Suspicion and surety: submitting a high-quality SAR

December 2023  |  FEATURE | BANKING & FINANCE

Financier Worldwide Magazine

December 2023 Issue

The corporate world, and the financial services (FS) sector in particular, is an obvious target for fraudsters. With money laundering and terrorist financing increasing exponentially, these nefarious activities are taxing even the most stringent of authorities.

Among the many countries blighted by fraud of this nature is the UK. According to the National Crime Agency (NCA), the scale of money laundering and terrorist financing impacting the UK annually is in the hundreds of billions of pounds, with FS the sector at the forefront of this risk landscape.

However, despite the multitude of anti-money laundering and countering the financing of terrorism (AML/CFT) regulations in existence, identifying guilty parties is often a drawn-out affair. The process generally begins with the reporting of suspicious activity to the relevant authorities, through a suspicious activity report (SAR).

Across the globe, SARs play an extremely important role in transferring intelligence at all levels. In 2022, the UK submitted almost 1 million SARs, with many millions more across the globe (the US, for example, submitted 3.5 million SARs).

“SARs enable those working in the FS sector to promptly and succinctly alert law enforcement to possible instances of money laundering or terrorist financing,” says Sandy Price, AML manager at the Institute of Chartered Accountants in England and Wales (ICAEW). “They provide critical information and help identify offenders.”

Submitting a high-quality SAR

Given the number of SARs submitted in the UK every year – the NCA forecasts there will be a million over the next year – it is essential that a SAR filing (which should be submitted to the NCA via its SAR online platform) is of the highest quality, with all the key information included to make them as useful as possible to law enforcement authorities.

In its SAR guidance, the NCA states that firms should ponder words such as ‘know’ and ‘suspect’ to determine when to submit a SAR. Also, they should not feel a suspicion is too small to report, as it may contribute to information that has already been submitted via other sources, to build a better picture of criminal activity, or may prove to be valuable information that leads to solving criminal cases.

When it comes to completing the ‘reason for suspicion’ component of a SAR, FS firms are requested to provide information on who is involved, how they are involved, how the circumstances arose, the nature of the criminal or terrorist property, the value of the criminal or terrorist property (estimated as necessary), where the criminal or terrorist property is located, when the circumstances arose or when they are planned to happen, and why the FS firm is suspicious or has knowledge.

The NCA also recommends that firms, once a SAR has been submitted, take care to ensure the individual or parties suspected are not made aware of the filing, as disclosing this information may prejudice an investigation. This is known as ‘tipping off’, and is a criminal offence. Another recommendation is that firms maintain a log of the SARs they have made.

“A new SAR portal was opened to all reporting organisations from 18 September 2023,” says Ms Price. “This new reporting tool should improve the quality of SARs submitted. A high-quality SAR will avoid the use of industry jargon and provide law enforcement with all identifying information the firm has about the persons involved.

“It should also clearly articulate the reason for suspicion and the whereabouts of the proceeds of crime if known,” she continues. “Reporters should consider that NCA staff review thousands of SARs a day, so the easier it is to read, the better. The use of glossary codes helps signpost the SAR to the right agency and fast-track them, where needed, to protect the vulnerable from harm.”

Remaining vigilant

As a source of crucial intelligence for law enforcement authorities, a SAR is undoubtedly an important component in the fight against money laundering and terrorist financing. But FS firms must also remain vigilant as to the evolving fraud landscape and, if need be, amend their reporting capabilities accordingly.

“The new SAR portal will improve the quality of the data submitted and enhance ease of access for law enforcement,” believes Ms Price. “We can already see the positive impact of increased staffing at the NCA. There has been more engagement with supervisors and firms, and we expect this to result in better quality SARs.

“Criminals do not stand still; as measures to combat their activities improve, they adapt, abusing new technologies such as artificial intelligence and digital currencies,” she concludes. “It is absolutely essential that firms and their staff continue to educate themselves on emerging risks and associated red flags and remain vigilant, reporting suspicion immediately.”

© Financier Worldwide

BY

Fraser Tennant