surrounding Suspicious Activity Reporting requires accountants to remain vigilant and proactive in adapting to new challenges and compliance expectations.
A fundamental principle of suspicious activity detection is identifying transactions inconsistent with the customer’s known business activities or financial profile. Specific indicators include transactions at odds with the stated nature of the customer’s business, transactions involving countries or entities with weak AML frameworks or high-risk jurisdictions without apparent business reason, account activity dramatically increasing in frequency or volume without satisfactory explanation, or funds flowing through an account with no apparent business purpose.
Third Party and Beneficiary Concerns
Investing in technology that supports Suspicious Activity Reporting can enhance the capability of financial institutions to detect and respond to suspicious activities rapidly.
Transactions involving unclear beneficiaries or third parties warrant investigation. Red flags include payments directed to unrelated third parties without clear commercial justification, deposits in accounts followed immediately by transfers to unrelated parties, customers insisting that beneficial ownership or control structures be obscured, customers providing inconsistent information about the true beneficial owner or controller of funds, or use of shell companies or complex corporate structures without legitimate business purpose.
As accountants engage with clients, they should build awareness around the importance of Suspicious Activity Reporting and how it relates to their operations and compliance.
Customer Behaviour Indicators
Ultimately, understanding the landscape of Suspicious Activity Reporting allows accountants to contribute effectively to their organisations while ensuring their clients remain compliant with regulatory requirements.
The behaviour and statements of customers can reveal suspicious intent. Accountants should be alert to customers who are evasive or uncooperative when questioned about transaction purposes or beneficial ownership, customers demonstrating an unusual level of sophistication in structuring or layering transactions despite their claimed business profile, customers requesting unusual confidentiality or secrecy arrangements, customers providing false or inconsistent information about their business or the nature of transactions, or customers attempting to establish multiple accounts at different branches or institutions.
Transaction Velocity and Timing
The speed and timing of transactions can signal suspicious activity. Red flags include rapid movement of funds in and out of an account with little or no intermediary activity, deposits followed immediately by withdrawals of substantially the same amounts, sudden spikes in transaction volume after extended periods of minimal activity, transactions occurring at unusual times or outside normal business patterns, or movement of funds between accounts at the same institution followed by movement back to the original account.
Documentary and Verification Issues
Problems with documentation or customer verification may signal suspicious activity. Specific concerns include customer identification documents that appear altered, forged or otherwise suspicious, inconsistencies between identification documents and customer statements, customers refusing or unable to provide supporting documentation for transactions, discrepancies between transaction documentation and actual transactions observed, or customer information that differs from public records or known facts.
Reporting Procedures and Timelines
Timing Requirements
The SAR filing deadline is critical. Under 31 CFR 1020.320(b)(3) and related regulations for other financial institution types, a Suspicious Activity Report must be filed no later than thirty calendar days after the date of initial detection of facts that may constitute a basis for filing a SAR. If no suspect was identified on the date of detection of the incident requiring filing, the institution may delay filing for an additional 30 calendar days to identify a suspect, but in no case shall reporting be delayed more than 60 calendar days after the date of initial detection of a reportable transaction.
For situations involving violations that require immediate attention, such as ongoing money laundering schemes or suspected terrorist financing, the institution must immediately notify by telephone an appropriate law enforcement authority in addition to filing a timely SAR.
Filing Procedures
Suspicious Activity Reports must be filed with FinCEN through the BSA E-Filing System. All filed SARs and supporting documentation must be retained for 5 years from the date of filing in accordance with 31 CFR 1010.430. The SAR must contain specified information including identification of the reporting institution, the subject of the suspicious activity, the nature of the transaction, the amount involved, and a narrative describing the suspicious activity.
The narrative portion of the SAR should focus on the information necessary to enable readers to understand the activity reported and what was unusual or irregular about the activity. The narrative may not exceed twenty thousand characters.
