Which observations at the on-site visits would justify writing a SAR/STR?

An analyst reviews an alert for high volume Automated Clearing House (ACH) activity in an account. The analyst’s initial research finds the account is for a commercial daycare account that receives high volumes of large government-funded ACH transactions to support the programs. The account activity consists of checks (cheques) made payable to individual names in varying dollar amounts. One check indicates rent to another business.

An Internet search finds that the daycare company owner has previous government-issued violations for safety and classroom size needs, such as not having enough chairs and tables per enrollee. These violations were issued to a different daycare name.

Simultaneous to this investigation, another analyst sends an email about negative news articles referencing local child/adult daycare companies misusing governmental grants. This prompts the financial institution (Fl) to search all businesses for names containing daycare’ or care*. Text searches return a number of facilities as customers at the Fl and detects that three of these businesses have a similar transaction flow of high volume government ACH funding with little to no daycare expenses. The analyst determines that site visits should be conducted for the three daycare businesses.

Which observations at the on-site visits would justify writing a SAR/STR? (Select Three.)
A . Signs of severe wear and poor maintenance at the site
B . A site located in a commercial building
C . Lights turned off at the site during operational hours
D . Visible attendance with children being dropped off by parents
E . Visible signage indicating the purpose of the building
F . A full parking lot of cars with no staff at the site

View Answer

Answer: A, C, F

Explanation:

The observations at the on-site visits that would justify writing a SAR/STR are signs of severe wear and poor maintenance at the site (A), lights turned off at the site during operational hours ©, and a full parking lot of cars with no staff at the site (F). These observations suggest that the daycare businesses are not operating legitimately or providing adequate services to their customers, and that they may be misusing governmental grants or laundering money through their accounts.

These observations are consistent with some of the red flags for fraud identified by ACAMS2, such as:

Inadequate facilities or equipment for the type of business

Lack of visible activity or customers at the business location

Discrepancy between reported income and expenses

Unusual volume or frequency of transactions

The other observations are not as relevant or indicative of fraud as options A, C, and F. A site located in a commercial building (B) could be a normal or legitimate choice for a daycare business, depending on its size, location, and availability. Visible attendance with children being dropped off by parents (D) could show that the daycare business is providing genuine services to its customers, although it does not rule out possible fraud or money laundering. Visible signage indicating the purpose of building (E) could also show that the daycare business is transparent and legitimate, although it does not guarantee its quality or compliance.

Reference: 1: ACAMS Advanced Financial Crimes Investigations Certification Study Guide, available at ACAMS 2: ACAMS Fraud Prevention eLearning Course Module 3: Fraud Detection Techniques