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How to enhance your fraud SAR filing process

With fraud on the rise, some immediate actions can help promote a culture of compliance at your organization.

The current state of fraud and Suspicious Activity Report (SAR) filings

Digitalization in the financial services sector has accelerated the number of new attack vectors for fraudsters and allowed bad actors to harness the speed and ease of digital payment services. In addition to their customers, financial institutions are victims of fraud and are suffering significant losses (customers in the US suffered $8.8 billion in losses in 2022¹). The financial services sector is faced with the costs of the fraud itself, time-consuming investigations, reimbursing customer losses and more indirect costs. Institutions must protect themselves from costly regulatory risks by timely and accurately reporting fraudulent activity.

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According to the Financial Crimes Enforcement Network (FinCEN) SAR statistics, of the 4.3 million SARs filed in 2022, 2.1 million were related to fraud, and the top 10 filers of SARs filed approximately 52% of all FY22 SARs.² Based on these numbers, financial institutions are filing fraud-related SARs more than ever, but the filings are concentrated with just a few institutions. Fraud-related SAR filings are projected to increase drastically with the rise in fraud scams and attacks.
 

Recent fraud scams and attacks

Whether your institution has a dedicated fraud SAR filing unit or makes referrals to the anti-money laundering team, it is important to be mindful of the types of fraudulent activity that require reporting. Common types of fraud that go unreported include:

  • Account takeover
  • SIM swapping
  • Imposter scams
  • Check fraud
  • Business and job opportunity scams
  • Prepaid card account takeover
  • Large-scale fraud rings
  • Micro-deposit harvesting
  • Love or romance scams
  • Goldendoodle scams
  • Prize or inheritance scams
  • Investment schemes
  • Phishing and smishing

Actions to take now

The EY Forensic & Integrity Services team has identified immediate actions that can promote a culture of compliance related to fraud SAR filing obligations:

  1. Report suspicious activity if your institution is the victim of an organized fraud attack, often referred to as a large-scale event.
  2. Measure and track fraud scams and attack types to enhance reporting that can identify vulnerabilities, customer education opportunities and potential bank reimbursement responsibilities.
  3. Test the referrals process between the business unit that identifies fraud and the team responsible for SAR filings to verify that SARs are filed appropriately and timely.
  4. Invest in modernization efforts through the implementation of new tools for tracking scams and attacks as well as their associated losses to drive prevention strategies.
  5. Conduct trend analysis to identify fraudulent accounts and their nexus to larger fraud rings and schemes.

Arpi Lal, Anthony Rauco, Josh Vine and Vivian Conley also contributed to this article.


Summary 

The number of new attack vectors for fraudsters is accelerating with digitalization in the financial services sector. Companies should respond by enhancing their fraud SAR filing process.

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