Overview
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) released new Frequently Asked Questions (“FAQs”) in October 2025 clarifying several aspects of Suspicious Activity Report (“SAR”) filing requirements under the Bank Secrecy Act (“BSA”). The guidance, issued in coordination with the federal banking agencies, seeks to eliminate confusion about when SARs must be filed, and most notably confirms that financial institutions are not required to document their decisions not to file a SAR.
This shift is part of Treasury’s effort to modernize anti-money laundering (“AML”) compliance and ensure SAR filings deliver meaningful, actionable intelligence to law enforcement, not just paperwork volume. For members of the Financial Industry Regulatory Authority (“FINRA”), this clarification has immediate implications for AML program design, supervisory documentation, and examination preparedness.
What Changed and Why It Matters
While the FAQs addressed a number of issues facing compliance officers and AML supervisors, including issues related to SARs filing for transactions near the $10,000 Currency Transaction Report (“CTR”) and having to perform recurring ongoing reviews solely because a prior SAR was filed, the most impactful clarification confirms that there is no regulatory mandate to prepare or maintain written documentation explaining a decision not to file a SAR.
FinCEN’s clarification responds to years of industry feedback about the burdensome “defensive filing” culture that had developed. Firms often filed or documented every potential alert to avoid examiner criticism and potential FINRA sanctions. Under the new FAQ, institutions are still required to identify, review, and report suspicious activity, but they are no longer obligated to maintain written documentation explaining why a SAR was not filed.
While institutions may choose to document their analysis as a best practice, FinCEN emphasized that such documentation is discretionary, and not required under the BSA or its implementing regulations. For FINRA member broker-dealers, this change reduces the administrative burden, but it heightens the importance of risk-based decision-making and supervisory consistency.
Practical Implications for Broker-Dealers
- Written Supervisory Procedures (WSPs). Broker-dealers should review, and if necessary, update their WSPs and AML compliance manuals to ensure that they accurately reflect the revised expectations, and include discretionary “as-appropriate” documentation references. Ultimately, FINRA Rule 3310 (AML Compliance Program) requires that procedures be reasonably designed to detect and report suspicious transactions, but it does not require documentation of non-filings.
- However, firms should avoid removing all internal review records. Examiners from FINRA or the SEC may still request evidence that a firm followed its own internal SAR evaluation procedures. Accordingly, a process log or compliance-review note may still be advisable to demonstrate that an alert was considered and dispositioned.
- Risk-Based Judgments Over Defensive Filings. The clarification gives firms greater discretion to decline filing when activity lacks sufficient indicia of suspicion. While documentation is optional, firms must still show that SAR decisions are made through sound escalation, review, and supervisory processes. FINRA and SEC examiners will likely test whether the process, not the paper trail, is robust. That said, the absence of documentation does not insulate a firm if regulators later conclude that it ignored suspicious activity. Supervisory judgment must remain well-supported by policy, training, and escalation protocols.
- Prioritize Quality over Quantity. FinCEN’s clear message: fewer but higher-quality SARs are more valuable than an avalanche of low-value filings. Broker-dealers should recalibrate their alert thresholds and escalation criteria accordingly.
- Prepare for Exam Shifts. FINRA’s AML examination program will likely shift focus from checking for “non-filing memos” to evaluating the reasoning process behind decisions. Based on this shift, firms should expect inquiries into:
- How alerts are triaged and escalated.
- How SAR thresholds are determined.
- Whether AML officers maintain independence in deciding to file or not file.
- Finally, AML officers should be prepared to reference the October 2025 FAQ directly when discussing their program changes.
Key Takeaways
FinCEN confirmed that SAR non-filing documentation is not legally required under the BSA.
Broker-dealers remain obligated to detect, escalate, and report suspicious activity consistent with FINRA Rule 3310.
Firms should maintain risk-based processes and internal consistency, even if no ‘no-SAR memo’ exists.
The focus is shifting toward decision quality and escalation integrity, not paperwork volume.
FINRA examinations may now evaluate process, reasoning and training rather than documentation completeness.
Final Thoughts
FinCEN’s clarification relieves broker-dealers of an administrative burden that often-created redundant paperwork, without enhancing AML effectiveness. But it also raises the bar for sound judgment, risk-based reasoning, and supervisory discipline. For broker-dealers, the best path forward is to document process quality, not paper quantity, while maintaining defensible decision records when risk exposure warrants it.
FinCEN’s message is clear: smart compliance is not about filing more, but about the quality of the filings.