Officials at the Financial Crimes Enforcement Network Agency believe insurers should have an easy time filing suspicious activity reports (SARs) through automated systems.

FinCen, an arm of the U.S. Treasury Department, give that assessment in a notice about a proposal to require insurers and other financial institutions to file SARs electronically by June 30, 2012.

Shifting to all-electronic filing for most reports should save the Treasury Department millions of dollars per year and improve the security and integrity of the filing process, officials say.

Today, filers mail paper reports to an Internal Revenue Service center in Detroit as unclassified mail with no special handling, officials say.

“On occasion, mailed paper reports have been delayed, and in some cases damaged beyond readability,” officials say.

Congress created FinCen and the current SAR program in the wake of the Sept. 11, 2001, terrorist attack.

The program encourages financial institutions to identify and report activities that might be related to money laundering, international narcotics trafficking or financing of terrorism.

In some cases, the Bank Secrecy Act (BSA) requires financial institutions to file SARs or other reports. In August, for example, the BSA reporting system expanded to include individuals filing the Report of Foreign Bank and Financial Accounts (FBAR) report, officials say.

FinCen has been encouraging insurers and other financial institutions to file SARs through an electronic BSA E-filing system since October 2002.

In 2010, FinCen upgraded the BSA E-filing system and made it easier for financial institutions to file through the Web.

As of July 1, filers were submitting 84% of BSA reports through the electronic system, and the system has had a 96% user satisfaction rate, officials say.

FinCen would exclude the Report of International Transportation of Currency or Monetary Instruments (CIMR) from the requirement, and it could provide hardship exemptions for some small businesses and money services businesses.

FinCen officials note that banks and broker-dealers already are highly automated, already use the BSA system in many cases, and already are required to file other regulatory reports electronically.

Similarly, the insurance company group “is highly automated,” officials say.

Officials cite the National Insurance Producer Registry (NIPR), a producer licensing system supported by the National Association of Insurance Commissioners, Kansas City, Mo., as an example of an insurance industry automation system.

Comments on the proposal are due Nov. 15.

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