Audit Report 

OIG 05-033 

FinCEN: Heightened Management Attention Needed Over 

Longstanding SAR Data Quality Problems 

March 23, 2005 

Office of 

Inspector General 

Department of the Treasury 
Contents 

FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

Page 1 

Audit Report 

 Results in Brief............................................................................................. 4 

 Background ............................................................................................... 11 

Findings and Recommendations .................................................................... 13 

Finding 1 Little Progress in Correcting Reported 

 SAR Data Quality Problems........................................................13 

Finding 2 Extensive SAR Data Quality Problems Likely to Impact 

 Law Enforcement Usage............................................................15 

Finding 3 Causes and Factors Contributing to SAR Data Quality Problems .....25 

 

 Recommendations.................................................................................. 29 

Appendices

 Appendix 1: Objectives, Scope, and Methodology ...................................... 43 

 Appendix 2: Number of Sampled SARs With Data Quality Problems 

 Affecting Investigative Fields ..................................................47 

Appendix 3: Projected SARs With Data Quality Problems 

 DIs versus MSBs ...................................................................48 

 Appendix 4: FinCEN's Revised Corrective Action Plan ..................................49 

 Appendix 5: Management Comments.........................................................55 

 Appendix 6: Major Contributors To This Report.......................................... 64 

 Appendix 7: Report Distribution................................................................ 65 

Abbreviations

 

 DI Depository Institution 

 FinCEN Financial Crimes Enforcement Network 

IRS Internal Revenue Service 

 LEA Law Enforcement Agency 

 MSB Money Service Business 
Contents 

FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

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 OIG Office of Inspector General 

 SAR Suspicious Activity Report 
OIG Audit 

Report

The Department of the Treasury 

Office of Inspector General 

FinCEN: Heightened Management Attention Needed Over Longstanding 

SAR Data Quality Problems (OIG-05-033) 

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 March 23, 2005 

William J. Fox 

 Director 

 Financial Crimes Enforcement Network 

The Financial Crimes Enforcement Network (FinCEN) has specified 

responsibility for administering the Bank Secrecy Act (BSA). A 

vital aspect of FinCEN’s responsibility is the collection and 

maintenance of suspicious activity reports (SARs) filed by financial 

institutions. Law enforcement agencies use SARs to identify 

potential investigative leads to financial crimes such as money 

laundering and terrorist financing. Aggregated SAR data is also 

analyzed to identify trends and emerging criminal activities, as well 

as developing intelligence data. Nearly 1.5 million SARs have been 

filed with FinCEN from April 1996 through December 2003. 

Our audit objective was to assess the status of FinCEN’s 

implementation of their management corrective action plan in 

response to our December 2002 report entitled FinCEN: Reliability 

of Suspicious Activity Reports, OIG-03-035. In that report, we 

raised concerns over longstanding SAR data quality problems. We 

reported that these data problems could adversely affect FinCEN’s 

ability to meet their core mission relative to the BSA and attendant 

money laundering programs. 

We conducted our audit fieldwork at FinCEN headquarters in the 

Washington, D.C., area, and also at the Internal Revenue Service’s 

(IRS) Detroit Computing Center (DCC) in Detroit, Michigan where 

SARs are collected and maintained on an automated data system. 

We also statistically sampled and reviewed over 400 SARs filed 

over a 12 month period ending October 2003. In reviewing the 

SARs, we focused on those data fields that law enforcement 

agencies (i.e., SAR users) advised us as being critical pieces of 

information for developing criminal investigative cases and or trend 

analysis. We also contacted 15 financial institutions from the 

sampled SARs to discuss our SAR observations. Finally, we met 

with several members of Treasury’s BSA Advisory Group regarding 
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SAR Data Quality Problems (OIG-05-033) 

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SAR data reliability problems1

. A detailed description of our audit 

objectives, scope and methodology is provided in Appendix I. 

Results in Brief

In December 2002, we reported that the SAR data base contained 

incomplete and inaccurate data, as well as over 3,000 duplicative 

SAR filings2

. We attributed these data quality problems to several 

causes including data entry errors for paper filed SARs, filer errors, 

and inadequate internal controls to detect and prevent SARs from 

being entered into the system. In response to our report, FinCEN 

committed to implementing a corrective action plan by June 2003. 

Although concurring with the reported findings, FinCEN also 

claimed that the existing SAR data error rate had been well within 

acceptable limits. 

From our initial follow-up audit work, we determined that FinCEN 

had made little progress in addressing the reported weaknesses or 

audit recommendations by the June 2003 timeframe. Moreover, 

we determined that FinCEN had not established data quality 

standards from which SARs could be routinely monitored for data 

quality purposes. What progress had been made in addressing our 

prior report consisted largely of additional outreach with financial 

institutions as to the proper filing of SARs. Little if any progress 

had been made to enhance internal controls to detect and prevent 

SARs with data quality problems from being entered onto the 

automated data system. (See Finding 1 on page 13.) 

Given FinCEN’s continued lack of systematic monitoring for SAR 

data quality problems, we expanded our audit work by reviewing a 

statistical sample of 406 SARs filed by depository institutions (DIs) 

and money services businesses (MSBs) over a twelve month period 

1

 The BSA Advisory Group is a panel of experts that was established to advise the Treasury Department

on ways to increase the utility to law enforcement of anti-laundering programs and eliminate 

unnecessary and over costly regulatory measures. 2

 In our December 2002 report, the problem of inaccurate and incomplete SAR data was actually 

reported as a repeat condition as first reported in The Financial Crimes Enforcement Network Suspicious 

Activity Reporting System, OIG-99-032, January 1999. 
FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

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ending October 20033

. We met with four different federal law 

enforcement agencies (including case agents) and asked them to 

identify the types of SAR information that would be critical for (1) 

identifying potential investigative leads, and (2) developing trend 

analysis for such things as strategic planning and intelligence 

gathering. By focusing our review on these critical data fields, our 

intention was to avoid identifying trivial or minor technical SAR 

data quality problems. 

We found that 251 (62%) of the 406 sampled SARs contained one 

or more data quality problems (i.e., missing, incomplete, 

inappropriate, and or inconsistent information) in a data field critical 

to law enforcement agencies. The problem SARs had been filed by 

110 (68%) of the 161 filers in our sample. Based on the sample 

results, we estimate that approximately between 227,000 and 

267,000 of the 416,000 SARs filed during the 12 month audit 

period contained similar errors as that observed from the 406 

sampled SARs4

. Our projections did not take into account the

additional problems associated with the known level of duplicate 

filed SARs in the system. (See Finding 2 on page 15.) 

In addition to measuring the extent of SAR data quality problems, 

we further analyzed the sampled SARs to gain a better 

understanding of the nature of problem SARs, such as whether 

there were discernable differences between depository institutions 

versus MSBs, and paper versus electronically filed SARs. We also 

isolated those data fields with the most frequent problems for 

further analysis. Some of our observations include: (1) although 

MSBs had more data quality problems than DIs, both groups had 

data quality problem rates in excess of 55%, (2) SARs filed 

electronically were not more accurate than paper filings, and (3) 

the most frequent type of data quality problem involved missing 

data that law enforcement would use to identify suspects for 

investigative purposes, and (4) a common problem with MSB SARs 

3

 At the time of our sample selection, depository institutions and MSBs collectively accounted for about 

99% of all filed SARs over a 12 month period. 4

 The statistical projections were made at the 95% confidence level and had a ±4.7% error rate. 
FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

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entailed either missing or an inadequate narrative description of the 

suspicious activity. (See Finding 2 on page 18.) 

Finally, we also looked at how timely SARs had been filed and 

processed to gauge how quickly law enforcement might gain 

access to SARs. We found that, on average, SARs with data 

quality problems took longer (73 versus 67 days) than non-problem 

SARs, as measured from the time of the suspicious activity to the 

time the SAR was entered onto the automated data system. In 

addition, just over 25 percent of the sampled SARs entailed total 

processing times exceeding 60 days. Most of the lapsed time 

could be accounted for by financial institutions’ filing time rather

than IRS processing time. (See Finding 2 on page 23.) 

We believe that SAR data quality problems were due to various 

causes as we previously reported in December 2002. And our 

sampled SARs and follow-up discussions with financial institutions 

provided further insights. For example, we determined that for 

paper SARs, the IRS DCC contractor was only required to verify

about a third of the data fields deemed as critical by law 

enforcement agencies. In addition, the continued absence of 

adequate internal controls to detect problem SARs and prevent 

them from being entered onto the SAR data system remains the 

primary weakness resulting in SAR data quality problems. (See 

Finding 3 on page 25.)

With 62% of the sampled SARs containing data quality problems,

the OIG believes that this longstanding problem can not be 

construed as falling within acceptable limits, and needs FinCEN’s 

heightened management attention. Unless sufficient progress is 

made in addressing this problem, the resulting adverse impact on 

law enforcement agencies will likely magnify as the number of 

different types of financial institutions become subject to the SAR 

filing regulation, as clearly shown by MSBs beginning in 2002. 

