Out-Law News | 29 Apr 2016 | 2:50 pm | 2 min. read
The Home Office pledged to take action to address "defensive reporting" by businesses in the regulated industries that file SARs in a document it published containing the findings from a consultation it held on the SARs regime (6-page / 35KB PDF) earlier this year.
Under the Proceeds of Crime Act (POCA) 'regulated' entities such as banks, accountants and law firms must report suspicions of money laundering to the National Crime Agency (NCA).
"The reporting sector has concerns regarding the phrasing of the requirement to report suspicious transactions, as set out in POCA," the Home Office said. "This concern, and the penalties for failure to report, drive a significant level of defensive reporting, where reports are made more because of concerns regarding a failure to comply with POCA than because of genuine suspicion. This places a burden on the regime, and detracts from a focus on serious and organised crime. The government is committed to taking action to recognise and address this concern."
The Home Office's commitment was outlined alongside broader proposals to reform UK anti-money laundering (AML) rules. In a statement last week UK home secretary Theresa May said that the government would "forge a new partnership with industry to improve suspicious activity reporting", with the government promising "fundamental reform" of the SARs regime.
According to the findings from its consultation, some businesses advocate a "tiered approach to reporting".
"Some respondents would like information that help them to identify criminality more effectively, and to use this as the basis for a tiered approach to reporting, whereby SARs are graded according to the degree of suspicion relating to the transaction, and where the reporter provides a significant level of input where they firmly believe the transaction is criminal," the Home Office said.
Other businesses believe that SARs should only have to be filed when the value of the transaction under scrutiny is higher than a set threshold amount, it said.
"A number of respondents felt that there should be a realistic de minimus value for SARs, to allow reporters to focus on the higher value transactions, and to reduce the number of SARs raised," the Home Office said.
Expert in financial enforcement and regulation expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said that better funding for agencies responsible for investigating money laundering concerns would help tackle the problem.
"The identification, prevention and prosecution of money laundering in the UK relies upon an under-resourced system of various agencies," Ruck said. "Whilst one catch-all agency focussing upon anti-money laundering may not be the answer, an increase in the resources available would surely help. For example, the FCA is currently responsible for regulating over 50,000 firms for the purposes of compliance with anti-money laundering requirements in both legislation and its own rules."
Ruck said that greater clarity on what happens to the information contained in SARs when it is submitted to the agencies is needed.
"Firms already put a lot of resources in to addressing money laundering and reporting suspicious transactions to agencies like the NCA, but they are left in the dark in terms of how that information is used and as to which type of transactions the agencies have particular concerns about," Ruck said. "If firms had more information, whether from assessing enforcement action they can see stemmed from SARs or by way of general trends highlighted by the agencies, then it could spur firms to adapt their AML controls and learn what higher value transactions pose risks."