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A thick line between suspicious activity report and suspicious transactions report in Nigeria

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By Kunle Ajiboye

A Suspicious Transaction Report (STR) is a document that financial institutions must submit to the Financial Intelligence Unit (FIU) whenever there is a suspected case of money laundering, terrorist or proliferation financing. A suspicious transaction is a transaction that burdens a financial Institution with a feeling of apprehension or mistrust on the regularity of a customer transactions considering its unusual nature or circumstances, or the person or group of persons involved in the transaction, a Suspicious Activity Report (SAR) on the other hand is any observed behavior that may indicate whether a bank customer is involved in or planning a crime, especially terrorism or terrorism-related crime. It can also refer to any incident, event, or activity of a Bank customer that seems unusual or out of place.

However, SARs can cover almost any activity that is out of the ordinary. An activity may be included in the SAR if the activity gives rise to a suspicion that the account holder is attempting to hide something or make an illegal transaction. The SAR became the standard form to report suspicious activity in 1996. Practically a SAR is a judgement call of a financial institution during enhanced customer due diligence and profiling, whereas an STR is a key risk indicator for a customer records audit.

The US Bank Secrecy Act of 1970 promoted, championed and established reporting monitoring suspicious activities of bank customers, which ordinarily would not fall under be currency transaction report rendered by Banks. However, SARs can cover almost any customer activity that is out of the ordinary based on information from the public domain.it is a financial institution reaction to the judgement of their client in the court of public opinion.

In Nigeria, suspicious report or activity report (SAR) has no berth in any of the anti -money laundering laws. More specifically, the Terrorist Prohibition & Prevention Act 2022(TPPA 2022) and Money Laundering Prohibition& Prevention Act 2022 (MLPPA 2022) aptly provide in Section 7 of the MLPPA 2022 that a customer transaction is deemed to be suspicious where it;

(a) involves a frequency which is unjustifiable or unreasonable,

(b) is surrounded by conditions of unusual or unjustified complexity,

(c) appears to have no economic justification or lawful objective,

(d) is inconsistent with the known transaction pattern of the account or business   relationship

In full concurrence, Section 84 of the TPPA 2022 enjoins everyfinancial institution to deem a customer transaction suspicious, where the customer funds are derived from illegitimate sources, or/and are intended to be used for an act of terrorism or terrorism financing, or proliferation financing. 

It is germane and of uttermost importance to note that the reporting timelines for suspicious transaction is the shortest when juxtaposed with other currency transaction report. For example, any single transaction, lodgment, or transfer of funds in excess of 500,000,000 for individual and 10,000,000.00 for corporate customers must be reported to the regulators within seven days. However, Financial Institutions must submit a suspicious transaction must be done within twenty four hours under the MLPPA 2022, the TPPA 2022 hindmost the timelines.

Under the Anti money laundering parameters the reason for such urgency is to ensure effectiveness in the investigative efforts against money launderers. Therefore, the earlier Regulators receive and log reports on their intelligence database that are they are able to assign the report to the appropriate agency for investigation.

But a deeper reflection also suggest the need for alacrity on the part of financial Institutions to submit suspicious transaction is premisedon the need for law enforcement to have an early lead in order to checkmate timelines for criminal activities, assess, follow, restrain movement of criminal assets and ultimately arrest the culprits. Hence, firms must not treat anti money laundering reporting process particularly STR lackadaisically.

A customer suspicious transaction is not validated because a small amount of money was involved or due to the repeated occurrence of similar transaction. These factors on the other hand are not considerations or show stopper where SARs are involved.

Finally, a note of caution, it should be noted that it is a criminal offence in Nigeria for a financial institution or its officers no matter how appropriately persuaded to disclose the contents of any report forwarded to the regulators to a third party or to the principal or beneficiary of the transaction, closely tied to this is also the offenceof ‘tipping off’, connoting that organizations or persons under investigation must not be privy to the contents of the report or even aware that they are under investigation through the effort of a Financial Institution irrespective of the intended goodwill.

Kunle Ajiboye LL.B, B.L, IDC, CRMCP, CAMS, MICA has 18 years’ experience in the financial services sector. He has worked for different international and local Banks in Nigeria as a Money Laundering Reporting Officer and Head of Compliance.

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