Suspicious Activity Reports and the BSA: What Firms Need to Know

As financial regulation evolves, so too does the expectation that firms across the investment space step up their role in the fight against financial crime. For Registered Investment Advisers (RIAs) and Exempt Reporting Advisors (ERAs), the long-standing exemption from Bank Secrecy Act (BSA) requirements is nearing its end, and with it, a new era of compliance is emerging. 

One of the key obligations firms will now face is complying with Suspicious Activity Report (SAR) requirements. SARs are a key mechanism for detecting and disrupting money laundering, fraud, and other financial misconduct. As the Financial Crimes Enforcement Network (FinCEN) prepares to extend AML rules to RIAs, now is the time for compliance leaders, GCs, and operational heads to get ahead of what’s coming. 

What is a SAR, and Why Does It Matter? 

A Suspicious Activity Report is a formal notice submitted to FinCEN when a firm detects behavior that may involve money laundering or other financial crimes. SARs are confidential, legally mandated, and a critical part of the U.S. financial intelligence framework. 

Banks, broker-dealers, and other institutions currently subject to the BSA have long been required to file SARs. RIAs and ERAs, however, have historically been exempt, despite managing trillions in assets and having exposure to high-risk counterparties, cross-border transactions, and complex structures. 

That’s changing. In mid-2024, FinCEN reaffirmed its intent to bring both RIAs and ERAs under the same AML obligations as other financial institutions, including SAR filing. A final rule is expected soon. (If you’re new to the proposed FinCEN rule and how it affects asset managers, see our earlier overview here.) 

What Triggers a SAR? 

The exact threshold can be surprisingly low. If a firm “knows, suspects, or has reason to suspect” that a transaction: Involves funds derived from illegal activity 

• Is designed to evade BSA requirements 

• Has no apparent lawful purpose 

• Uses the investment adviser as a conduit for illicit activity 

…it likely warrants a SAR.  

In practice, this could cover anything from irregular wire activity and unusual LP structures to evasive KYC responses and concerns about beneficial ownership. The obligation isn’t to prove wrongdoing, but to recognize red flags and escalate appropriately. 

Preparing for SAR Obligations: What Firms Should Do Now 

While the final FinCEN rule is still pending, it’s not too early for RIAs and ERAs to begin laying the groundwork. That includes: 

• Conducting a risk assessment based on your investor base, fund structures, and geographic exposure 

• Reviewing AML and KYC processes to ensure they’re robust and actionable 

• Designating a compliance officer to oversee your AML program and SAR process 

• Building an escalation workflow for identifying, reviewing, and submitting suspicious activity 

• Training legal, ops, and investment teams to spot red flags and escalate appropriately 

What Makes a Good SAR? 

Filing a SAR isn’t just a formality, it’s an important piece of the AML toolkit. Strong SARs are: 

• Timely – submitted within 30 days of detecting suspicious activity 

• Detailed – include relevant parties, transaction details, and a clear narrative 

• Objective – focus on patterns and facts, not assumptions 

• Confidential – never disclose to the subject of the SAR (tipping off is a criminal offence) 

SARs are filed electronically via the BSA E-Filing System. For firms new to the process, getting familiar with this system early can save time and reduce stress once the rule goes live. 

Why It Matters 

This rulemaking isn’t just a bureaucratic shift. It reflects a deeper regulatory belief: that asset managers are now systemically important players in the financial system, and need to be held to the same compliance standards as banks, brokers, and fintechs. The upside? Firms that invest early in their AML infrastructure will be better positioned for fundraising, operational resilience, and regulator confidence.  

How Avantia Can Help

We help asset managers prepare for regulatory change, without overengineering processes or slowing down deal flow.

Working across thousands of transactions, we’ve designed compliance processes that are practical, efficient, and work across juristictions. If you’re unsure how the FinCEN rule may affect your firm, or want to get ahead of your SAR obligations, we’re here to help. 

Final Thought 

As the deadline for compliance approaches, firms should see this not just as a compliance obligation, but a strategic opportunity. Whether you’re an RIA or ERA, now is the time to prepare. 

Read our full breakdown of the FinCEN AML final rule →