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Filing a Suspicious Transaction Report (STR) or Suspicious Activity Report (SAR) is primarily based on observable suspicious activity. This means that financial institutions are required to identify and report transactions or patterns that raise concerns about potential money laundering, fraud, or other financial crimes. The emphasis on observable behaviors ensures that the report is grounded in concrete evidence rather than assumptions or subjective opinions.

Observable suspicious activity can include a variety of behaviors, such as unusual patterns of transaction frequency, transactions that significantly deviate from the customer’s normal behavior or the typical activities within their industry, and transactions involving high-risk jurisdictions. These indicators help in building a case for suspicion, making it clear for law enforcement or regulatory bodies to investigate further.

While customer profiles, employee recommendations, and public perception may inform an institution's overall risk assessment, they are not sufficient alone to justify filing an STR/SAR. Relying solely on customer profiles could overlook specific activities that are suspicious. Employee recommendations, while valuable, might also stem from personal bias rather than objective criteria. Public perception could be influenced by unfounded rumors or biases that do not accurately reflect the risk posed by a client. Therefore, focusing on observable suspicious activity provides a more reliable foundation for mandatory reporting, ensuring compliance with anti