The Crucial Role of CARs in AML Compliance
July 3, 2023
At a glance
- The main takeaway: Businesses that provide financial services of any kind are subject to strict anti-money laundering (AML) regulations. It is strongly recommended by FinCEN that financial institutions also file Continuing Activity Reports (CARs) for any continuing suspicious activity.
- Assess the impact: However, even though CARs are very effective in assisting law enforcement, they are sometimes overlooked for their more common cousin document – Suspicious Activity Reports (SARs). Confusion over how much detail to include in a CAR compounds the situation.
- Take the next step: Understand CAR best practices and work with a Certified Anti-Money Laundering Specialist to set your team up for compliance success.
Schedule a consultation with one of Aprio’s Certified Anti-Money Laundering Specialists (CAMS) now.
The full story:
Suspicious Activity Reports (SARs) are a significant and critical component of an overall Anti-Money Laundering (AML) program. However, there is another type of report that is sometimes given lower priority or consideration: Continuing Activity Reports (CARs).
CARs are essentially follow-up SARs. Submitted to FinCEN to document ongoing suspicious activity, CARs are just as critical to an institution’s AML compliance program. And they can provide an important bridge between law enforcement and financial institutions.
Understanding the role CARs play, when they’re filed, how much information to include, and why they are sometimes overlooked can help you remain compliant and keep your customers protected.
5 questions people ask about Continuing Activity Reports (CARs)
1. What are CARs, exactly?
CARs are comprehensive reports submitted by financial institutions to regulators to document and monitor the ongoing activities of their customers. They are always filed after an initial SAR has been filed on the initial suspicious activity. These reports provide a detailed analysis of a client’s ongoing transactions and financial behavior. CARs highlight any unusual or suspicious patterns that may warrant further investigation, as well as any changes that may have occurred since the initial SAR was filed.
2. When is the best time to file a CAR?
Consistent monitoring of client activities is essential to managing risk and ensuring the prevention of financial crimes. FinCEN guidance states that financial institutions with SAR requirements may file CARs after a 90-day review with the filing deadline being 120 days after the date of the previously related SAR filing. For filings where a subject has been identified, the timeline is as follows:
- Day 0: Identification of suspicious activity and subject
- Day 30: Deadline for initial SAR filing
- Day 120: End of 90-day review
- Day 150: Deadline for CAR with subject information (120 days from the date of the initial SAR filing on Day 30)
3. Why aren’t CARs used as often as SARs?
Unlike SARs, CARs often receive less attention due to their proactive nature. SARs are typically filed when suspicious activity is detected, while CARs require financial institutions to actively monitor client activity to determine if the suspicious activity is continuing. However, this proactive approach is precisely what makes CARs valuable in identifying potential risks and enhancing overall compliance efforts. CARs are also not a requirement by FinCEN, however, they are highly recommended.
4. Why are CARs helpful to Law Enforcement?
CARs provide law enforcement agencies with a comprehensive overview of a client’s financial activity over an extended period of time. CARs allow financial institutions to keep law enforcement up to date on developments on a case, and most importantly, can help expedite an investigation that needs immediate attention. By analyzing CARs, investigators can identify patterns, connections, and trends that might have otherwise gone unnoticed. This information can prove crucial in uncovering illicit activities and building strong cases against criminals.
5. How can CARs be used to assess a client’s risk level?
In some situations, financial institutions can use CARs to evaluate client relationships and determine if termination is warranted to mitigate potential risks.
Writing CARs: 5 best practices for financial institutions
Understanding the purpose and value of regularly submitting CARs is only half of the financial crime prevention equation. Knowing how to submit a CAR and how much detail to include is essential for effective CARs. Following are five best practices to consider following.
1. Include comprehensive transaction details: Provide a detailed account of the client’s financial activity, including transaction types, dates, amounts, and involved parties in every CAR you submit.
2. Document the rationale behind suspicious patterns: If any unusual or alarming patterns are identified, clearly explain the reasons for concern. Support observations with evidence and documentation.
3. Leverage data analytics tools: Data analytics tools can aid in identifying patterns and trends that may require further investigation. Use available tools to boost your powers of observation.
4. Write clearly and concisely: Remember that humans read the CARs you submit. Write in a straightforward and understandable manner, avoiding jargon or unnecessary technical terms.
5. Include initial SAR filing: The information included in the initial SAR filing should also be included at the very top of the CAR narrative, such as important dates and transactions, and the SAR ID. The initial SAR narrative should not be reproduced in its entirety; only the most important details of information should be transferred to the CAR narrative.
A final word
Continuing Activity Reports hold immense potential in the fight against financial crime. By proactively monitoring and reporting ongoing customer activity, financial institutions can assist law enforcement agencies in identifying risks, patterns, and connections that might otherwise go unnoticed, as well as assist law enforcement in triaging cases to investigate. Make the CARs you submit as effective as possible by writing comprehensive and informative reports.
Build a more effective AML program with less effort by partnering with the right advisors. Aprio’s Forensics team includes Certified Anti-Money Laundering Specialists (CAMS) with the extensive regulatory experience you need.
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About the Author
Haley Beatty is a forensic accounting, financial crime reporting expert. Her specialties include Anti-Money Laundering (AML), Know Your Client (KYC) investigation and regulatory compliance. She has advised some of the largest financial institutions in the world and led teams of 500 investigators. Haley works closely with clients to establish and advance AML compliance, monitoring and reporting programs that exceed regulatory requirements. She has experience advising a broad spectrum of financial industry clients from FinTech companies to MSBs and transaction processors.