8.3 SARs, CTRs, OFAC, Information Sharing, and AML Red Flags

Investment Company and Variable Contracts Products Principal Series 26

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1 Chapter 1: Registration of the Broker-Dealer and Its Associated Persons

1.1 Broker-Dealer Registration, FINRA Membership, and Firm Filings 1.2 Individual Registration: Forms U4 and U5, Registration Categories, and Exempt Persons 1.3 Pre-Hire Screening, Fingerprinting, and Statutory Disqualification 1.4 Heightened Supervision, Interim Plans, and the Taping Rule 1.5 Broker-Dealers, Investment Advisers, Dual Registrants, and Unregistered Entities

2 Chapter 2: Training, Continuing Education, and Product Knowledge

2.1 Continuing Education (Rule 1240), the Maintaining Qualifications Program, and the Annual Compliance Meeting 2.2 The Investment Company Act of 1940: Classifications, Registration, and Fund Governance 2.3 Mutual Fund Pricing, Redemption, Exchanges, Sales Charges, and Share Classes 2.4 Variable Annuities and Variable Life Insurance: Structure, Charges, and Rule 2320 2.5 Closed-End and Interval Funds, UITs, Money Market Funds, 529 Plans, and Investment Risks

3 Chapter 3: Supervisory System, Conduct Standards, Insider Trading, and Discipline

3.1 The Supervisory System, Written Supervisory Procedures, and Standards of Conduct 3.2 Insider Trading, Information Barriers, and Personal Trading Supervision 3.3 FINRA Investigations, Disciplinary Proceedings, Sanctions, and Exemptions

4 Chapter 4: Communications with the Public

4.1 Communications Categories, Principal Approval, Filing, and Recordkeeping (Rule 2210) 4.2 Content Standards, Investment Company Advertising, and Professional Designations 4.3 Variable Contract Communications, Fund Rankings, Bond Fund Volatility Ratings, and Investment Analysis Tools 4.4 Correspondence and Internal Communications, Social Media, Public Appearances, and Telemarketing

5 Chapter 5: Recommendations, Customer Accounts, and Product Sales Supervision

5.1 Regulation Best Interest, Conflicts, and Form CRS 5.2 Know Your Customer, FINRA Suitability, and Institutional Accounts 5.3 New Accounts, Customer Authority, Discretion, and Order Handling 5.4 Mutual Fund Breakpoints, Share Classes, and Switching Supervision 5.5 Deferred Variable Annuities and the Seven-Business-Day Principal Review 5.6 Prospectuses, Summary Prospectuses, SAIs, and Ongoing Disclosures

6 Chapter 6: Compensation, Outside Activities, and Personal Conduct

6.1 Cash Compensation, Distribution Arrangements, and Conflicts 6.2 Gifts, Gratuities, and Business Entertainment (Rule 3220) 6.3 Training Meetings, Sales Contests, and Non-Cash Compensation 6.4 Referral Payments, Bank Networking, and Unregistered Persons 6.5 Outside Business Activities, Private Securities Transactions, and Rule 3290 Transition 6.6 Outside Accounts, Borrowing and Lending, Account Sharing, and Guarantees

7 Chapter 7: Customer Account Operations, Transfers, and Privacy

7.1 Account Records, Trusted Contacts, Confirmations, and Statements 7.2 Cash Accounts, T+1 Settlement, Regulation T, Extensions, and Freeriding 7.3 ACATS Transfers, Transfer-on-Death Accounts, and Account Changes 7.4 Regulation S-P, Incident Response, Service Providers, and Identity Theft

8 Chapter 8: Anti-Money Laundering, Customer Identification, and Sanctions

8.1 AML Program, Independent Testing, Training, and Governance 8.2 Customer Identification, Due Diligence, and Beneficial Ownership 8.3 SARs, CTRs, OFAC, Information Sharing, and AML Red Flags

9 Chapter 9: Supervisory Controls, Business Continuity, and Regulatory Reporting

9.1 Supervisory Controls, Annual Testing, and CEO Certification 9.2 Business Continuity, Systems Resilience, Cybersecurity, and Vendors 9.3 Rule 4530, FOCUS and Annual Reports, and Customer-Asset Events

10 Chapter 10: Office Classifications, Inspections, and Records

10.1 OSJs, Branches, RSLs, and Inspection Cycles 10.2 Inspection Reports, Independent Review, Signage, and Office Files 10.3 Broker-Dealer Books and Records, Electronic Storage, and Correspondence

11 Chapter 11: Complaints, Arbitration, Mediation, and Expungement

11.1 Customer Complaints, Investigation, Retention, and Reporting 11.2 Predispute Agreements, Arbitration Codes, Eligibility, Panels, and Awards 11.3 Mediation and Customer-Dispute Expungement

12 Chapter 12: Financial Responsibility, Membership Changes, and Investor Protection

12.1 Net Capital, Minimum Tiers, Haircuts, and Early Warning 12.2 Customer Protection, Possession or Control, Reserve Formula, and Exemptions 12.3 New-Product Review and Continuing Membership Applications 12.4 SIPC, Fidelity Bonds, Proxy Materials, and Financial Reports

8.3 SARs, CTRs, OFAC, Information Sharing, and AML Red Flags

Key Takeaways Explain This Topic AI

Broker-dealers file SARs for covered suspicious transactions involving at least $5,000, generally within 30 calendar days of initial detection or up to 60 days when no suspect is identified.

