US Bank SAR Rule: How 31 CFR 1020.320 Works for Advisers

When a US bank suspects that a client's money is dirty, the rule it follows is 31 CFR 1020.320, the bank suspicious activity report (SAR) rule. Accountants are not the people who file under this section, but you will meet its effects: a client's bank may ask unexpected questions, freeze an account or close it without explaining why, and the reason it cannot explain is that the rule forbids it. This guide sets out what the rule says, using the text on Cornell's Legal Information Institute site, so that accountants and finance students understand the system on the other side of their clients' bank accounts. For the UK equivalent, see our guide to suspicious activity reports and tipping off.

Please read "What we could not confirm" at the end. This section applies to banks, and the page we read does not address accounting firms, so nothing here is a statement of what an accountant must file.

Who the rule applies to

Section 1020.320 applies to banks. It requires them to report suspicious transactions to the Treasury Department. Other parts of the regulations contain similar SAR rules for other types of financial institution, which we did not read. Our overview of US AML requirements for CPAs explains why accounting firms are treated differently.

What triggers a report

A report is required for a transaction conducted or attempted by, at or through the bank that involves at least $5,000 in funds or other assets, and where the bank knows, suspects or has reason to suspect one of several things: that the funds come from illegal activity, that the transaction is designed to evade Bank Secrecy Act requirements, or that it has no apparent lawful purpose. The test includes attempted transactions, so a client who backs out when a bank asks questions can still be the subject of a report.

The deadlines

The report is made on a SAR filed with FinCEN, and the bank must collect supporting documentation. It is due 30 calendar days after the bank first detects facts that may warrant a report. If no suspect was identified at that point, the bank may take an extra 30 days to identify one, but reporting may not be delayed by more than 60 calendar days. For urgent matters such as ongoing money laundering, the bank must also phone an appropriate law enforcement authority immediately.

Confidentiality

A SAR, and any information that would reveal its existence, is confidential. Banks and their staff generally may not disclose either. If a bank is subpoenaed or otherwise asked for a SAR, it must decline, cite the section and 31 U.S.C. 5318(g)(2)(A)(i), and notify FinCEN. Limited sharing is allowed, for example with law enforcement, regulators or other institutions for joint SARs. This is the source of the experience many advisers have: a bank will not tell a client why it has restricted an account, because it cannot. The UK has a similar principle in its tipping-off rules, described in the guide linked at the top.

The safe harbor

Banks and their staff are protected from liability for disclosures made under this section, to the extent provided by 31 U.S.C. 5318(g)(3). This protection is why banks file when in doubt, and it means a client has limited legal routes to challenge a report.

Record retention

Banks must keep a copy of each SAR and its supporting documentation for five years from the filing date, and make the supporting documentation available to authorised authorities on request.

What this means for accountants

Our own observations, not legal advice. First, advise clients that a bank may restrict or close an account without giving a reason, and that the bank's silence is required by law rather than rudeness. Second, help clients to keep clear paper trails for large or unusual payments, since the trigger includes transactions with no apparent lawful purpose. Third, do not tell a client that a SAR has been filed if you hear that from a bank contact. Whether such a disclosure by an accountant is itself restricted depends on rules we did not read, so take advice before saying anything. For structured study, see our CPD courses.

Frequently asked questions

Can a bank tell its client that it filed a SAR?

No. The rule says a SAR and information revealing its existence are confidential, with limited exceptions.

What is the dollar threshold?

At least $5,000 in funds or other assets for the transaction types the section covers.

How long does a bank have to file?

30 calendar days from first detection, extended to a maximum of 60 days where no suspect is identified.

What we could not confirm

The page we read gives the rule's source as a 2010 final rule amended in 2011 and does not show a current-as-of date, so later changes could exist. It does not discuss continuing-activity reviews, other thresholds that apply to other institutions, or accounting firms. We did not read FinCEN guidance or SAR filing instructions. We could not confirm how the confidentiality rules apply to an accountant who learns of a SAR indirectly. This post is general information, not legal advice.