Legislative and bureaucratic impediments to suspicious transaction reporting regimes

Abstract

Begins with the undoubted benefits of suspicious activity reports (SARs) in identifying and indicting terrorist financing schemes and detecting money laundering trends like abuse of telephones card sales and money order transmitters; but comparative analysis of anti‐money laundering efforts in over 20 jurisdictions shows that use of SARs is routinely hindered by legislative and bureaucratic deficiencies. Outlines legislative impediments, of which the most common is the lack of safe harbour protection for financial personnel who report suspicious transactions; another is the absence of a Financial Intelligence Unit (FIU) in a country to oversee the collection and investigations of SARs, and a third is failure to share SAR information with foreign regulators. Moves on to bureaucratic impediments, including failure to train and staff FIUs properly; FIUs also often lack necessary computer systems for effective information exchange, while many jurisdictions put time or other limits on FIU investigation of the huge numbers of SARs generated by banks and other institutions.