From the always-excellent Patrick McKenzie:<\/p>\n\n\n\n
\nA SAR [suspicious activity report] is not a conviction of a crime. It isn\u2019t even an\u00a0accusation<\/em>\u00a0of a crime. It is an interoffice memo documenting an irregularity, about 2-3 pages long. Banks file about\u00a04 million<\/a>\u00a0per year. (There are some non-bank businesses also obliged to file them, but nobody is presently complaining about decasinoing, so ignore that detail. Banks are the\u00a0central<\/em>\u00a0filers of SARs.) For flavor:\u00a0about 10%<\/a>\u00a0are in the bucket Transaction With No Apparent Economic, Business, or Lawful Purpose. FINCEN has\u00a0~300 employees<\/a>\u00a0and so cannot possibly read any significant portion of these memos. They mostly just maintain the system which puts them in a database which is searchable by many law enforcement agencies. The overwhelming majority are write-once read-never.<\/p>\n\n\n\n
Banks are extremely aware that most SARs are low signal, and that a good customer might wander into getting one filed on them. But there are thresholds and risk tolerance levels. And SARs will sometimes, fairly mechanically, cause banks to decide that they probably don\u2019t want to be holding a hot potato. It\u2019s risky, plausibly, and expensive, certainly. At many institutions, for retail accounts, the institution will have serious questions about whether it wants to continue working with you on the second SAR. It will\u00a0probably<\/em>\u00a0not spend that much time thinking deeply about the answer.<\/p>\n\n\n\n
So can the bank simply explain<\/em> to the customer that staff time preparing SARs is expensive and that routinely banking customers who turn out to be real<\/em> money launderers is a great way to end up with billion<\/a> dollar<\/a> fines<\/a>? No, they cannot.<\/p>\n\n\n\n
The typical individual named in a SAR is low-sophistication and cannot meaningfully participate in a discussion with a Compliance officer, because they\u2019re very probably at the social margins. Do you have a favorite axis of disadvantage? Immigrant, no financial background, limited English ability, small business owner, socioeconomic class, etc? The axis has non-zero relevance to one\u2019s probability of getting a SAR filed on oneself due to innocent behavior. Very many people who have SARs filed on them are disadvantaged on several axes simultaneously.<\/p>\n\n\n\n
No, the bank cannot explain why SARs triggered a debanking, because disclosing the existence of a SAR is illegal<\/em>. 12 CFR 21.11(k)<\/a> Yes, it is the law in the United States that a private non-court, in possession of a memo written by a non-intelligence analyst, cannot describe the nature of the non-accusation the memo makes. Nor can it confirm or deny the existence of the memo. This is not a James Bond film. This is not a farce about the security state. This is not a right-wing conspiracy. This is very much<\/em> the law.<\/strong><\/p>\n<\/blockquote>\n\n\n\n
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