Even FinCEN’s own BSA initiatives could be adversely impacted 

such as the new $18 million BSA Direct system designed to 

expedite user access to and analysis of SAR data. 
FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

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Before we issued the draft report, FinCEN provided us with a 

revised corrective action plan in response to our prior report of 

December 2002. We believe FinCEN’s revised corrective action 

plan of September 2004 is an improvement over its predecessor 

version of July 2003. We also believe that if properly 

implemented, FinCEN’s revised corrective action plan largely 

addresses our previously reported weaknesses and audit 

recommendations. 

Nevertheless, based on our current audit findings gained from the 

406 sampled SARs, we make 14 recommendations aimed at

refining or enhancing various aspects to FinCEN’s revised 

corrective action plan. Foremost is the need for FinCEN to 

officially designate a data integrity officer, and to establish data 

quality standards from which to systematically monitor SARS. 

(See Recommendations on page 29.)

 Management Comments

In its comments to our January 19, 2005 draft report, FinCEN 

management stated that our recommendations, when considered 

contextually and accorded the appropriate priority in view of the 

many important compliance issues, will assist FinCEN in better 

ensuring that SARs contain as much useful information as is 

available to filers. This, according to FinCEN, will maximize the 

utility of the SARs to law enforcement and other consumers of the 

data. In its specific comments to the recommendations, FinCEN 

generally concurred with our recommendations and described the 

actions taken or planned in response to each recommendation. 

FinCEN management emphasized its commitment to effective BSA 

implementation. However, FinCEN management believes that our 

report needs to be placed in context for two reasons. First, undue 

focus on data quality may skew the perspective of the filers and 

could undermine the overall effectiveness of financial institution 

SAR reporting programs by creating distorted incentives. Second, 

our report could be read to portray unfairly the level of industry 

compliance with the suspicious activity reporting rules. FinCEN 
FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

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management also cited a concern that while our report 

acknowledges certain assumptions and inherent research 

limitations, these caveats to our report conclusions are not readily 

apparent. 

According to FinCEN management, its approach to enhancing data 

quality is targeted toward education and outreach to the financial 

industry, combined with a periodic analysis of reports filed and the 

pursuit of appropriate remedial action against filers with systemic 

data quality issues. FinCEN has taken this approach in lieu of 

inflexible rules preventing SARs with blank or incomplete fields 

from being filed in the first instance. While it is seeking to enhance 

data perfection capabilities on the front end, FinCEN believes that it 

cannot risk a delay in an even imperfect report being placed in the 

database when it may be critical to law enforcement. 

FinCEN management noted that in 2004, FinCEN expanded 

dramatically its role in the administration of the BSA, including 

creating a new office to support the examination function 

performed by other agencies and devoting one-third of its analytical 

resources to regulatory compliance support. This expansion – with 

an accompanying augmentation in resources – is expected to 

better identify and address SAR data quality problems. 

 

FinCEN management provided a number of observations in its 

comments which are summarized below: 

• The SAR is designed to provide law enforcement with lead 

information, not proven facts. FinCEN management expressed 

concern that this important perspective is lost in the report and 

that the report suggests a zero tolerance for errors or omissions. 

• SAR data quality is but one of many important BSA compliance 

issues. As the delegated administrator of the BSA, FinCEN has 

an obligation to determine where it will devote resources to 

ensure effective BSA implementation. By focusing on a single

aspect of compliance, FinCEN is concerned that it may well lead 

filers to do the same. While our report asserts that over half of 
FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

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the SARs are problematic because one or more critical fields are 

blank or contain inappropriate information, it is impossible to 

assess whether those SARs are of less value to law 

enforcement on an aggregate basis. 

• The conclusion that 62% of the suspicious activity reports filed 

contained data quality problems is potentially misleading. 

“Problem” SARs include those reports filed with a single field 

missing, such as the phone number of the suspect – such 

information may be difficult or impossible to obtain, and alone 

does not serve a foundation for concluding that the SAR is of 

little value. Whether a missing field affects the value of a SAR 

depends on the facts and circumstances – the impact cannot be 

quantified statistically. 

• There may be legitimate reasons why certain information may 

not be provided in a SAR, such as when the filer does not have

the information. Even with blank fields or fields containing 

inconsistent information, the narrative section provides critical 

analysis, and may provide more information to law enforcement 

than any other field. In this regard, FinCEN will continue to 

focus on ensuring that filers provide a comprehensive 

description in the narrative section. 

• Our report does not provide the information necessary to 

determine whether a SAR was timely filed. The timeframe 

between the conclusion of the suspicious activity, as provided 

in the SAR, and the date the report was filed does not 

conclusively establish whether the SAR was filed in a timely 

manner because the date the activity was discovered is not

reported. Moreover, FinCEN believes it essential that financial 

institutions use the allotted filing time to ensure that the facts 

are reviewed and the reports receive appropriate senior level 

review before they are filed. 

• The criticism leveled against reports filed by MSBs must be 

measured against the realities of compliance in the industry. 

MSBs range from several large, highly sophisticated services 
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SAR Data Quality Problems (OIG-05-033) 

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providers to a countless number of small “mom and pop” 

businesses that do not speak English. MSB industry compliance 

remains a central focus of FinCEN, but ensuring the

implementation of the most basic of recordkeeping and 

reporting requirements continues to be a significant challenge. 

While FinCEN takes enforcement actions against MSBs when 

warranted, it will continue to focus resources on identifying 

these businesses and educating them on BSA regulatory 

requirements. 

The complete text of FinCEN’s response is provided as Appendix 5. 

OIG Evaluation

We believe that our report appropriately acknowledges the 

limitations and caveats cited by FinCEN above and we conducted 

our analysis in a manner to avoid identifying trivial or minor 

technical SAR data quality problems. Additionally, we considered 

whether SAR narratives included critical information that was 

omitted in the data fields. We also have not advocated a “zero 

tolerance” for SAR errors and omissions. And as FinCEN cites in 

its response to the draft report, the number of errors affecting the 

value of the SAR can not be gauged without knowing the facts and 

circumstances of the individual report. However, due to the 

absence of FinCEN data quality standards, we purposely avoided 

implying any level of tolerance for errors. In this regard, we would 

reiterate that a single field was a part of the collective information 

that law enforcement noted as being important in developing 

investigative leads and or for the purpose of identifying trends. 

Our purpose in presenting filing and processing timeframes for the 

sampled SARs was to show when SAR information would be

available to law enforcement, and for FinCEN to consider in 

ascertaining whether current regulatory timeframes are responsive 

to the needs of law enforcement. FinCEN is correct that it cannot 

be conclusively determined whether the institutions were late in 

filing the SARs as the regulatory filing timeframes are based on the 

date the institution first identifies the suspicious activity, which is 
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SAR Data Quality Problems (OIG-05-033) 

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information not captured on the SAR form. We note this limitation 

in the report. However, as the report describes below, groups of 

SARs with lengthy timeframes far exceeding regulatory time 

frames does indicate potential regulatory non-compliance, and we 

believe FinCEN should monitor for such patterns. 

Furthermore, we recognize the challenges faced by FinCEN with 

ensuring compliance by the MSB industry with SAR requirements. 

Our intent by providing data on the MSB SARs in our sample is to 

highlight the specific and unique problems found with the MSB 

filings so as to assist FinCEN in refining its outreach and 

enforcement efforts. For example, we noted that many MSB SARs 

either lacked any narrative descriptions of the suspicious activity or 

the narratives provided such little information that we believe they 

were of negligible value to law enforcement. 

The extent of problem SARs found in our sample (62 percent)

clearly warrants increased attention to SAR data quality. In this 

regard, we believe SARs continues to be a basic underpinning to 

many of FinCEN’s BSA programs and mission. We also believe 

FinCEN’s September 2004 revised corrective action plan to our 

December 2003 report and the corrective actions taken and 

planned in response to the recommendations in this report 

demonstrate a marked increase in FinCEN management’s 

commitment and responsiveness to address SAR data quality 

issues. 

Background

FinCEN’s mission is to safeguard the U.S. financial systems from

criminals and terrorists and to assist law enforcement in the 

detection, investigation, and disruption of illicit activity by 

administering the Bank Secrecy Act (BSA). A major aspect of this 

responsibility is the collection and maintenance of suspicious 

activity reports (SARs) that financial institutions are required to file 
FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

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when they identify a suspected criminal activity, such as money 

laundering and terrorist financing.5

 

Under a 1996 joint agreement, the Internal Revenue Service (IRS) 

collects, processes, and stores SARs at its Detroit Computing 

Center (DCC). From the filed SARs, the IRS DCC creates and 

maintains a SAR database, known as the Suspicious Activity 

Reporting System (SAR System). SAR filers may choose from four

media of filing: hardcopy paper, magnetic diskettes, magnetic 

cartridges, or an Internet medium known as the Patriot Act 

Communication System (PACS). Nearly 1.5 million SARs have 

been filed with FinCEN from April 1996 through December 2003. 

Federal and State law enforcement agencies, as well as federal 

regulators for financial institutions, have access to the automated 

SAR System. SAR information is used for various functions, 

depending on the users authorized responsibilities. For example,

law enforcement agencies may use SARs to investigate financial 

crimes, whereas financial institution regulators may use SARs to 

ensure industry compliance with the BSA. 

