By Tom Richmond
The National Crime Agency (NCA) recently published its annual report into Suspicious Activity Reports (SAR) received in 2019.
In the last year, the NCA has received approximately 480,000 SARs, resulting in approximately £130million in potential criminal proceeds being frozen, including around £8 million in potential tax evasion. This is up massively from the approximately £52million which was seized the year before. The main reasons for the increase appear to be owing to the increased sophistication which firms are applying to their financial crime monitoring in particular in the FinTech and Challenger Banks area.
It's is not surprising to see that a majority of the SARs come from Financial Services in particular banks and building societies. What is surprising is that even though there are around 5270 IFAs in the UK (more than all bank and building society branches combined), not a single one has submitted a SAR!
Perhaps the lack of IFA-submitted SARs is because IFAs do not have the wealth of intelligence which larger financial institutions have, or perhaps IFAs are not fully aware of their reporting obligations. But if you're an IFA, now presents a good opportunity to refresh yourselves and your firms of what is suspicious and what to do if you have one.
A SAR, or Suspicious Activity Report, is a disclosure a firm makes to inform the NCA (and by extension, law enforcement) that a client is in some way acting suspiciously, indicating money laundering or terrorist financing.
A SAR protects you, your organisation, and the UK in general 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 2002 (POCA).
‘Suspicious' is a very subjective term and as such there are no hard and fast rules on what does and what does not constitute as suspicious activity. However, some examples of what could be considered as suspicious would include:
If the customer:
If the funds are unusual such as:
If the transaction has unusual features, such as:
As soon as you ‘know' or ‘suspect' that a person is engaged in money laundering, terrorist financing, or dealing in criminal property, you must report this to your MLRO.
The MLRO will review the suspicions and decide if a Suspicious Activity Report (SAR) needs to be disclosed to the NCA.
Failure to report any money laundering suspicions is an offence on the grounds of negligence. This offence can be punishable by a conviction of a maximum of 5 years imprisonment, a fine, or both. This can also lead to an offence of money laundering which can carry a penalty of 14 years imprisonment.
You should review your existing internal reporting processes, ensure that everyone has completed their Financial Crime Training and that all staff members understand their reporting obligations.
Whilst £130 million is an impressive figure when compared to the close to £100 billion which is estimated to be laundered through the UK every year, this is a drop in the ocean and we as an industry need to do more in terms of suspicious activity reporting. If you have any questions, let us know!
Tom joined Apricity after spending nearly 10 years in a variety of compliance roles, including Financial Crime (anti money laundering, counter terrorist financing and bribery and corruption). He has experience in complaint remediation at the Financial Ombudsmen Service.
Tom holds advanced certificates in Anti Money Laundering and in Managing Sanctions Risk and a certificate in securities and investments.
