Reported by Tad Simons  Technology Journalist/Thomson Reuters Institute

Fraud is on the rise almost everywhere, and there is no indication of a slowdown anytime soon, according to the statistics behind SARs filings

The number of suspicious activity reports (SARs) — the documents that financial institutions must file with the federal government’s Financial Crimes Enforcement Network (FinCEN) whenever behavior by employees or customers is detected that may be associated with money laundering, fraud, or other types of criminal activity — is one of the most accurate measures of the prevalence of financial crime in any given year in the United States. Not surprisingly, the number of SARs have been steadily rising.

A surge in SARs

In mid-2023, a Thomson Reuters Regulatory Intelligence special report on the surge in SAR filings predicted that approximately 3.75 million SARs would be filed in 2023, a 4.5% increase over 2022 SARs and a historic record. That prediction was accurate but fell a bit short — the final SARs tally for 2023 ended up being 3,809,823 SARs, a 5% increase over 2022 and yet another record in terms of filing volume.

Prior to the pandemic, SARs were increasing at a rate of roughly 2% to 3% year-over-year, but several converging factors have accelerated those statistics. A surge in fraud during the pandemic kickstarted the trend, which was then followed by a series of massive data breaches that exposed the personal data of millions of people, sparking an increase in all types of electronic fraud, including synthetic identify theft, account takeovers, and various forgery-related activities.

Given that SARs filings over the past few years have shown no signs of slowing down, there is little reason to believe 2024 will be any different. Indeed, SARs filings in 2024 are expected to continue increasing at a rate of 4% to 5%, which has quickly become the new normal for SARs filing volumes, according to Jacob Denman, Risk and Fraud Product Manager at Thomson Reuters.

The rise in check fraud

Denman says he even expects areas of fraud that declined slightly in 2023, such as check fraud, to maintain a steady pace into 2024 as well. “Honestly, it’s hard to see how check fraud could go any higher,” Denman offers, but he concedes that it might.

Until 2021, check fraud averaged about one quarter-million SARs per year, but the number of check-fraud SARs began rising in 2021, and almost doubled — to more than 683,000 in 2022, compared to more than 350,000 SARs the previous year.

Interestingly, that timeframe coincides to when national and international crime rings began raiding mailboxes and stealing mail from postal carriers. Then — in a practice called checkwashing — criminals change the payee on any checks they steal and cash them or deposit them electronically into another account.

The number of check-fraud SARs fell slightly in 2023, to 665,505, but even that number is shocking, Denman says. “Check fraud accounts for almost 20% of all SARs filed,” Denman says. “And if you consider that more than half of all SARs are filed by the top five or six banks in the country, and those banks are getting hit close to 100,000 times a year — that’s nuts.”

Read full report: https://www.thomsonreuters.com/en-us/posts/investigation-fraud-and-risk/sars-fraud-2024/