The OIG has issued two reports dealing with the quality of SAR 

data. In a January 1999 report, we first reported on SAR accuracy 

problems involving SARs with missing information that law 

enforcement needed. More recently, in December 2002 we 

reported again that the same types of SAR data quality problems 

were still being identified by law enforcement agencies. 

Additionally, over 3,000 duplicate SARs were entered into the data 

base in the prior year. We noted this repeat audit finding and 

emphasized the need for enhanced controls to prevent and detect 

SARs with data quality problems from being entered into the SAR 

System. 

FinCEN concurred with our December 2002 report and committed 

to addressing the reported weaknesses and recommendations, with 

a targeted completion date on most weaknesses by June 2003. 

5

 31 CFR 103.17 - 103.21
FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

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Although committing to address this longstanding problem, FinCEN 

also noted that “...the current error rate is well within acceptable 

limits.” 

The events of September 11, 2001 intensified the importance of 

SARs in tracing financial crimes, as well as transactions used to

finance terrorist activities. The USA PATRIOT Act passed shortly 

thereafter, extended BSA reporting requirements to other financial 

institutions such as insurance companies, securities brokers, and 

even gem dealers. The volume of SARs will likely increase 

significantly in future years, as demonstrated by the number of 

SARs filed by money service businesses beginning in January 

2002. 

Findings and Recommendations 

Finding 1 Little Progress in Correcting Reported SAR Data Quality 

Problems

As noted above, we reported in December 2002 that FinCEN’s 

SAR data quality problem was a recurring problem going back to 

1999. In response to the December 2002 report, FinCEN 

committed to various corrective actions with a target completion 

date of June 2003, but claimed that the existing SAR error rate 

had been within acceptable limits. 

We found that little if any substantive progress had been made

toward addressing the December 2002 reported conditions or 

implementing the corrective actions. What corrective actions had 

been taken dealt largely with filer outreach as to proper SAR filing. 

Moreover, we found that FinCEN had not developed data quality

standards from which SAR data quality could be monitored, and 

that there was no documented support or institutional recollection 

for the assertion that errors were within acceptable limits. 

From our initial follow-up audit work completed by October 2003, 

we found that FinCEN’s draft corrective action plan had attempted 
FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

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to address our December 2002 report. The corrective action plan 

was drafted by July 2003 and provided for: 

• Identifying and removing duplicate SARs filed in 2002; 

• Emphasizing SAR data quality in industry outreach efforts; 

• Expanding edit and validity checks; 

• Establishing mandatory SAR fields, and corresponding with 

filers to obtain missing or corrected information in those 

fields; 

• Identifying industry trends and specific filers with persistent 

errors. 

We found that FinCEN had started implementing the outreach 

features of the corrective action plan, but the majority of control 

weaknesses and reported conditions remained outstanding. In 

addition, we believe the corrective action plan suffered from 

several omissions, and key aspects were premised on unreliable 

assumptions, casting doubt on whether the plan would effectively 

address SAR data quality problems. More specifically, we found 

that: 

• The previously identified 3,000 plus duplicate SARs were 

still in the SAR System, and almost 4,000 duplicate SARS 

had been filed in the subsequent year. 

• Plans to expand manual and system edit checks lacked 

supportable cost estimates. We were unable to evaluate the 

estimated costs due to the lack of sufficient details, 

supporting documentation, and material differences in cost 

estimates between FinCEN’s and IRS’ cost figures. 

Consequently, we were not able to assess the adequacy of 

the planned data quality control enhancements. 

• Reliable costsestimates aside, FinCEN officials were also 

uncertain sufficient funding would be available. 

• Mandatory fields for either monitoring or enforcement 

purposes had still not been established. 

• Error rate standards from which to monitor data quality were 

not provided in the plan. 
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SAR Data Quality Problems (OIG-05-033) 

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• Finally, the corrective action plan lacked an implementation 

schedule with target completion dates for each provision. 

Given the lack of sufficient progress in addressing our December 

2002 report, we expanded our audit field work to independently 

assess the extent of SAR data quality problems. 

Finding 2 Extensive SAR Data Quality Problems Likely to Impact 

Law Enforcement Usage

Given FinCEN’s lack of sufficient progress in addressing our prior 

report, we statistically sampled 406 SARs filed over a 12 month 

period for detailed review and analysis. To avoid focusing on minor 

and trivial data quality problems, we met with four different federal 

law enforcement agencies to identify those SAR data fields deemed 

to be critical for identifying investigative cases and or developing 

aggregate SAR trend analysis. 

We found that 251 (62%) of the 406 sampled SARs contained a 

data quality problem in one or more critical SAR data fields. From 

the sample, we estimate that as many as 267,000 SARs filed over 

the year ending October 2003 may have similar data quality 

problems as the sampled SARs. Even though FinCEN had not 

actually established standards to systematically gauge data quality, 

we believe that our observed 62 percent data quality problem rate 

would likely exceed any measure of reasonableness, and is more 

accurately described as excessive. 

Sample Selection and Basis for Identifying Data Quality Problems

From IRS records, we determined that about 416,000 SARs had 

been filed over a 12 month period ending October 31, 2003.6

 

From the total filings we statistically sampled 406 SARs, which 

were comprised of 203 filed by depository institutions (DIs) and 

6

 The total universe was adjusted for sampling purposes and excluded roughly 37,000 MSB SARs that

would have omitted certain information. (See Appendix 1, on page 43. 
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SAR Data Quality Problems (OIG-05-033) 

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203 filed by money service businesses (MSBs).7

 Other sample 

characteristics included 240 paper and 166 electronic filings, i.e., 

diskette, cartridges, or PACs.8

 The 406 sampled SARs were filed 

by 161 different financial institutions. 

To avoid focusing on data quality problems of a minor or trivial 

nature, we met with four different federal law enforcement 

agencies and asked about the critical data fields used to identify

investigative leads to suspected financial crimes such as money

laundering and terrorist financing. Some of the law enforcement 

agencies also aggregated SARs for other analysis, such as 

identifying emerging trends and patterns, resource deployment or 

policy initiative strategies, or to develop intelligence information. 

Based on input from the law enforcement officials, including case 

agents, we focused our detailed review on about 50% of the 

available SAR data fields.9

 These critical data fields were then 

reviewed for data quality problems defined as missing, incomplete, 

inappropriate, or inconsistent information.10 For example, errors 

might entail missing account numbers, filers marking the “other” 

suspected criminal activity designation with no further explanation, 

or the suspected criminal activity checked-off was inconsistent 

with the narrative explanation of the suspicious activity. 

The Extent of SAR Data Quality Problems

From our detailed SAR reviews, we found that 251 (62%) of the 

406 sampled SARs had missing, incomplete, inappropriate, and/or 

inconsistent information in one or more data fields deemed critical 

7

 As noted previously, DIs and MSBs accounted for 99% of total SARs. Filers not sampled included 

casinos, card clubs, and broker/security dealers. 8

 Paper SARs accounted for about 53% of total SAR filings for the year. 9

 The total number of data fields differed between the DI and MSB SAR forms. 10 SARs were not reviewed narrowly on the basis of the cited types of data problems. We did not

count the SAR as a problem if it was obvious from the entire SAR that the missing, inconsistent or

incomplete data fields could be reasonably explained. For example, certain missing suspect 

identification fields could be reasonably explained when the suspected crime involved non-account

holders or other external parties. 
FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

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to law enforcement agencies for either investigative or trend 

analysis. The problem SARs had been filed by 110 (68%) of the 

161 financial institutions in the sample. The SAR data quality 

problems involved to varying degrees both investigative case 

development and aggregate trend analysis data fields, as shown in 

the following table. 

Table 1 

 Extent of SAR Data Quality Problems 

Number of SARS with Data Quality 

Problems Affecting 

Data Quality 

Problems in: Investigative Fields 

Trend Analytic 

Fields 

 1-4 Fields 191 (47%) 153 (38%) 

 5-8 Fields 47 (12%) 14 (3%) 

 9-23 Fields 9 (2%) 1 (<1%) 

SARs with Problems (a) 247 (61%) 168 (41%) 

SARs With No Problems 159 (39%) 238 (59%) 

 Total SAR Sample 406 (100%) 406 (100%) 

Source: OIG Analysis 

Note (a): The previously cited 251 total problem SARs was comprised of 247 

problem SARs affecting investigative fields plus four SARs affecting only trends 

analytic fields. Most problem SARs affected both types of critical SAR data 

fields. 

Based on the sample results, we estimated that the total number of 

SARs with similar data quality problems filed by DIs and MSBs 

during the 12 month period ranged from 227,000 to 267,000 

SARs. 

According to law enforcement officials, a problem SAR would not 

necessarily be useless in pursuing an investigative lead because the 

filing institution could be contacted for follow-up on a specific data 

field. However, follow-up for such purposes may add time to or 

delay the investigative process. Follow-up for such clarifications 

might also detract from other more potentially productive cases 

should subsequent follow-up yield non-productive information. One 

law enforcement agency indicated that there were so many SARs 

filed that they would simply ignore SARs with data problems and 
FinCEN: Heightened Management Attention Needed Over Longstanding

SAR Data Quality Problems (OIG-05-033) 

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continue culling through the remaining SARs until a sufficiently 

complete one could be used to assess the investigative potential. 

