WASHINGTON — The number of suspicious activity reports filed by banks, thrifts, and credit unions is on track to set a record for the 12th year in a row — every year since regulators first required the filings, according to data released by the Financial Crimes Enforcement Network.
In the first six months of this year the number of filings by financial institutions increased 5% from a year earlier, to 343,974. If that trend continues, the full-year total is likely to exceed last year's figure of 649,176.
Fincen Director Jim Freis attributed the increase to the expansion of anti-laundering programs and jumps in specific types of fraud.
"AML programs at all types of financial institutions continue to develop, and they are not only capturing more suspicious activity — they are reporting it in ways that are increasingly useful to law enforcement, and that vital interaction is constantly improving," Mr. Freis said. "There are also notable projected increases in reports of several types of fraud — not just mortgage fraud, but consumer loan, credit card, and check fraud."
Reports of mortgage fraud also appear to be on track to set a record. In the first six months of this year there were 32,660 filings related to suspected mortgage fraud — more than in all of 2005, and almost as many as in 2006. But since the housing crisis began, mortgage fraud has been spiking. Last year there were 52,868 SARs related to mortgage fraud.
Rob Rowe, a vice president and senior counsel at the American Bankers Association, said the heightened attention on mortgage fraud has put more attention on fraud in general.
"With mortgage fraud, you have a lot more turmoil in the mortgage markets, and second, because mortgage fraud has been brought to everyone's attention, bankers and customers are better at detecting problems," Mr. Rowe said.
There have been similar increases in other lending areas. In the first six months of this year depository institutions filed 39,410 SARs on check fraud, versus 71,844 in all of last year; 2,039 on commercial loan fraud SARs, versus 3,645 in all of last year; and 11,085 on consumer loan fraud, versus 17,772 in all of last year.
Bankers filed 19,809 SARs related to credit card fraud in the first six months of this year, versus 32,575 in all of last year. There were 18,207 SARs related to identity theft in the first six months of this year, versus 30,958 in all of last year.
The states with the most SARs were California, New York, Florida, and Texas. A record 69,533 reports were filed in California in the first six months of the year, versus 149,990 in all of last year.
Observers gave different reasons for the filing increase but agreed it is here to stay.
Robert Serino, a partner at Buckley Kolar LLP and a former Office of Comptroller of the Currency counsel, said that even though the focus is on the credit crisis, bankers are not likely to reduce their attention on laundering issues as a result.
"I think there's great sensitivity in the banks that while the major issue" is the credit crisis, "they can't totally lose sight of something else," Mr. Serino said.
David Caruso, the chief executive officer and managing director of Dominion Advisory Group LLC in Centerville, Va., said that just because there are more SARs does not necessarily mean there are more criminals.
More data is needed to come to a clearer conclusion about the cause for the filing increase, he said. "I suspect there's a reasonable number of people in that SAR population who are repeat offenders passed around from bank to bank, and that has a real impact for banks, and it clutters up the system."