In February, the Financial Crimes Enforcement Network launched a dedicated whistleblower platform inviting individuals to report fraud, money laundering and sanctions breaches, with the potential for financial rewards where information leads to successful enforcement action. The message is clear: in the fight against financial crime, vigilance is everyone’s responsibility.
Suspicious activity reports for private markets fund managers, that message resonates in a very practical way. Every investor KYC file reviewed, every capital call processed and every transfer of interest assessed carries an unspoken question – “does this look right?”
Most of the time, it does. But occasionally, something feels off. A structure is unusually complex. A source of wealth explanation doesn’t quite add up. A transaction sits outside the patterns you would expect.
It’s in these moments that judgement matters—and the way a firm
responds can make all the difference.
Table of Contents
Turning vigilance into action
In regulated firms, instinct alone is not enough. When something does not look right, the response must be grounded in a clear, defensible framework.
Suspicious Activity Reports, or SARs, are the mechanism that translate concern into action. A SAR is a formal submission to authorities, such as FinCEN in the United States, when a firm spots activity that may indicate money laundering, fraud, terrorist financing or sanctions breaches.
A well-considered SAR shows that the firm has not ignored a concern. It demonstrates careful assessment and appropriate escalation. For managers operating in increasingly complex, global environments, this is not just about compliance—it is about good governance across the entire fund lifecycle.
Quality over quantity
Regulators have increasingly reinforced that effective SAR (suspicious activity reports) reporting is less about the number of reports filed and more about their quality. Guidance issued by FinCEN in October last year sought to clarify reporting expectations and encourage institutions to focus resources on producing high-quality, meaningful submissions.
As John K. Hurley, Under Secretary for Terrorism and Financial Intelligence, stated:
“SARs should deliver better outcomes by providing law enforcement the most useful information, not by overwhelming the system with noise. Compliance requires real resources, and that’s why prioritisation is crucial.”
For private markets firms, this means striking the right balance. Over-reporting strains resources and distracts from real risks. Under-reporting creates regulatory and reputational exposure. The real challenge is in knowing the difference between legitimate complexity and genuine suspicion.
The role of the AML Officer
The AML Officer sits at the heart of this decision-making process.
They design and oversee SAR policies, guide escalation decisions and ensure staff understand what red flags look like in the context of the firm’s strategy and investor base. In private markets, that context is rarely simple. Multi-layered ownership structures, cross-border investors, secondary transactions and subscription facilities all introduce layers of complexity.
When something does not look right, the AML Officer must assess whether it is unusual but explainable, or indicative of a deeper issue. As firms grow and investor pools diversify, this role grows in scope and significance.
Embedding good judgement across the organisation
A single officer cannot carry vigilance alone. When something does not look right, staff must feel confident raising it.
That confidence comes via:
- Ongoing, risk-based training tailored to private markets activities
- Clear guidance on firm-specific red flags
- Consistent and professional escalation processes
- Strong underlying data, continuous screening and well-maintained investor records
Robust KYC at onboarding, combined with ongoing monitoring, gives teams the context needed to assess unusual behaviour properly. Without structured, reliable data, even experienced professionals are left relying too heavily on instinct.
Raising the internal standard
The enhanced focus on whistleblowing and SAR (suspicious activity reports) quality reflects the seriousness with which regulators view financial crime.
For private markets managers, the question is not whether issues will arise, but how they will respond when something does not look right.
SARs are the formal expression of that response. Handled thoughtfully and proportionately, they protect firms, investors and the integrity of the financial system.
The most resilient firms will be those that embed structured judgement across their operations, ensuring that moments of doubt are not dismissed, but examined carefully and acted on responsibly.
How we can help
At Sonata One, we support private markets firms in strengthening the foundations that underpin sound judgement. Through comprehensive investor onboarding and KYC services, ongoing monitoring and disciplined review processes, we help AML officers and their teams make informed, proportionate decisions when concerns arise.
Responsibility for reporting remains with the firm. Our role is to ensure the data, processes and controls behind those decisions are robust.
If you would like to discuss how your current framework supports effective SAR decision-making, speak to our team or book a conversation with us.