The potential impact of data quality problems on law enforcement 

when developing aggregate trend analysis would likely be quite 

different than for investigative purposes. For trend analysis, 

aggregating data fields would be conducted without knowledge of 

specific problem data fields because the SAR System does not flag 

those SARs with missing, incomplete or inconsistent data fields. 

Some concerns include misleading trends, skewed indications of 

emerging financial crimes, and erroneous intelligence. Duplicate 

SARS and or missing information on the location of the suspicious 

criminal activity could also adversely impact resource deployment 

decisions and or policy initiatives. 

The Nature of SAR Data Quality Problems 

In further analyzing the 251 SARs with data quality problems, we 

found certain differences as well as similarities based on some of 

the sub-group sampling characteristics. 

 

Type of Filing Financial Institution - Within their respective filing 

groups, both DIs and MSBs had high data quality problem rates 

(henceforth defined as the number of SARs with data quality 

problems divided by the total number of reviewed SARs), but data 

quality problems were clearly higher for MSBs than for DIs as 

shown below. 

 Table 2 

 SAR Data Quality Problems for MSBs vs. DIs 

 MSBs DIs 

Problem SARs 138 (68%) 113 (56%) 

SARs – No Problems 65 (32%) 90 (44%) 

Totals 203 (100%) 203 (100%) 

Source: OIG Analysis 
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Although not reflected in the table above, we found that three 

MSBs accounted for the majority of the problem MSB SARs. 

These three MSBs accounted for 106 (77%) of the 138 

problematic MSB SARs. We also found that MSB problem SARs 

generally had a greater number of problem data fields per SAR than 

DIs. For example, 34 MSB SARs had between 5 and 8 problem 

data fields, as compared to 13 DI SARs with a comparable level of 

problems; see Appendix 2 for a further detailed breakout. Also see 

Appendix 3 for our projected number of SARs with data quality 

problems for MSBs versus DIs for the year. 

Filing Medium - We found a 5 percent difference in the data quality 

problem rate between paper and electronically filed SARs as shown 

below. 

 Table 3 

 SAR Data Quality Problems Paper vs. Electronic Filings

 

 Paper Electronic 

Problem SARs 143 (60%) 108 (65%) 

SARs – No Problems 97 (40%) 58 (35%) 

Totals 240 (100%) 166 (100%) 

Source: OIG Analysis 

We did not assess if the 5 percent difference was statistically 

significant or project this difference beyond the sample. Although 

not shown in the above table, MSBs accounted for a majority

(60%) of the paper SARs with data quality problems. 

Most Problematic Data Fields – Of the 251 SARs with data quality 

problems, we found that the most problematic data fields were 

largely related to the suspect’s identity or whereabouts, as shown 

in the following table. 
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Table 4 

Most Problematic SAR Data Fields

 

SAR Data Fields With Problem 

Number of 

SARs 

(%) of 

Sample 

SSN, EIN, or TIN 64 16 

Date of Birth 65 16 

Phone number 82 20 

State of Subject 22 5 

Street Address of Subject 26 6 

Zip Code of Subject 23 6 

Source: OIG Analysis

 

According to law enforcement officials, not only are these types of 

data fields critical in pursuing investigative leads, but it was their 

belief that these were the fields with the most common data 

quality problems. For example, the date of birth was mentioned as 

a problematic data field. As one law enforcement official 

emphasized, numerous individuals may have identical names, so

the subject's name is of less value unless accompanied by the date 

of birth. 

Data Fields Particularly Problematic with MSBs - We found that 77 

(38%) of the 203 MSB SARs had a problem with the narrative field 

in terms of adequately describing the suspected criminal activity. 

In contrast, less than 5% of the sampled DI SARs had this type of 

problem. The narrative section is to provide a detailed description 

of the events that led to filing a SAR, and is considered critical by 

most of the law enforcement officials we met. 

Of these 77 MSB problem SARs, 14 failed to include a narrative 

description. Many of the remaining problem narratives contained 

so little information that we believe they would have been of 

negligible value to law enforcement. Illustrating this problem is one 

MSB SAR with the following description, "Funds transfer 

transactions purchased in patterns to indicate suspicious activity." 
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One or two sentence narratives such as this were typical of these 

problem MSB SARs. 

The phone number of the business where the suspicious activity 

occurred was another common yet fundamental problem with MSB 

SARs. This data field was either missing or incomplete for 35% of 

the sampled MSB SARs. The data field is fundamental to law 

enforcement in following-up with the MSB to clarify missing, 

incomplete, inappropriate, or inconsistent information. 

We also observed that suspect identification information was not 

included in 52 (25%) of the 203 sampled MSB SARs. All 52 SARs 

reported a suspected money laundering technique known as 

transaction structuring.11 However, because the individual 

transaction amounts reported were under $3,000, the filer was 

exempt under the BSA regulations from recording customer 

identification information.12 13 

Most Frequent Types of Data Quality Problems - By far the most 

frequent type of data quality problem was missing information. 

Missing information in the investigative critical data fields was a 

problem in 185 (46%) of the 406 sampled SARs. By comparison, 

110 SARs (27%) had missing data in fields critical for trend 

analysis. The frequency for each type of data quality problem 

affecting investigative and trend critical data fields is shown below. 

 

11 Structuring refers to the act of completing a series of sequential transactions for the purpose of

disguising the ultimate beneficial owner and or originating source of the transaction. 12 Due to the $3,000 exemption, the 247 problem SARs reflected in Table 1 excludes 18 of the 52 

MSB SARs mentioned above. The other 34 SARs were included in the 247 because they had other 

types of data problems. 13 During our audit, we discussed the $3,000 threshold for requiring institutions to record customer 

identification information for funds transfers and money orders with FinCEN. A FinCEN official told us 

that this threshold is currently being reevaluated by the BSA Advisory Group. This reevaluation includes 

FinCEN's plans to solicit comments via a questionnaire expected to be published in 2005. 
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 Table 5 

 Frequency of the Types of SAR Data Quality Problems

 

Problem SARs Affecting Percent of Sample

Type of Data 

Quality Problem

Investigative FieldsTrend 

Analysis

Investigative FieldsTrend 

Analysis

Missing Information 185 110 46 27

Missing From Field, 

But in Narrative See note 21 See note 5 

Inappropriate Info 107 78 27 19

Incomplete Info 55 13 14 3

Inconsistent Info 7 3 2 <1

Source: OIG Analysis 

Note: We did not categorize as a problem SAR "Missing From Field, But in Narrative" as 

affecting the investigative fields because the information was still provided. However, for 

trend analysis these SARs are considered problematic because any analysis performed on 

a blank field could be materially impacted by the missing information. 

Duplicate SARs Filed

Our December 2002 report noted that the SAR System contained 

over 3,000 duplicate SARs identified for the year 2001. During 

our initial follow-up field work, IRS personnel identified about 

7,300 duplicate SARs posted to the SAR System in calendar years 

2001 and 2002. 

In July 2004, we were advised by a senior FinCEN official that 

these duplicates had still not been purged from the SAR System 

nor were they marked for ease of identification for SAR users. 

More recently, we were again advised that the SAR System was 

canvassed again, and for the period 1996 through 2003 about 1% 

of the SARs were duplicates. We estimate that this would amount 

to roughly over 15,000 SARs. 

Clearly, duplicate SARs could adversely impact law enforcement 

efforts when aggregating SARs to identify trends, assess resource 

deployment strategies, or formulate policy initiatives. FinCEN has 

acknowledged as much in congressional testimony, “...we are also 
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devoting analysts to study Bank Secrecy Act data and all other 

available information to gain an increased understanding of 

methodologies, typologies, geographic patterns of activity and 

systemic vulnerabilities relating to terrorist financing. These 

analysts will focus on regional and systemic 'hot spots' for terrorist 

financing, studying and analyzing all sources of information.”14 

In light of how SARs are being aggregated, we believe 15,000 

duplicate SARs could materially skew law enforcement analysis, 

unless the extent and nature of duplicate SARs is systematically 

monitored. 

Timeliness of SAR Filings and Processing 

Besides reviewing the 406 SARs for data quality problems, we also 

looked at how long it took financial institutions to file and the IRS 

to process SARs onto the automated system. These timeframes 

taken together approximated how long before law enforcement 

would have access to SARs through the SAR automated data 

system.15 

Under the SAR regulations, financial institutions are required to file 

a SAR within 30 days of discovery of the suspicious activity. DIs 

are given an additional 30 days if they are unable to identity a 

suspect. As shown below, we found from the sampled SARs it 

took on average 71 days between the day of the suspicious 

activity to the date the SAR was posted to the SAR System. 

