The bank reporting rule that brought New York Gov. Eliot Spitzer to the attention of federal investigators aims to keep the country's financial system from being misused by criminals and terrorists.

Since 1996, banks and a number of other financial institutions have been required to file Suspicious Activity Reports, known as SARs, if they think they have spotted violations of federal laws. The reports go to the Financial Crimes Enforcement Network, or “FinCEN,” a unit of the U.S. Treasury Department.

FinCEN then posts the SARs in a database that is available to law enforcement agencies, including the Internal Revenue Service, according to Steve Hudak, a FinCEN spokesman. Law enforcers look at the database hoping to pursue leads they already have, but “suspicious activity review teams” of enforcers across the country also look at the data to try and find crimes they don't know about, Hudak said. One important federal law aimed at money laundering is the Bank Secrecy Act, passed in 1970, which requires cash transactions to be reported to authorities if they exceed $10,000. In 1986, another law, the Money Laundering Control Act, made it a criminal offense for a person to try to keep a bank from reporting transactions of that size by dividing them into several smaller transactions - a practice known as “structuring.”

Under the rules for filing SARs, some suspicious transactions are only required to be reported if they are for $5,000 or more. But banks are required to report all suspected “structured” transactions, no matter what their size, if the total of the transactions would be more than $10,000, Hudak said.

SARs have to be sent to FinCEN within 30 days of the relevant transaction, or within 60 days if a suspect can't be identified in connection with the activity. Transactions subject to SARs requirements include deposits, withdrawals, stock and bond purchases, and transfers between accounts, according to www.Bankrate.com.