Suspicious Activity Reporting – Unleashing Imagination as an Analytic Technique

Always a big-ticket issue within the financial services industry – this article does not dive into the legislative/regulatory/policymaking level debate but focuses on the analytical approach to suspicious activity reporting.

On the eve of the 17th anniversary of September 11th – I couldn’t help but think how a Suspicious Activity Report (SAR) may disrupt and prevent the next terrorist attack.

I worry however, that today’s suspicious activity reporting regime is overly restricted by flawed parameters. Moreover, the regime has us constantly looking over our shoulders and in many ways backwards.

To elaborate on the point, think about debatable rules like the 30-day SAR filing deadline. Disjointed policies and procedures that create paralysis instead of meaningful analysis. Typologies, red flags, and generic thresholds, created by “experts” that have likely never spent a minute actually targeting an illicit financial network, that have designed a false direction for what we are hunting. Constant scrutiny and criticism from quality control processes, audits, and examinations that create an almost unsustainable rigor for most that embark on this type of work.

The aforementioned leaves us so hyper-sensitive and confined that the majority of questions we ask often relate to the following:

“Will I get through the analysis within the deadline?”

“Why is the procedure instructing me to do this when the policy states that?”

“I don’t see any red flags from this typology (alert type) list so I don’t need to file a SAR, right?”

“What is QC, audit, and the regulator going to question about my analysis and decision this time?”

A process driven by these questions is a process underscored by restrictive parameters. A workforce that must operate within these parameters is a workforce unignited, uninspired, and unmotivated because they are distracted from the real mission, the important mission.

Legislators, policymakers, regulators, law enforcement, intelligence professionals, and industry practitioners must see the disconnect and must act. Continuing to view the purpose behind a SAR filing as a regulatory obligation not only equates to failure, but may equate to another national tragedy.

The very nature of suspicious activity reporting is based on analysis – and to be more precise intelligence analysis. In the world of intelligence analysis – we apply techniques in the examination or interpretation of what is known. Recent history (post-9/11) has taught us that intelligence analysis is much more than an examination of the known. The unknown and attempting to identify it and understand it is the real work behind intelligence analysis.

With regard to suspicious activity reporting – most of the examination centers around missing pieces (things that are not known) – parameters lend no useful tool or technique to understanding the unknown. Only an imagination, unrestricted and uninhibited, can rigorously determine or make sense of the unknown to yield real intelligence. The kind of intelligence (or SAR) that may one day save lives.

“Imagination is more important than knowledge. For knowledge is limited to all we now know and understand, while imagination embraces the entire world, and all there ever will be to know and understand.”– Albert Einstein