Continuing Activity Reports
Accountants should understand that continuing suspicious activity may require subsequent filings. FinCEN previously suggested that institutions file SARs for continuing suspicious activity on a periodic basis. In recent guidance issued in October 2025, FinCEN clarified that this approach is not mandatory. Instead, institutions may file SARs for continuing activity as appropriate in line with applicable timelines. For institutions that elect to file continuing activity SARs in accordance with FinCEN’s guidance, the timeline provides for filing a continuing activity report within 120 calendar days of the initial SAR.
Confidentiality and Safe Harbour Protections
Confidentiality of SARs
A fundamental protection is the confidentiality of Suspicious Activity Reports. Under 31 USC 5318(g)(2) and 31 CFR 1020.320(e), SARs and any information that would reveal the existence of a SAR are confidential and may not be disclosed except to FinCEN or appropriate law enforcement authorities. The institution and all directors, officers, employees and agents of the institution are prohibited from disclosing a SAR or any information that would reveal the existence of a SAR except in specified circumstances.
This confidentiality obligation is absolute. An accountant may not advise a customer that a SAR has been filed, may not discuss the SAR with other parties except in limited circumstances, and must decline to produce the SAR if summoned unless authorised by FinCEN or pursuant to an exception in the regulations.
Safe Harbour Protections
Federal law provides safe harbour protections for persons who file SARs. Under 31 USC 5318(g)(3), an institution, its directors, officers, employees and agents that make a disclosure to government authorities or that file or prepare a SAR shall not be liable to any person under any law or regulation of the United States, or any state or local law, for the disclosure or for failure to provide notice of the disclosure to the person who is the subject of the SAR.
These protections are broad and protect both mandatory and voluntary SAR filings. An accountant may rely on these protections when filing a SAR based on reasonable grounds to suspect suspicious activity.
Practical Application: Red Flag Identification in Accounting Contexts
For accountants working within accounting firms or within financial institutions, recognising suspicious activity requires combining regulatory knowledge with understanding of the specific client base and transaction patterns. The following scenarios illustrate common concerns.
Scenario 1: Structuring in Bookkeeping
An accounting firm providing bookkeeping services for a small retail business notice that over a 6-month period, the client has begun making frequent cash deposits in amounts of nine thousand dollars, sometimes as much as 5 times per week. The client’s stated business volume has not increased. The deposits are made at different branches of the same bank. After the deposits clear, the funds are transferred to an account at a different financial institution. These facts suggest possible structuring and should trigger a SAR.
Scenario 2: Inconsistency with Known Business
An accountant reviewing the accounts of a management consulting firm notes that the firm has suddenly began receiving regular deposits from a wholesale precious metals supplier. The firm has no apparent connection to that industry. Payments from the consulting firm’s account to entities in jurisdictions with weak AML frameworks have increased dramatically. The business owner provides evasive responses when questioned about the new business activities. This pattern of inconsistent business activity and suspicious geographic connections warrants investigation and potentially a SAR.
Scenario 3: Unusual Beneficial Ownership Structures
During tax preparation work, an accountant discovers that a client has recently established three new business entities in different states, each with opaque ownership structures involving multiple layers and offshore entities. The stated business purpose is vague. Significant funds are being transferred between these entities daily with no clear business rationale. These facts suggest possible use of the corporate structures to obscure beneficial ownership and facilitate money laundering, warranting a SAR.
Implementing Effective Detection Systems
Procedures and Documentation
Accounting firms and accountants working within covered financial institutions should establish written procedures designed to identify suspicious activity. These procedures should include specific indicators or red flags relevant to the institution’s customer base and products. The procedures should address the process for analysing transactions, determining whether suspicious activity thresholds are met, and escalating concerns to the compliance officer.
Training and Awareness
All accounting personnel involved in client service, financial transactions or compliance should receive training on AML obligations and suspicious activity identification. Training should address red flag indicators relevant to the accountant’s specific responsibilities, the SAR filing process including timelines and thresholds, confidentiality obligations, and safe harbour protections. Documentation of training completion should be maintained.
Read More: US AML Compliance Requirements For Accountants.
Monitoring and Transaction Review
Effective suspicious activity detection requires ongoing monitoring of client accounts and transactions. For many accounting firms, this monitoring occurs during routine service delivery as accountants review client financial records and transactions. However, formal procedures should document the monitoring process and require staff to escalate identified concerns.
