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Reporting suspicious activities: what you need to know

Accountants can play their part towards detecting and preventing economic crimes by making Suspicious Activity Reports (SARs) to the National Crime Agency (NCA). The NCA’s latest SARs in Action publication demonstrates how the UK Financial Intelligence Unit (UKFIU) use SARs to help identify some of the key serious organised crime threats, and various types of fraud that target potentially vulnerable members of society. SARs also help HMRC mitigate tax and illicit financing risks. 

While there are limitations on the current NCA SAR system which is part of a wider SAR reform programme, accountants should endeavour to submit the best quality report that they can, in line with the NCA’s guidance.  Here is a brief re-cap of what an SAR is, including some advice by Anne Davis, Director of Professional Standards at The Institute of Financial Accountants (IFA)

What is a Suspicious Activity Report?

SARs are disclosures concerning knowledge or suspicion, or where there are reasonable grounds for suspicion, of money laundering or terrorist financing. They are submitted by the nominated person or the Money Laundering Reporting Officer (MLRO) to the NCA using the online portal. It is the MLRO’s responsibility to determine whether an internal report by an employee in a public practice firm should be submitted to the NCA. As well as being part of your mandatory responsibilities enshrined in The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended in 2019), submitting a report to the NCA helps to protect your business from the risk of laundering the proceeds of crime. All SARs and any source material that is submitted, is confidential to protect the identity of the MLRO and their organisation. 

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When to make an SAR?

In instances where there is knowledge or suspicion of money laundering (as set out in part 7 of the Proceeds of Crime Act 2022) or terrorist financing (as set out in part 3 of the Terrorism Act 2000) in a regulated sector, it is essential that you make a report to the UKFIU which is part of the NCA. 

What you’ll need to establish is whether there is knowledge or ‘suspicion’, before the MLRO becomes obliged to make an SAR.  The threshold for suspicion is low. Suspicion is defined as when “you think there’s a possibility, which is more than fanciful, that the relevant fact exists”. However, “a vague feeling of unease would not suffice” to make the matter a reportable suspicion. 

MLRO’s need to form their views on whether there is suspicion of money laundering, irrespective of whether concerns are raised by employees through internal reporting. In order to decide whether or not there is suspicion, it is reasonable for the MLRO to ask questions about the employees concerns and review relevant information to support a judgement on suspicion. While some due diligence is needed, there is no requirement to undertake an extensive investigation in order to submit a SAR.  

As an employee of a public practice firm, it is always better to err on the side of caution and raise an issue relating to knowledge or suspicion of money laundering, as every issue must be considered by your appointed MLRO who can then make onward disclosure i.e. SAR if appropriate. If your organisation does not yet have an MLRO, it is your responsibility to appoint one.

The importance of conducting due diligence, and knowing your client, cannot be underestimated. Failure to conduct due diligence of your client may prevent the MLRO from submitting an SAR because the identity of the person is not known. Having insufficient information on the identity of the person and/or information on the proceeds of crime, negates the obligation of submitting a SAR by the MLRO to the NCA since law enforcement would not be able to investigate this any further.

Tips for making a good report

Suspicious Activity Reports can be submitted via the NCA website, however it is essential that any reports are high quality. In their 2020 Annual Report, the UKFIU disclosed that they received and processed 573,085 SARS and 62,408 Defence Against Money Laundering (DAML) submissions. 

The best way to deliver a report is to:

  • Be clear and concise: make the report and any supporting information succinct and logical. Avoid using jargon or acronyms and keep your formatting clear and simple. 
  • Provide the right information including:
    • Subject type. Use the options to classify each subject as suspect, victim or unknown, this helps put each subject’s role into context and also makes clear where subjects are not suspected of criminal activity.
    • Subject details – individuals. Where possible provide any middle names, date of birth (especially helpful), addresses (including postcodes where known), email addresses, web page addresses and any other known identifiers such as National Insurance number, passport number, car registration or phone numbers.
    • Subject details – entities. Wherever possible include the registration number, (tax reference and VAT number is also useful), country of incorporation, addresses (including postcodes where known), email and web addresses, phone numbers and wherever possible the full legal name and designation, e.g. Limited, SA, GmbH etc.
    • Financial transactions. When the suspicion relates to a financial transaction, include details of the beneficiary/remitter of funds, bank account details, transaction date and transaction type e.g. credit card, cash and explain the reason why any of the transactions are suspicious.
    • Services provided. Provide details of the types of services being provided at the time the suspicion arose e.g. audit, assurance, company formation, tax etc. and include date of activity, how the activity will take place and where known, full identity of the parties involved as well as indicators suggesting complicit criminal behaviour or negligent behaviour of the professional(s) involved.
    • Reason for suspicion. Keep your explanation clear, concise and in plain English and focus on what you have seen and why it is unusual or suspicious. Where you feel able to, refer to which predicate offences (i.e. the underlying criminal conduct giving rise to the money laundering) you think may have been committed.
  • Use glossary codes: these help aid law enforcement agencies to make use of the SARs. You can identify the appropriate glossary code here

To help guide you through the SAR process, you might want to refer to the Accountancy Sector SAR template. Ultimately, you need it to cover the what, who, why, when, how, and where of the crime, while keeping it as succinct as possible. It is also important to note that the SAR regime is not a route to report crime or matters posing an immediate risk to others, and there may be a need to make reports to other authorities as well as UKFIU to make sure that the right information gets to the right place. 

One final point, it is essential to remember that tipping off is illegal. Tipping off relates to disclosing an SAR or any information from the SAR that is likely to prejudice the investigation by law enforcement. Internal discussions within a firm do not constitute tipping off. 

 

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