The New York Times has a piece today about people whose bank accounts are suddenly closed with no warning. The reason is that they've done something that triggers one or more Suspicious Activity Reports from their bank. The nature of the SARs is never revealed, but they often lead to banks deciding not to do business with you anymore. Apparently there is no appeal from this process, which is mostly automated. It reminds me a bit of the no-fly list, which bans people from flying in the US with no explanation and no appeal.
Is this problem getting worse? Oh yes. The Times piece got me curious about how many SARs are submitted by US banks, and eventually I dug up the numbers:
In the past 25 years, the rate of SAR submissions has soared by more than 20x, from 231 per million to 5,479 per million. This means either (a) Americans are conducting way more suspicious activity than they used to, or (b) banks are reporting even tiny infractions as SARs. I suppose you can guess which one I think it is.
POSTSCRIPT: If you happen to be engaged in legitimate activity that might nevertheless look suspicious to a pattern-seeking computer, it turns out your best bet is to keep two bank accounts. That way you always have one handy in case one of your banks suddenly decides to drop you.
Last summer my bank upgraded everyone's debit card and when I got mine I went through all my accounts and changed the card number, including my streaming media subscriptions. Doing this all at once made the bank lock my account and I had to go down there in person, explain it and sign a paper that I had explained it, and I was me, before they would unlock it.
I’m curious; one of the majors, a national bank, a regional bank?
MidWestOne.
The italics are right in the name.
I did the exact same thing, changing my card info on probably 20 online accounts. No reaction from my bank (Bank of America).
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Banks get fined for failure to file SARs. They do not get fined for over reporting. Tada
Note also (I work in a business that has to comply with anti-money-laundering rules, including training everyone on them) that I've been taught that it's illegal to tell a customer that a specific activity is suspicious, that a SAR has been filed, or what activity a filed SAR covered.
Did they say why?
Federal Regulations.
the logic from a prosecuting pov is clear, not to tip off.
If the banks communicate, and I sure they do on the sly, two accounts is suspicious of you fit a certain...profile.
You have to think opening a second account is enough by itself to trigger a SAR . . .*
Like no-fly lists, the lack of both notification and appeal really seem like textbook due process violations prima facie. We're a generation beyond 9/11 now so maybe the emergency has abated enough for either cool-eyed appeals consideration or legal oversight here.
* because what innocent person needs more than one account after all, and if you're the speaker of the House you don't need even one (OT, but do you think he uses the corner check-cashing outlet?)
Like no-fly lists, the lack of both notification and appeal really seem like textbook due process violations prima facie.
It's not the government engaging in this bullshit; it's private businesses who face a lot of grief if they're insufficiently zealous in carrying out the government's mandates.
I'm as ready as the next guy to blame financial institutions for nefarious activities. But this one's on the government, and its inane rules. Trying being an American expat trying to access the US banking system. Oy. Fucking. Vey.
Security law over-reach, yes.
Rather than blaming banks, blame the unintended consequences of overreach
The financial institutions don't communicate between each other for such things, nonsensical conspiracy thinking.
They report to US federal authorities.
Then again, how much of this increase was due to reporting the activities of the Biden crime family?
Seriously, I would expect the increase in SAR submissions is due to the increase in compliance, and the penalties to financial institutions for non-compliance.
How very Kafkaesque. People have a right to know why they are on the no-flight list and why their bank account was suddenly closed. The process is unconstitutional.
The no-fly list is maintained by a government agency and constitutional limits apply. When a bank decides it doesn't want to do business with you any more, that's a private act and the constitution doesn't apply. On the other hand, the ban on telling people about SARs appears to infringe the first amendment.
Really, Kevin?
Really?
An SAR is triggered by a movement of $10,000, which was the level established in the Bank Secrecy Act of 1970.
That is the equivalent of $77,000 today.
My kid wants to buy an $11,000 used car, which will trigger an SAR when he pays for it in cash.
No kid was buying a used car for 70 grand in 1970.
Ah inflation adjustment. A very useful observation on equivalency.
and consequences of hard coding values without inflation adjustment.
Excellent research! Yes, my first thought was, this is an inflation issue.
That is not correct. The threshold for filing a SAR is $2,000. You may be thinking of a CTR, which is $10,000.
Cash is king.
I wouldn't be surprised if actually illegitimate activity has increased quite a lot since 96. I would think all the online tools and information make scams easier.
However, I still don't think any algorithm is infallible and shouldn't have a human review and an appeal process.
Shouldn't have a human review?
You mean there are other Americans besides Hunter Biden who are the subject of Suspicious Activity Reports? Millions of them? Poor Jimmy Comer will feel such a fool* when the news gets out.
*Wishful thinking, of course. I doubt Comer is capable of feeling foolish about any of the idiotic lies he's been telling.
As someone in charge of the AML (anti money laundering) department at a small multi-billion dollar bank, I feel that I understand a little bit about the situation.
I do my best never to know about the specifics of a SAR because the fewer people who know, the better. But I see the numbers we file and see the actual SAR at least 10 times a month.
There is basically zero penalty for filing a SAR and there is a BIG EFFING penalty if it is determined that you should have filed a SAR.
Example 1: Customer wants $15k in cash. The teller says they will need to fill out a form so the customer asks how much can he take out without filing the form. So he takes out $8,000. Then he goes to another branch and pulls out $7k. We file a SAR. If he had just taken out $15k then we would have filled out a form and not filled a SAR. We also had to fill out the form from out data.
The SAR was a total waste of time.
Well over 90% of SARs are worthless. Probably 95% of the increase in SARs is a waste of time.
I think we have the explanation for the increase in SARs! Improved compliance by banks to avoid penalties (including systems improvement to catch the behavior sited above), and inflation, making the $10k cash threshold much more likely to be breached than in the 1970's when the legislation was enacted.
I remember taking a required on line course at work relating to "smurfing", having a group of "smurfs" deposit amounts just less than $10k cash into multiple bank accounts. Not very relevant to what I did in a non bank financial company, but likely viewed as required nevertheless. There was always a quiz I had to pass in order to get credit for the course, so I needed to pay some attention to this BS.
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It sounds like they figured out how to bring back 'universal default'.