14 Testimony Before House Committee on Financial Services, Subcommittee on Oversight and 

Investigations, June 9, 2004 15 The OIG acknowledges the timeframe analysis does not take into account instances when financial 

institutions contact law enforcement directly in concert with filing the SAR. 
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Table 6 

SAR Filing and Processing Timeframes

Date of 

Suspected 

Activity 

To SAR 

Preparation

SAR 

Preparation 

To 

IRS DCC 

Receipt 

IRS DCC 

Receipt 

To SAR 

System 

Posting 

Total 

Elapsed 

Time 

Total Sample Average (a) 53 12 7 71 (b)

Paper SARs 48 15 10 72

Electronic SARs 59 7 3 69

DI SARs 51 11 7 68

MSB SARs 54 13 8 73

SARs With Data Problems 56 12 7 73

SARs Without Data Problems 47 12 8 67

Source: OIG Analysis 

Note (a): Sample was reduced by 12 due to missing information needed to measure all the

timeframes. 

Note (b): Individual timeframes can not be added to derive the total elapsed time due to

rounding and adjustments associated with missing date information. 

Most of the total elapsed time can be accounted for by the filing 

institution rather than IRS processing time. As shown in the above 

table, IRS processing time was the shortest average time of the 

four measured timeframes. 

Total elapsed time differed very little between paper and electronic 

filings (72 versus 69 days), but it appears to take financial 

institutions longer to prepare the SAR when using an electronic 

media (59 versus 48 days). 

The largest difference in elapsed time was between SARs with and 

without data quality problems. The former took on average 6 more 

days before getting into the SAR System. 

Though the total elapsed time averaged 71 days, there were 154 

SARs (52 DIs and102 MSBs), or 38%, that may have exceeded 

applicable regulatory SAR filing timeframes, as shown below. 
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 Table 7 

 Comparing MSB & DI SAR Filing Timeframes 

 (Suspected Activity to IRS DCC Receipt)

Days Number of SARs 

Elapsed DI MSB Total Sample 

0-30 110 99 209 (52%)

31-60 39 46 85 (21%) 

61-90 22 27 102 49 (12%) 

91-120 9 52 6 15 (3%) 

121-1,383 21 23 44 (11%) 

Totals 201 201 402 (99%) 

 Source: OIG Analysis 

Note, DIs are given an additional 30 days to identify a suspect, 

whereas MSBs are not accorded the additional 30 days. As shown 

above, 52 DIs total filing time exceeded 60 days, whereas almost 

twice as many MSBs (102) exceeded 30 days. Because we were 

not able to determine when the filer had first suspected a potential 

violation (i.e., the discovery date), the above table only provides an 

indication of potential late filings. Of particular note would be the 

44 SARs with total filing times exceeding 120 days or four 

months. 

Finding 3 Causes and Factors Contributing to SAR Data Quality

Problems

We noted in Finding 2 that 62% of the sampled SARs had missing, 

incomplete, inappropriate, or inconsistent data in at least one data 

field deemed to be critical to law enforcement agencies. Our prior 

December 2002 report attributed various causes and factors for 

the SAR data quality problems. While our sampled SARs illustrated 

the extent of data quality problems, our analysis of the nature of

those problems surfaced additional causes and contributing factors 

that we had not previously identified. Discussions with 15 SAR 

filers also provided additional insights. These causes and 

contributing factors can be grouped into four categories: (1) overall 

system controls, (2) broad reliance on financial supervisory 
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regulators, and factors unique to either (3) the type of filer or (4) 

filing medium. 

Absence of Overall Controls to Detect and Prevent SARs with Data 

Quality Problems – As noted in Finding 1, FinCEN had not 

implemented our prior recommendation to establish system 

controls to screen and prevent SARs with data quality problems 

from being entered onto the SAR System. We believe this 

situation continues to be a primary cause and management 

weakness. The lack of adequate controls is illustrated by the 

following: 

• FinCEN had not created a position either internally or at the 

IRS DCC with specific responsibility for monitoring for and 

ensuring SAR data quality (i.e. a Data Integrity Officer). 

Instead, monitoring was largely done sporadically on an ad

hoc basis. 

• FinCEN had not established data quality standards to 

routinely monitor and measure performance. IRS did, 

however, have limited error rate standards for the contractor 

who transcribed paper SARs into an electronic format for 

uploading onto the SAR System. However, these contractor 

standards only covered paper filings, were not 

comprehensive, and were in need of refinement, as 

discussed further below. 

• The SAR System was not routinely screened for duplicate 

filings. Thus duplicates were not purged or flagged so that 

law enforcement users could systematically make any 

needed adjustments when aggregating SAR data for trend 

analysis. 

• Electronically filed SARs were not subject to system edits or 

data perfection routines other than for format. 

• There was no systematic program or process for 

corresponding with filers for known problems. 

Consequently, FinCEN lacked a systematic mechanism to 

provide filers with feedback on any problem SARs they 

specifically filed. 
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• No systematic mechanism existed for obtaining law 

enforcement feedback or input specifically dealing with data 

quality. According to one senior member of the BSA 

Advisory Group, and from a review of recent meeting 

minutes, SAR data quality has not been an agenda item, nor 

has law enforcement agencies been routinely contacted to 

identify critical SAR data fields prior to our audit. 

Instead of enhanced detection and prevention controls, FinCEN 

appears to have focused primarily on industry outreach. For 

example, FinCEN made Frequently Asked Questions and clarifying 

guidance available on a website, revised filing instructions, and 

covered additional filing guidance tips in their periodic The SAR 

Activity Review, Trends, Tips and Issues reports. The singular 

focus of outreach in lieu of enhanced system controls over problem 

SARs may have reached a marginal level of effectiveness, in light 

of our observed SAR data quality problem rate of 56% for DIs 

(which have been subject to SAR filing since 1996). Furthermore, 

14 of the 15 institutions we contacted attributed problem SARs to 

filer error and oversight. 

Broad Reliance Placed on Financial Supervisory Regulators – 

FinCEN does not have in-house staff to examine financial 

institutions to ensure compliance with the BSA. Instead, FinCEN 

relies on the federal functional regulators to ensure that SARs are 

complete and accurate. Through onsite examinations, these 

federal regulators check for compliance with the various 

requirements of the BSA, including SAR filing. 

From a review of the regulators’ examination handbooks, we found 

that these examination procedures may not be complete or even 

provide for addressing whether an institution files accurate and 

complete SARs. Of the six regulators responsible for examining 

DIs or MSBs for BSA compliance, we found that only two 

examination handbooks specifically provided for assessing the 

completeness and accuracy of SARs. However, these two 

handbooks lacked guidance or criteria as to how these 

assessments were to be completed or what even constituted a 
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complete and accurate SAR. The other four regulators focused 

only on whether financial institutions were filing SARs when 

warranted. All six handbooks lacked any discussion as to specific 

SAR data fields as being critical or vital to law enforcement needs. 

The absence of specific examination guidance addressing SAR 

accuracy and completeness was reflected in our sampled SARs. 

We sorted the 251 SARs with data quality problems according to 

the filing institution’s primary regulator, and then compared the 

data quality problem rates. In relative percentage terms, no single 

regulator appeared to have been highly effective in ensuring their 

respective institutions filed accurate and complete SARs as shown 

below. 

 Table 8 

SARs with Data Quality Problems Sorted by Regulator

Regulator 

Problem 

SARs 

Total 

Sampled 

SARs 

SAR 

Problem 

Rates (%)

OTS 13 17 76

NCUA 9 12 75

IRS 138 203 68

FDIC 21 38 55

OCC 56 107 52

FRB 14 29 48

Totals 251 406 62

 

Source: OIG Analysis 

Note, the IRS’ SAR totals include Postal Service filings. 

MSB Outreach Did Not Focus on Completeness and Accuracy – We 

noted in Finding 2 that MSBs had a higher SAR data quality 

problem rate than DIs (68% versus 56%). Based on discussions 

with officials and review of various documents, we found that 

FinCEN’s initial SAR outreach material to the MSB industry was not 

provided until May 2003, 16 months after the industry had been 

subject to SAR filing in January 2002. Furthermore, the initial 

material that was sent to about 640 MSBs did not specifically 
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cover the topic of filing complete and accurate SARs. Instead, the 

material only covered the filing requirement. 

SAR Data Quality Problems Unique to Paper Filings – In our 

December 2002 report, we noted that one cause of problems 

entailed data entry problems arising from the transcription of paper 

SAR information into an electronic format by a contractor for the 

IRS. The contractor is subject to a quality assurance process 

whereby certain data fields are to be keystroke verified. This entails 

entering certain data fields twice and resolving any differences. To 

test the accuracy of the contractor’s data transcriptions, we 

compared the originally filed paper SARs in our sample to the SAR 

record in the automated system. 

From our audit tests along with discussions with IRS officials and a 

contractor representative, we determined that: 

• Less than one-third of the data fields deemed by law 

enforcement as being critical for investigations and trend 

analysis were subject to keystroke verification procedures 

covered in the contract. 

• 40 (17%) of the 240 sampled paper SARs included 

keystroke errors. 

Although the 17% keystroke error rate appears high, it should be 

noted that the contractor met one of the two contract quality 

standards. The contract provides for a 1% error rate standard for 

just those fields subject to the double keystroke verification 

procedures, and a 3% standard for essentially all other fields. 

