CAML CME-2B: The Guide to Suspicious Activity Reporting (SAR)

In the fight against financial crime, the ability to identify and escalate suspicious behavior is the ultimate legal obligation of any financial professional. For the CISI Combating Financial Crime (CAML CME-2B) exam, Suspicious Activity Reporting (SAR) and the role of the MLRO are heavily tested areas.

The Role of the MLRO

Every regulated financial institution must appoint a Money Laundering Reporting Officer (MLRO). This individual holds a highly sensitive, senior position and acts as the central hub for all AML concerns within the firm.

The SAR reporting chain involves two distinct steps:

1. Internal Reporting: When a front-line employee (like a teller or wealth manager) spots a red flag, they are legally obligated to file an internal SAR to the MLRO.
2. External Reporting: The MLRO reviews the internal report. If the MLRO agrees that there are reasonable grounds for suspicion, they must file an external SAR to the national Financial Intelligence Unit (FIU).

Recognizing Red Flags

Employees are not expected to be detectives, but they are expected to recognize ‘red flags’—behaviors that deviate from the client’s normal profile. Exam questions will often present scenarios and ask if they warrant an internal SAR.

Common red flags include:

• A client suddenly depositing large amounts of cash when their business does not typically handle cash.
• Transactions involving high-risk jurisdictions with no clear economic rationale.
• A client attempting to make a transaction just below the reporting threshold (known as ‘smurfing’ or structuring).
• A client becoming highly defensive or evasive when asked standard KYC/CDD questions.

The Offense of Tipping Off

One of the most serious criminal offenses in AML regulation is Tipping Off.

If an employee files an internal SAR, they must act completely normally around the client thereafter. If the employee implies, hints, or directly tells the client that an investigation is underway, they are committing a crime. Tipping off allows criminals to destroy evidence, move funds rapidly, or flee the jurisdiction before law enforcement can act.

Conclusion

For the CAML CME-2B exam, ensure you understand the flow of information: Employee -> Internal SAR -> MLRO -> External SAR -> FIU. Never alert the client, and always escalate red flags.