SARs and supporting documentation are retained for five years, and the existence or consideration of a SAR must not be disclosed to its subject.

A CTR covers more than $10,000 in currency by or on behalf of one person in one business day, aggregated when the firm knows the transactions are related.

OFAC sanctions screening and blocking or rejecting treatment depend on the applicable sanctions program; a confirmed blocked-property event is reported on the required timetable.

USA PATRIOT Act Sections 314(a) and 314(b) support government queries and voluntary protected information sharing under different conditions.

Last updated: September 2026

Suspicious Activity Reports

Under the broker-dealer SAR rule, a firm generally files a Suspicious Activity Report for a transaction conducted or attempted by, at, or through the broker-dealer involving at least $5,000 when it knows, suspects or has reason to suspect that the transaction involves illegal funds, seeks to evade BSA requirements, lacks an apparent lawful purpose after reasonable review, or uses the firm to facilitate crime.

The firm files no later than 30 calendar days after initial detection of facts that may constitute a basis for filing. If no suspect is identified, the period may extend to 60 calendar days , but the firm cannot delay merely to finish every investigative step. Urgent ongoing criminal activity may require immediate law-enforcement contact in addition to the SAR.

The SAR and supporting documentation are retained for five years . Personnel must not disclose a SAR or reveal that one is being considered to its subject or another unauthorized person. Customer-facing staff can request information or explain a restriction without tipping off the subject.

Currency Transaction Reports and Structuring

A Currency Transaction Report is required for more than $10,000 in currency received or paid by, through or to the institution on behalf of one person during one business day. Known related currency transactions are aggregated. Currency means coin and paper money; a check or wire is not currency merely because it represents dollars. The CTR generally is filed within 15 calendar days and retained for five years.

Structuring is arranging transactions to evade BSA reporting or recordkeeping. Two $6,000 cash deposits can require a CTR when aggregated and can also support a SAR if the pattern was designed to evade reporting. A firm policy refusing physical cash reduces exposure but does not excuse review of attempted transactions or cash equivalents used suspiciously.

OFAC Sanctions

OFAC administers sanctions programs and the Specially Designated Nationals and Blocked Persons List. Firms screen customers, beneficial owners, counterparties and transactions using risk-based controls. A potential match must be resolved using identifiers; a similar name alone is not a confirmed match.

The required response depends on the sanctions program. Some transactions must be blocked and assets placed in an interest-bearing blocked account; others must be rejected rather than blocked. A firm should not state that every OFAC match receives identical treatment. Initial reports of blocked property are generally due to OFAC within 10 business days , with other reports and records required by regulation.

Section 314 Information Sharing

Under Section 314(a) , FinCEN sends law-enforcement requests through financial institutions, which search designated records and report any positive matches through the specified process, generally within 14 days. The request and search are confidential. Section 314(b) is a voluntary information-sharing safe harbor among eligible financial institutions that have filed the required notice and follow its use and confidentiality limits. It permits sharing to identify and report possible money laundering or terrorist activity; it is not permission to share data for marketing.

Packaged-Product Red Flags

Pattern Why it matters

Purchase followed by quick redemption despite a load or surrender charge Customer appears indifferent to economic loss and may be moving value

Free-look cancellation with refund to a different person or bank Possible layering, fraud or third-party funding

Repeated fund-family switches and offshore wires Obscured trail and activity inconsistent with investment purpose

Multiple customers using the same address, phone or bank account Possible nominee, synthetic identity or coordinated control

Sudden liquidation after an ownership or address change Account takeover, exploitation or sanctions concern

The principal documents the facts, sources reviewed, rationale and escalation. A decision not to file requires as much disciplined reasoning as a decision to file, and repeated alerts should be considered together rather than closed one by one.

Case Documentation

A SAR case should separate facts from inference and identify the relevant dates, accounts, persons, amounts, instruments and disposition of funds. The narrative should explain why the activity is unusual for the customer and describe supporting documents without inserting unsupported conclusions. Continuing activity is reviewed for supplemental filings under current procedures.

OFAC false-positive resolution should preserve the identifiers compared and the reason for release. A rushed name-only decision can either freeze an innocent customer or release blocked property. Updates to sanctions programs and lists require prompt screening of existing relationships under the firm's risk-based design.