Although the two standards are measured differently, we found 

that the contractor met the 1% standard but exceeded the 3% 

standard by about 14%. 

Recommendations 

Before we issued our draft report, FinCEN provided us with a 

revised corrective action plan in response to the December 2002 

report. (See Appendix 4 on page 49.) We believe FinCEN’s 
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revised corrective action plan, dated September 3, 2004, is an

improvement over its predecessor version in July 2003. Based on

our current findings and insights gained from the 406 sampled 

SARs, we are making the following recommendations aimed at

refining and or enhancing various aspects to FinCEN’s revised 

corrective action plan. We also include several recommendations 

to address weaknesses that were not identified in our 2002 report, 

or not addressed in the revised corrective action plan. 16 

Overall System Controls 

In Finding 3, we noted that a primary cause for SAR data quality 

problems was a lack of an overall system of controls to better 

detect and prevent data quality problems. We believe that 

FinCEN’s revised corrective action plan essentially addresses this 

weakness in terms of enhanced outreach, and quarterly 

identification of duplicates and SARs with blank fields. It also 

provides several means for resolving data quality problems, 

including referrals to bank regulatory agencies, direct follow-up 

with egregious filers, and remedial enforcement action, as 

necessary. 

To enhance the revised corrective action plan, we recommend the 

following refinements: 

1. Given the results of our sample, establish a position for 

a BSA data administrator (i.e., data integrity officer) 

with specific responsibility for ensuring the accuracy 

and timeliness of the SAR data system, or assign this 

responsibility to an existing position. We believe this 

would enhance both accountability and FinCEN’s 

responsiveness to SAR users, filers, and regulators. We 

also believe this position would be better situated by 

16 It should be noted that the OIG recalculated the overall error rate for the 406 sampled SARs using the 

9 critical fields noted in the revised September 2004 corrective action plan. FinCEN’s reduced data

fields resulted in a 43% error rate. As the revised action plan points out, the process of determining the 

scope of critical fields is iterative. 
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reporting directly to FinCEN rather than the IRS. 

Management Response FinCEN concurred with 

comment. It agreed with the concept of ensuring 

appropriate attention is given to BSA data integrity and 

for improving data quality through reasonable means, 

and that appropriate officials should be held 

accountable. Given its organizational and management 

structure, it will assign this responsibility and 

accountability to three existing Assistant Directors 

rather than a single individual. The target date for 

completion is April 31, 2005. 

OIG Comments The OIG believes there could be added 

challenges to shared as opposed to singular 

accountability for data quality issues, and FinCEN should 

monitor whether this approach is effective. 

Nevertheless, we believe that FinCEN’s planned 

management corrective action adequately addresses the 

intent of the recommendation. 

 

In Finding 3, we pointed out that FinCEN had not established 

standards by which data quality would be monitored, and 

performance measured. The revised corrective action plan calls for 

quarterly automated reviews to identify filers with systematic or 

pervasive filings of duplicate SARs, or SARs with blank data fields. 

However, there is no specific mention of establishing standards for 

these reviews. Accordingly, so as to better ensure that such 

reviews are consistent and filers have a more precise understanding 

of what is expected, we recommend that the Director of FinCEN: 

2. Establish measurable standards to address at least two 

data quality aspects: critical data fields that are 

responsive to law enforcement needs, and an 

acceptable level of data quality. 

Management Response FinCEN concurred with 

comment. It plans to establish measurable standards to 
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address both critical data fields and acceptable data 

quality levels. In terms of critical data fields, FinCEN 

noted that it would expand obtaining input beyond law 

enforcement to include other SAR users such as federal 

regulators as well as SAR filers. FinCEN also 

commented that the identification of critical fields must 

be made in a manner consistent with its policy goals 

and objectives for the suspicious activity reporting 

regime, with an understanding that blank fields may be 

unavoidable or justifiable. In terms of acceptable data 

quality levels, FinCEN plans to establish criteria to be 

used during the planned quarterly analysis (as provided 

in the revised corrective action plan of September 2004) 

once they have established baseline data on the revised 

critical data fields. The target date for completion is

December 1, 2005. 

OIG Comments The OIG did not intend to limit 

obtaining input to law enforcement and believes 

FinCEN’s plan to expand the process to other SAR users 

is commendable. However, the expanded process may 

present FinCEN with added challenges given users 

different authorities and responsibilities as noted on 

page 12. For example, FinCEN may find it necessary to 

establish several groups of “critical data fields” for 

assessing regulatory compliance as opposed to 

developing criminal investigative leads. Nevertheless,

the OIG believes FinCEN’s planned management 

corrective action adequately address the intent of the 

recommendation if properly implemented. 

FinCEN’s revised action plan of September 2004 suggests that 

periodic consultations have begun with the law enforcement 

liaisons. However, the plan is silent as to whether this is to be a 

continual evaluation. Based on our law enforcement contacts in 

identifying critical data fields, we would further recommend as a 

refinement that the Director of FinCEN: 
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3. Establish a process to periodically include input from 

law enforcement case agents for a contemporary 

investigative perspective. 

Management Response FinCEN concurred with 

comment. It plans to seek input not only from law 

enforcement, but also from filing institutions as well as 

the regulators. FinCEN noted that in addition to 

consultations with law enforcement liaisons, it currently 

seeks input from these sources at least every 3 years 

during the form renewal process, and more frequently

when forms are amended. FinCEN, however, will 

establish a procedure for the periodic solicitation of 

additional input. The target date for completion is 

September 30, 2005. 

OIG Comments The OIG believes FinCEN’s planned 

management corrective action adequately meets the 

intent of the recommendation if properly implemented. 

 

In Finding 2, we noted that there were about 15,000 duplicate 

SARs in the data system. FinCEN’s revised corrective action plan 

addresses this problem with a plan to scan the SAR System 

quarterly, expanding outreach, and evaluating options for alerting 

SAR users of possible duplicates. As an added refinement, we 

recommend that the Director of FinCEN: 

 

4. Assess the need to identify the specific data fields 

associated with the 15,000 duplicates and advise law 

enforcement so that they may better gauge the potential 

impact of duplicates. Duplicate SARs involving certain 

crimes may be of more importance to certain law 

enforcement agencies given their differing authorities 

over certain crimes such as credit card fraud versus 

mortgage loan fraud. 

 

Management Response FinCEN concurs and plans to 

sample duplicate records to assess whether the 
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duplicates may affect statistical summaries of the SAR 

data. The target date for completion is September 30, 

2005. 

OIG Comments The OIG believes FinCEN’s planned 

management corrective action adequately addresses the 

intent of the recommendation if properly implemented. 

 

5. Assess the need and feasibility of identifying, tagging or 

segregating duplicate SAR filings into a suspense file 

until a more systematic process can be developed to 

prevent them from being entered into the system. 

Management Response FinCEN concurred and stated 

that, given duplicates comprise a small fraction of the 

overall reports in the database, it will focus on 

education and outreach. FinCEN plans to identify on a 

quarterly basis, filers with systemic and pervasive 

duplicate filings, and to take appropriate action in 

reaching out to such filers. FinCEN further stated that 

within the current system it was not feasible to identify 

and segregate duplicate SARs. However, FinCEN will 

explore new technology to flag duplicate reports in its 

BSA data repository project, BSA Direct, which is 

currently under development. 

OIG Comments The OIG believes FinCEN’s planned 

management corrective action addresses the intent of 

the recommendation. We also believe this corrective 

action in concert with that in response to 

recommendation 3 will also provide SAR users an 

avenue to express the need for any further interim

measures prior to the full implementation of the new

BSA Direct system to flag duplicate SARs. The OIG 

also would agree in that in nominal terms duplicates 

may in fact be a small portion of total filed SARs. As 

noted on page 22, duplicates amounted to roughly 1 

percent of all filed SARs. However, as noted in 
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Finding 2, duplicate SARs could materially skew law 

enforcement analysis, unless the extent and nature of 

duplicate SARs is systematically monitored. 

In Finding 2, we provided information on the average filing and 

processing times for the sampled SARs. With just over 25% of

SARs exceeding 60 days, and 11% taking longer than 4 months, 

we recommend that the Director of FinCEN: 

 

6. Advise and solicit the views of law enforcement 

agencies as to whether the observed timeframes are 

responsive to their needs. In so doing, FinCEN will be 

better positioned to assess any needed changes, such

as whether filer outreach or supervisory oversight 

should be focusing on the timely filing of SARs. 

Management Response FinCEN concurred. It plans to 

solicit the views of law enforcement as well as the 

views of the federal regulators that supervise these 

institutions. FinCEN noted that the timeframes 

observed in the report alone do not indicate that its 

regulations were violated. The target date for 

completion is December 1, 2005. 

 

OIG Comments The OIG believes FinCEN’s planned 

management corrective action adequately addresses the 

recommendation if properly implemented. And as we

noted in Finding 2, the reported timeframes are intended 

to bring to FinCEN’s attention to indications of 

potentially late filings that we believe FinCEN should 

monitor. 

 

7. Assess the need to review timeliness as part of the 

planned quarterly SAR reviews for indications of 

potential violations of the regulatory filing timeframes. 

