7 minute read
Suspicious minds
David Potts asks how you can harness your suspicious mind to stamp out money laundering.
David Potts Director of Operations, AIA
Money laundering is the process by which the profits of illegal activities are disguised and made to appear legitimate. The National Crime Agency estimates that the scale of money laundering impacting the UK annually is in the hundreds of billions of pounds.
The impact of money laundering is devastating, but money laundering is not only a crime itself; money laundering is a key enabler of other serious crimes such as modern slavery, drugs trafficking, fraud, corruption and even terrorism.
A high quality SAR can provide a critical intelligence resource for law enforcement and be instrumental in identifying money launderers, sex offenders, fraud victims, murder suspects, missing persons, people traffickers, fugitives and terrorist financing. It’s crucial to remember that investigations are often based on multiple SARs, and your report could be the missing piece of the puzzle.
Visit www.aiaworldwide.com/anti-moneylaundering-supervision for more information on the red flags of money laundering and your obligations as an AIA member under the Money Laundering Regulations 2017.
SARs overview
What is a SAR?
A SAR is a Suspicious Activity Report, a piece of information which alerts law enforcement that certain client/customer activity is in some way suspicious and might indicate money laundering or terrorist financing.
Reason for suspicion
Submitting a SAR provides law enforcement with valuable information on potential criminality. It also protects you, your organisation and UK financial institutions from the risk of laundering the proceeds of crime.
By submitting a SAR to the NCA, you will be complying with any potential obligations you have under the Proceeds of Crime Act (POCA) 2002.
When do I submit a SAR?
As soon as you “know” or “suspect” that a person is engaged in money laundering or dealing in criminal property, you must submit a SAR.
Do I have to submit a SAR?
If you don’t submit a SAR, you may commit an offence if you have “knowledge” or “suspicion” of money laundering activity or criminal activity or do something to assist another in dealing with it. Submitting a SAR provides a defence against committing a money laundering offence.
May I inform a client/customer that I have made a report?
You must not say anything to your client/ customer which leads to an investigation being prejudiced. Once you have submitted your SAR, you should remember your obligations not to
make any disclosures which might constitute an offence of tipping off. This comes under POCA 2002 s 333A or the Terrorism Act (TACT) 2000 s 21D. The NCA does not provide or approve standard wording for you to use in such circumstances. It is therefore necessary that you give careful consideration as to how you will handle your relationship with the subject once you have submitted the SAR. This is particularly true if the subject is a client or customer of your business.
What is obtaining a defence against money laundering or terrorist property in relation to SARs?
Persons and businesses generally, and not just those in the regulated sectors, may avail themselves of a defence against a principal money laundering or terrorist financing offences for a specified future activity that they believe may involve the proceeds of crime.
The NCA can provide a reporter with a defence to those offences, and the relevant power is contained in POCA 2002 s 335 (seeking “appropriate consent”) and TACT 2000 s 21ZA (seeking “prior consent”).
A reporter can submit a SAR, setting out their suspicion about the activity or the individual, the actual activity for which they seek a defence and details of the proceeds of crime. The legislation gives the NCA seven working days to respond to the reporter, and if the decision is to provide a defence, then the reporter will receive an email with a letter informing them of the decision. Where the NCA decides to refuse the reporter a defence, the activity must not proceed for a further 31 calendar days; or, if earlier, until further notified by the NCA. When the NCA has made a decision to refuse, the reporter will be telephoned with the decision and receive an email with a letter informing them of the decision.
Further information is available in a separate document published on the NCA website entitled “Requesting a Defence Under POCA or TACT”. This provides information on the process to be followed and what to expect if you wish to apply to the NCA for a defence.
Submitting SARs
Who do I send SARs to?
Send SARs directly to the NCA using the SAR Online system.
The NCA’s electronic SAR Online system will allow you to submit SARs in a secure and efficient manner and to receive a prompt acknowledgement. The SAR Online system is accessible through a link on the NCA website (www.nationalcrimeagency.org.uk).
How do I register with SAR Online?
You will require a unique email address in order to register for this service, and you can register by internet at the above address. You will be supplied with a password by email. When your account has been activated, you will be able to login, complete and submit SARs. (See bit.ly/2pkBwsc for more information.)
SARs Reform Programme
To ensure that the UK can address its economic crime threats, it is vital that the capabilities of the public and private sectors remain robust and fit for purpose. However, the ever-changing and multifaceted nature of the economic crime threat increases this challenge.
The Financial Action Task Force’s Mutual Evaluation Review (MER) of the UK in 2018 (see bit.ly/2JAU3am) recognised that the SARs regime delivers significant outcomes against economic and wider crime, including terrorist financing and money laundering investigations and asset recovery results.
Considering the scale of the threat faced by the UK, it is paramount that this system works as effectively as possible to produce the high quality financial intelligence necessary to detect and disrupt economic crimes.
The Financial Action Task Force’s MER recommended that the UK reform the SARs regime and the UK Financial Intelligence Unit (FIU) as a priority.
The UK government’s Economic Crime Plan (bit.ly/2pmJ9OR), published in July 2019, highlighted an objective to strengthen the capabilities of law enforcement, the justice system and private sector to detect, deter and disrupt economic crime.
SAR intelligence was the foundation of a money laundering charge and assisted in identifying the conduit of funds of a company owned by the subject to other accounts held by the subject which were then drawn in cash to the extent of approximately £2 million. The main subject was convicted of numerous offences and received a prison sentence. Confiscation proceedings are underway.
A subject had opened multiple current accounts in quick succession and was using these to launder funds on behalf of others. SARs identified the criminality and caused an investigation to commence. Subsequent enquiries have identified that the subject has used false instruments in order to open some of the accounts identified. Enquiries are ongoing.
As part of this ambition, it was recognised that the system surrounding the reporting of suspicious activity required significant enhancement. Innovative solutions are necessary to make use of the vast quantities of data and information now available to the public and private sectors.
The SARs regime is a critical aspect of the UK’s system for combating economic crime: the SARs Transformation Programme, led by the Home Office, aims to fundamentally reform the SARs operating model and deliver a regime with much better IT, enhanced feedback and a reformed UKFIU.
Overall, the government is committed to making the environment as difficult as possible for criminals to operate, while allowing business and society to prosper.
AIA has been working with this process to ensure that the UK has a good understanding of the current collective capabilities for combating economic crime so that together we can develop and deploy the right capabilities at the right time.
It is a key priority to ensure that the technologies that enable the transaction processes and suspicious activity reporting mechanisms are convenient enough for customers and reporters to use, agile enough to identify economic crime and robust enough to prevent it before it has taken place.
Further information and guidance You can find further information on how to submit a SAR on the NCA’s website and download guidance for submitting quality SARs.
Log in to the secure AIA members area to access documents and advice including: ● AML Guidance for the Accountancy Sector; ● Member in Practice Handbook; and ● AML templates and guidance. ●
International Accountant | Issue 108