Accountants should remain alert to changes in customer behaviour or transaction patterns. A sudden increase in activity, new business relationships, or changes in the location or nature of transactions should prompt investigation.
Distinguishing Legitimate from Suspicious Activity
A critical challenge for accountants is distinguishing between legitimate business activity and suspicious activity warranting a SAR. Not all unusual transactions are suspicious. An accountant should document the reasoning underlying the decision to file or decline to file a SAR.
FinCEN has clarified that there is no regulatory requirement to document a decision not to file a SAR. However, accountants may choose to maintain brief documentation of significant analysis undertaken in evaluating whether a SAR should be filed, particularly in complex situations.
Common Mistakes and Pitfalls
Over-reporting Based on Transaction Amount Alone
A common error is filing a SAR solely because a transaction exceeds specified dollar thresholds. As FinCEN has clarified, the presence of a transaction at the five thousand dollar or ten-thousand-dollar threshold, standing alone, does not trigger a SAR obligation. The accountant must have knowledge, suspicion or reason to suspect that unlawful activity is involved.
Failure to Escalate Obvious Red Flags
Conversely, accountants sometimes fail to escalate transactions exhibiting multiple red flags. A transaction showing several concerning indicators should be escalated for analysis and potential SAR filing even if no single indicator is conclusive.
Inadequate Narrative Documentation
SARs that lack sufficient detail or contain vague narratives reduce their utility to law enforcement. The narrative should clearly explain what activity occurred, what made the activity suspicious, and what facts support the conclusion that suspicion is warranted.
Premature Disclosure
A critical error is disclosing to a customer that a SAR has been filed or is under consideration. Such disclosure violates the confidentiality obligations under 31 USC 5318(g)(2) and may result in regulatory sanctions.
Recent Regulatory Developments
In October 2025, FinCEN issued updated guidance addressing SAR reporting requirements. The guidance clarifies several important points relevant to accountants. First, transactions at or near the ten-thousand-dollar CTR threshold do not, by themselves, require SAR filing. Second, the timeline for continuing activity reporting is flexible and not mandatory at fixed intervals. Third, institutions are not required to conduct periodic reviews following a SAR to determine whether suspicious activity continues. Instead, institutions should rely on risk-based monitoring systems to identify and report suspicious activity as detected.
These clarifications reflect FinCEN’s commitment to ensuring that SAR filings focus on activities providing genuine value to law enforcement rather than routine filings based solely on transaction amounts.
Conclusion
For accountants working within covered financial institutions, understanding how to identify and report suspicious activity is essential to compliance with BSA obligations and to contributing to national security and law enforcement efforts. The suspicious activity reporting system depends on financial institutions and their personnel identifying transactions or patterns that may indicate money laundering, terrorist financing or other financial crimes.
Accountants should maintain awareness of common red flag indicators, understand the applicable thresholds and timelines for SAR filing, and implement procedures designed to identify suspicious activity within their institutions or client base. The safe harbour protections under 31 USC 5318(g)(3) and the confidentiality obligations under 31 USC 5318(g)(2) establish clear legal frameworks within which accountants can fulfil their reporting obligations.
The regulatory environment for suspicious activity reporting continues to evolve. Recent FinCEN guidance has streamlined expectations and clarified that SAR filings should focus on activities providing genuine intelligence value rather than routine filings based solely on transaction thresholds. By maintaining awareness of regulatory developments and implementing effective detection and reporting procedures, accountants can contribute meaningfully to the effort to prevent financial crimes and protect the integrity of the financial system.
The responsibility to identify and report suspicious activity is both a legal obligation and a professional duty. Accountants fulfilling this responsibility with diligence and care provide essential support to law enforcement agencies and contribute to the broader effort to combat money laundering, terrorist financing and other financial crimes affecting the security and integrity of the financial system.
As professionals, accountants play a crucial role in the Suspicious Activity Reporting ecosystem and must remain informed about industry changes and regulatory updates.