Management Response FinCEN concurred and plans to 

assess the feasibility of identifying institutions that may 
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Page 36 

be pervasively filing SARs after the required regulatory 

filing timeframes. If accurate information can be 

extracted, procedures will be developed for 

incorporating this data as part of the planned quarterly 

reviews. The target date for completion is September 

30, 2005. 

OIG Comments The OIG believes FinCEN’s planned 

management corrective action adequately addresses the 

recommendation if properly implemented. 

Although our analysis surfaced indications that as many as 154 

SARs exceeded the 30 or 60 day regulatory timeframe, our 

analysis did not include a review of the filers' records to establish 

when the suspicious activities were discovered. We also did not 

determine whether any of the extensive filing timeframes were 

willful or due to negligence, and we did not assess whether any

one filer demonstrated a pattern or practice of untimely filings. 

Nevertheless, we recommend that the Director of FinCEN: 

 

8. Assess the need to refer any of the identified lengthy 

filing timeframes (those exceeding 30 or 60 days) to the 

applicable regulatory agencies to determine whether 

timely SAR filing is an area warranting detailed 

examination or enforcement action. 

 

Management Response FinCEN concurred. If feasible 

pursuant to recommendation 7, FinCEN plans to refer 

financial institutions with pervasive filing deficiencies to 

the applicable regulatory agency for possible follow-up 

action. The target date for completion is December 1, 

2005. 

 

OIG Comments The OIG believes FinCEN’s planned 

management corrective action adequately addresses the 

intent of the recommendation if properly implemented. 

The OIG also recognizes the difficulty of obtaining 

precise information to assess compliance with the 
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Page 37 

required filing timeframes given that the date the 

suspicious activity was discovered is not captured on 

the SAR form. However, as we note in Finding 2, the 

overall timeframes as measured from information 

available on the SAR form does provide an indicator of 

potential late filers. For example, total filing time for 44 

(11%) of the 402 sampled SARs exceeded 120 days, 

well over the maximum 60 days accorded DIs under the 

regulation. Accordingly, we believe such large time 

periods as these provide a reasonable indictor of 

potential late filings worthy of follow-up. 

Reliance on Financial Regulators 

In Finding 3 we pointed out that the supervisory regulatory 

agencies responsible for examining financial institutions lacked 

clear guidance or procedures for examiners to assess SAR accuracy 

and completeness. We are aware of FinCEN’s July 2004 initiative 

to establish the “Office of Compliance,” charged with supporting 

the examination functions performed by financial regulators. 

Accordingly, we recommend that the Director of FinCEN ensure 

that the Office of Compliance: 

 

9. Assesses the adequacy and consistency of regulators’ 

examination handbooks covering financial institutions’ 

compliance with the BSA SAR filing requirements. This 

assessment should include the need to clearly spell out 

examiners responsibilities, and the examination 

procedures to determine whether institutions are filing 

accurate, complete, and timely SARs. 

Management Response FinCEN concurred. FinCEN is 

currently working with the five Federal banking agencies 

to draft interagency Bank Secrecy/Anti-Money 

Laundering examination procedures. At its request, 

guidance on SAR quality was added to the draft 

examination manual, including an examination procedure 

which directs examiners to sample reports filed by the 
FinCEN: Heightened Management Attention Needed Over Longstanding

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subject institutions. FinCEN has also started a similar 

process with IRS for their BSA examinations of money 

service businesses. 

OIG Comments The OIG believes the management 

corrective action adequately addresses the 

recommendation if properly implemented. 

 

FinCEN’s revised corrective action plan also provides for notifying 

federal regulators of filers with systemic or pervasive duplicates 

and missing information for follow-up purposes. So as to better 

ensure timely follow-up in such cases, we recommend that the 

Director of FinCEN ensures that the Office of Compliance: 

 

10. Establishes policies and procedures for timely routine 

follow-up on regulatory referrals to federal regulators to 

determine their supervisory resolution.17 

Management Response FinCEN concurred. It plans to 

establish routine follow-up on referrals to regulators as a 

function of the newly created Office of Compliance. 

The target date for completion is December 1, 2005.

OIG Comments The OIG believes FinCEN’s planned 

management corrective action adequately addresses the 

intent of the recommendation if properly implemented. 

 

 

17 It should be noted that regulators may not act on a referral in a timely manner if they do not address 

the referral before the next scheduled exam. For example, some regulators' examination cycles range 

between 12 and 36 months before the next scheduled examination. Existing resources at one 

regulatory agency may preclude reexamination before 20 or more years. At the exit conference, 

however, FinCEN indicated that they could not request an expedited out-of-cycle examination of all the 

regulators to address a FinCEN referral.
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Unique MSB SAR Data Quality Problems

 

In Finding 2 and 3 we noted several unique aspects to the problem 

SARs filed by MSBs. Accordingly, we recommend that the 

Director of FinCEN: 

 

11. Assess the need for either enhanced outreach or 

supervisory enforcement action with the three MSBs 

accounting for over 77% of the problem MSB SARs in

our sample. 

Management Response FinCEN concurred and has 

assessed the issue, engaged in enhanced outreach, and 

taken appropriate regulatory action against these 

entities. The enhanced compliance activities have been 

completed in conjunction with pending or completed 

enforcement actions. 

OIG Comments The OIG believes FinCEN’s 

management corrective action adequately addresses the 

recommendation. 

Unique Paper SAR Data Quality Problems 

In Finding 3, we noted that the IRS DCC data transcription 

contractor for paper SARs was keystroke verifying data fields for 

less than a third of the data fields deemed critical by law 

enforcement agencies. Furthermore, 17% of our sampled paper 

SARs included keystroke errors. We recommend that the Director 

of FinCEN, in consultation with the IRS and law enforcement 

agencies: 

12. Assess the need to expand the number of data fields 

subject to keystroke verification to include data fields 

critical to law enforcement. 

Management Response FinCEN concurred. It plans to 

review the IRS SAR data entry contract and the 
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standards outlined for keystroke verification, as well as 

request copies of reports used by the IRS to ensure 

contractor adherence to the requirements. FinCEN 

noted, however, that keystroke verification will only 

result in correction of typos not in the addition of 

information that is available to the keyer. The target 

date for completion is December 30, 2005. 

OIG Comments The OIG believes FinCEN’s planned 

management corrective action adequately addresses the 

recommendation if properly implemented. We would 

also agree that key stroke verification would not address 

missing information. However, as a point of 

clarification, the recommendation is only intended to 

expand the number of data fields subject to keystroke 

verification to those deemed critical by SAR users. 

13. Reassess how the contractor’s 3% performance 

standard is to be measured so as to give greater 

consideration to the number of SARs with errors rather 

than just the total number of errors. This would provide 

added perspective to situations where a few SARs 

account for a large number of errors as opposed to a

large number of SARs each with a few errors. 

Management Response FinCEN concurred. It plans to 

establish a process to periodically obtain input from IRS 

as to how the 3% error rate is monitored and the 

number SARS involved. The target completion date is 

October 31, 2005. FinCEN also noted that, given the 

volume of reports processed by the IRS-DCC, the 

timeframes for posting SARs were very reasonable. 

OIG Comments The OIG believes the planned 

management corrective action adequately addresses the 

intent of the recommendation if properly implemented. 
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14. Assess whether the scope of the contract could be 

economically and feasibly expanded to identify SARs 

with missing and or incomplete data fields. This might 

provide FinCEN with a means of identifying egregious 

problem filers in a timelier manner than the quarterly 

reviews noted in the revised corrective action plan. This 

would also cover the majority of SARs since most SARS 

are filed by paper. 

Management Response FinCEN concurred in concept. 

It has assessed a number of options to identify SARs 

with missing and incomplete data fields and determined 

that using information technology to identify records 

needing further analysis is the most cost effective 

approach. FinCEN has begun a process to receive 

computer-generated reports quarterly with highlights to 

certain types of data quality issues. According to 

FinCEN, the longer-term technology solutions include its 

BSA Direct project and accelerating electronic filing. A 

key design feature of BSA Direct project is the use of

sophisticated data cleansing techniques that will 

automatically elucidate certain problems and 

dramatically improve the overall quality of the BSA data. 

BSA Direct will be operational in October 2005 so it is 

impractical to implement other temporary measures at 

this time. FinCEN also noted that there is a growing 

number of paper filers using its BSA E-Filing system to 

file their SARs. 

 

OIG Comments The OIG believes FinCEN’s 

management corrective action adequately addresses the 

intent of the recommendation. 

 
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* * * * * * 

We would like to extend our appreciation to both FinCEN and the 

IRS for their cooperation and courtesies extended to our audit staff 

during the audit. If you have any questions, please contact me at 

(415) 977-8810 ext. 222 or Jack Gilley, Acting Audit Manger, at 

(415) 977-8810 ext. 235. Major contributors to the report are

listed in Appendix 6. 

/s/ 

Benny W. Lee 

Director, Western Field Audit Office
Appendix 1 

Objectives, Scope and Methodology 

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Our audit objective was to assess the status of FinCEN's 

management corrective action plan in response to our December 

2002 audit report. Our prior report disclosed problems with the 

completeness and accuracy of SAR records, and the existence of 

numerous duplicate SARs. 

