The Treasury Department requires virtually all businesses that provide financial services to the public to file”Suspicious Activity Reports” when they see financial transactions that might indicate malfeasance. This monitoring requirement used to be focused primarily on banks, but as part of the USA Patriot Act it was expanded to get a broader view of the financial system. Apparently this expansion was worthwhile as the latest “SAR Review” released by the Financial Crimes Enforcement Network shows quite an uptick in this type of suspicious behavior.
Despite -- or maybe because of -- the focus on following the money to stop terrorism, questionable activities associated with terrorist financing were the topic of 30% more filings than last year. Money laundering filings went up in 2010, after a decline the year before. (Apparently even criminals had a tough time with the recession). Interestingly depository institutions actually reported a year over year decline in suspicious activity. The growth is in the “shadow banking” world that includes credit unions and money services businesses. Of those, Gaming Establishments increased their filings by 16% and Card Clubs increased 180%.
All of this serves as a reminder that the technology allowing more transactions to happen more easily is also fertile ground for criminals. This isn’t just a big business problem. Ironically, according to the Association of Certified Fraud Examiners per employee losses from fraud are 100 times greater for small businesses than those for larger companies. The Association cites 3 areas where small businesses make themselves especially vulnerable: inadequate screening of new employees, not using financial controls to contain fraud, and allowing employees to conduct transactions that make it easy to commit fraud. The fraud triangle is built on a base of incentive and rationalization. All it takes is opportunity to commit the crime. If employers make it easy, it’s more likely to happen.