STR / SAR & Tipping-Off

1. Definition #

STR/SAR is the reporting pathway for suspicious activity or transactions. The reviewer prepares internal evidence and narrative for MLRO review; the MLRO or authorised reporting function decides external filing under applicable legal overlay.

2. Why It Matters #

Poor escalation can lead to missed reporting obligations. Over-questioning a customer after suspicion arises can create tipping-off risk.

3. Common Triggers and Use Context #

• Funds suspected to be proceeds of crime.
• Activity suspected to be related to TF/PF.
• Attempted suspicious transaction.
• CDD/EDD cannot be completed and suspicion exists.
• Customer behaviour suggests evasion, concealment or fronting.
• Sanctions evasion indicators.
• Unusual activity becomes suspicious after review.

4. Suspicion Is a Reasoned Analytical Conclusion #

Suspicion is not a keyword match, a single red flag or an automatically generated alert. It is a reasoned analytical conclusion formed after comparing activity, customer profile, source evidence, explanations, unresolved discrepancies and applicable escalation rules.

Safe wording should separate:

A strong case note explains why an issue was cleared, why more information is needed or why it was escalated. It should not rely on vague wording such as “looks fine” or “customer is known”.

5. Source Basis #

• SRC-FATF-001: Recommendations 20 and 21.
• SRC-EGMONT-001: FIU institutional context.
• Jurisdiction layer: reporting thresholds, deadlines, forms, defences and consent/defence-against-money-laundering procedures are jurisdiction-specific. Verify the current FIU and primary legal sources before operational use.

6. Difference: unusual vs suspicious #

7. How It Is Used in AML/KYC/KYB #

1. Identify suspicious facts and red flags.
2. Build chronology.
3. Preserve evidence.
4. Avoid unnecessary customer contact if it could tip off.
5. Draft internal suspicion memo.
6. Escalate to MLRO through approved channel.
7. Await MLRO decision.
8. Record decision and follow-up controls.

8. Evidence to collect #

• Customer profile and expected activity.
• Transaction data and timeline.
• Related counterparties and geographic exposure.
• Screening results.
• Communications and document requests.
• Customer explanations already received.
• Analyst notes showing why facts are unusual/suspicious.
• Any attempted transactions.

9. Tipping-off control rules #

• Do not tell the customer that an STR/SAR has been or may be filed.
• Do not explain that a case is under MLRO/FIU review.
• Do not ask questions that reveal the suspected issue unless approved.
• Keep internal communications need-to-know.
• Mark case as confidential where policy allows.

10. STR/SAR internal memo template #

# Internal Suspicion Memo

Subject: [customer/counterparty/transaction]
Trigger: [what caused suspicion]
Timeline: [events]
Facts: [evidence-backed facts]
Unusual features: [list]
Why suspicion may exist: [reasoning]
Known explanations: [customer/internal]
Open questions: [material gaps]
Tipping-off risk: [low/medium/high]
Recommended MLRO action: [review/file/do not file/request controlled info]
Source basis: SRC-FATF-001; [local source]
Evidence index: [files/screenshots/logs]

11. Decision matrix #

FIU practice and national guidance#

Use Egmont sources for FIU role, international cooperation and case-analysis context. Use FinCEN advisories and narrative materials only as United States examples of typologies and reporting quality.

The final decision to file, the reporting channel, timing, confidentiality rule and tipping-off boundary remain jurisdiction-specific and must be decided by the authorised MLRO or reporting officer under applicable law and policy.