To assess FinCEN’s implementation of our audit recommendations, 

we visited FinCEN in July 2003. Because SARs are collected at 

the IRS DCC, and the SAR data base is maintained by the IRS, we

also visited the IRS DCC in August 2003. To assess the adequacy 

of FinCEN's corrective action plan, we interviewed FinCEN and IRS 

officials to determine the target dates for implementing the plan, 

the estimated cost of implementation, the basis for the cost 

estimates, the existence of obstacles to implementation, and 

whether FinCEN had formally requested the IRS to implement plan 

modifications. 

 

We briefed FinCEN officials in October 2003 on our preliminary

observations as to the little progress in implementing their 

management corrective action plan noted in their response to our 

December 2002 report. As a result, we expanded our scope to

include detailed testing of a statistical sample of SARs to assess 

the accuracy and completeness of the database. Additional followup audit work was also conducted to assess the current level of 

duplicate SAR filings in the database. 

Sampling Methodology

So as to avoid identifying SAR data quality problems of a technical 

and trivial nature, we met with law enforcement officials, including 

case agents, at the FBI, Secret Service, Department of Justice, and 

Department of Homeland Security. These officials included two 

members of the BSA Advisory Group, as well as the FBI and Secret 

Service FinCEN liaisons. We inquired about their use of SARs and 

any data integrity problems they had encountered, and what SAR 

data fields they considered critical for investigative case 

development and trend analysis. 
Appendix 1 

Objectives, Scope and Methodology 

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We conducted detailed SAR testing at the IRS DCC from December 

2003 through February 2004. From IRS records, we determined 

that over 99 percent of SAR filings were made by depository 

institutions (DIs) and money services businesses (MSBs). 

Approximately 450,000 SARS had been filed by these two types 

of institutions over the 12 month period ending October 2003. We 

did not include SARs filed by securities and futures dealers, or 

casinos and card clubs in our tests, because they only comprised 

about 1 percent of the total SAR universe. This was the most 

current available information at the time of our sample. 

The universe of over 450,000 SARs was adjusted by excluding 

about 37,000 MSB SARs with reported transactions of under 

$3,000. This was to avoid inclusion of SARs where the filer was 

not required by regulation to obtain customer identification 

information. 

From the resulting adjusted universe of about 416,000 SARs, we 

randomly sampled 406 SARs comprised of 203 SARs filed by DIs 

and 203 SARs filed by MSBs. Based on a predicted error rate of 5 

percent, we determined the sample size to obtain a sample 

precision of ± 3 percent at a 95 percent confidence level. Our 

projections of problem SARs were based on the adjusted universe. 

We calculated the sampling error at a 95 percent confidence level 

based on the sample results. 

We stratified our sample by media of filing so as to assess any 

differences between paper versus electronic filings. The latter 

consisted of diskette, cartridge, and PACS Internet. 

In certain instances, we replaced a SAR in our sample with another 

randomly selected SAR. This was done, for example, if the SAR 

filer used an incorrect SAR form (e.g., an MSB used the SAR form 

for a DI). 

Detailed SAR Testing Methodology

We reviewed each sampled SAR to determine if information in 

critical fields was complete, appropriate, and consistent. We did 
Appendix 1 

Objectives, Scope and Methodology 

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not attempt to reconcile sampled SARs with the filing institution’s 

records. 

We considered a SAR field as missing information if the field was 

blank, and incomplete if it was partially blank. However, if from 

review of the entire SAR, there was information to indicate that the 

filing institution was not in a position to obtain the missing 

information, we did not treat the field as missing or incomplete. 

We considered the information in a SAR field as inappropriate if the 

information was clearly incorrect or inconsistent with instructions 

or intent. For example, a U.S. state was shown as the issuer of a 

passport. Finally, we considered a SAR field as inconsistent if 

information in the field conflicted with information in the narrative 

section. 

At the request of FinCEN, we also reviewed each paper SAR 

against the SAR System record to determine if the data 

transcription contractor met contract accuracy requirements. We 

disregarded trivial discrepancies that neither changed intended 

meaning, nor resulted in loss of information. 

We also used the sampled SARs to measure SAR timeliness from 

two respects: (1) how long it took between the date of the 

suspicious activity and the date the SAR was filed by the 

institution, and (2) how long it took the IRS to process the SAR 

upon receipt. Together these time periods provided an indicator as 

to how quickly law enforcement had access to SAR information. 

The measured timeframes were based on a combination of actual 

recorded dates from the SAR and estimated timeframes (e.g., 

posting to the system) provided by IRS officials. Estimated 

timeframes were predominately used for the posting date for all 

SARs, and the date IRS received electronic SARs. 

To obtain further insights on the causes of SAR data quality 

problems, we contacted 10 DIs, and 5 MSBs from our sample. We

obtained their perspectives on problems encountered when filing 

SARs, as well as the adequacy and accessibility of FinCEN's SAR 

guidance. 
Appendix 1 

Objectives, Scope and Methodology 

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Review of SAR Processing Controls

Through direct observation, review of applicable documents, and 

interviews, we documented SAR processing steps. We focused on 

controls to ensure that SARs are complete and accurate, and that 

all SARs are entered onto the data base. 

Duplicate SARs

We initially inquired with FinCEN officials as to the status of any 

corrective action taken to address the 3,000 duplicate SARs noted 

in our December 2002 report. Upon determining the duplicate

SARs had not been purged or flagged for end-users, we updated, 

through FinCEN, the extent of duplicate SARs, and also discussed 

the methodology used to identify duplicate filings. 

Audit Coordination

In planning our detailed review at the IRS DCC, we coordinated 

with the Treasury Inspector General for Tax Administration (TIGTA) 

to ensure that we would not duplicate TIGTA ongoing or recently 

completed audits. We also inquired as to any TIGTA audit findings 

related to SAR data quality. 

We conducted our audit from June 2003 through November 2004 

in accordance with generally accepted government auditing 

standards. 
Appendix 2 

Number of Sampled SARs With Data Quality Problems 

Affecting Investigative Fields 

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SARs With Problems in: DIs MSBs Total 

 1 – 4 Fields 99 (49%) 92 (45%) 191 

 5 – 8 Fields 13 (6%) 34 (17%) 47 

 9 - 23 Fields 0 (0%) 9 (4%) 9 

SARs With Problems 112 (55%) 135 (67%) 247 

SARs Without Problems 91 (45%) 68 (33%) 159 

 Total SARs Sampled 203 (100%) 203 (100%) 406 

Source: OIG Analysis
Appendix 3 

Projected SARs With Data Quality Problems 

DIs versus MSBs

 

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Estimated Number of 

SARs With Problems 

Type of Filer

SARs in 

Population Minimum Maximum 

Sampling 

Error 

±% 

DIs 285,336 139,610 178,055 6.7% 

MSBs 130,180 80,761 96,232 5.9% 

DI & MSB 

Combined 415,516 227,669 266,989 4.7% 

Source: OIG Analysis 

With sample stratification, the overall sample precision (sampling error) 

becomes smaller than that of each stratum. 
Appendix 4 

FinCEN's Revised Corrective Action Plan 

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Appendix 4 

FinCEN's Revised Corrective Action Plan 

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ATTACHMENT A 
Appendix 4 

FinCEN's Revised Corrective Action Plan 

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Appendix 4 

FinCEN's Revised Corrective Action Plan 

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Appendix 4 

FinCEN's Revised Corrective Action Plan 

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Appendix 4 

FinCEN's Revised Corrective Action Plan 

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ATTACHMENT B 
Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 5 

Management Comments

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Appendix 6 

Major Contributors to This Report 

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Western Field Audit Office

Garrett Gee, Audit Manager 

Jack Gilley, Auditor-in-Charge 

David Bach-y-Rita, Auditor 

Ernest Lui, Auditor 

John Mansfield, Auditor 

OIG Headquarters

Myung Han, Economist 
Appendix 7 

Report Distribution 

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Department of the Treasury 

Under Secretary, Office of Terrorism and Financial Intelligence (TFI) 

 Assistant Secretary, Terrorist Financing & Financial Crimes 

Office of Strategic Planning and Performance Management 

Office of Accounting and Internal Control

Financial Crimes Enforcement Network

Associate Director, Regulatory Policy & Programs Division 

Assistant Director, Deputy Chief Financial Officer 

Office of Management and Budget

OIG Budget Examiner 

Internal Revenue Service

Associate Commissioner for Modernization/Chief Information 

Officer 

Director, Fraud/Bank Secrecy Act 

Small Business Self/Self Employed Division 

Legislative Analysis Officer (Audit Coordinator) 

Department of Homeland Security

Special Agent-in-Charge, Criminal Investigative Division, United 

States Secret Service 

Deputy Assistant Director, Financial and Trade Investigations 

Immigration and Customs Enforcement 

Department of Justice

Assistant Director, Criminal Investigative Division 

Federal Bureau of Investigations 

Principal Deputy Chief 

Asset Forfeiture/Money Laundering Section