In the banking world a SAR is a Suspicious Activity Report. These are filled out to help the government identify illegal activity. Generally its for things like terrorism or drug trafficking, but any illegal activity can be included.
There are guidelines which spell out when a SAR must be filed. They are not clear concerning this situation.
A long time borrower, with perfect in-house credit, has a loan that is up for renewal. According to your institutions guidelines he has to show a repayment source, normally that means a tax return. In the course of the conversation you are told that he didn't file his taxes.
You can not give him the loan. That's not a question. Do you file an SAR?
Does it matter to you that the IRS, not the DEA or FBI or your local cops are the largest user of the SAR data base?
No, because he might have other legitimate methods of repayment. And are you supposed to report just based on knowledge of something?
ReplyDeleteNo, I would not file a SAR.
ReplyDeleteAs I see it, "suspicious activity" as it pertains to terrorism, drug money laundering, etc, does not apply here. There isn't even proof of other illegal activity such as tax evasion, as the fact that the gentleman admitted he hadn't filed a tax return doesn't mean that he won't file one eventually or that he is even required to file one (an assumption you would have to make to categorize not filing as illegal).
Attempting to renew a loan without a tax return does not fall under "suspicious activity", IMO.
As to the second question: Yes, it bothers me, but No, it does not surprise me. Many Congressional acts, such as the USA PATRIOT Act (which also further expanded the BSA and use of SARs), are being used for purposes beyond that for which they were initially designed.
Difster is correct there are other ways to qualify a repayment source. Unfortunately the borrowers loan covenants state he will provide annual tax returns. The rest of the story is that the loan has been renewed over several years WITH OUT getting them.
ReplyDeleteWaterboy's answer is close to what mine was.
I belong to a forum for bankers and someone posted this scenario because it has happened to them. I'm a professional member and post there under my real name and employment info.
I was the only one to go against the "turn him in" crowd. I only drew one supporter after I posted. That supporter could see that doing a SAR in this situation could cause more problems for the bank because of other regulatory requirements.