ECSH33600 - Checking internal reporting and suspicious activity

During a compliance check, you must confirm that suspicious activity is being reported to the National Crime Agency (NCA).

Consider the following:

  • Confirm the business’s nominated officer (NO) is aware of their role to consider any disclosures in the light of any relevant information which is available to the business and determine whether it gives rise to knowledge or suspicion, or reasonable grounds for knowledge or suspicion, that a person is engaged in money laundering or terrorist financing (ML/TF). Regulation 21(5) Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) regulation 2107 (MLR2017) refers. Please note, a sole proprietor or company director with no employees does not need to appoint a NO and is responsible for submitting suspicious activity reports (SARs) in relation to their business.
  • Does the NO have a good understanding of the requirements under MLR 2017, Part 3 of the Terrorism Act 2000 (TACT) and Parts 7 and 8 of the Proceeds of Crime Act 2002 (POCA)?
  • Does the NO know how to submit a SAR and have an awareness of the SARs online facility?
  • Are employees regularly given training in how to recognise and deal with transactions and other activities or situations which may be related to ML/TF and proliferation financing (PF) and report it to the NO? You should review training material provided to relevant staff to ensure it is specific to the business – see ECSH33220. It is good practice to ask individual employees about their understanding of the process.
  • Is there a suitable procedure in place for employees to report suspicious activity to the NO? Again, it is good practice to ask individual employees about their understanding of the process.
  • What information does the NO take into account regarding the customer when considering if a situation gives rise to reasonable grounds for suspicion of ML/TF/PF?
  • Does the number of SARs seem reasonable to the size and nature of the business, considering the risk of ML/TF/PF identified?
  • Does the business deal correctly with any situations requiring a defence against money laundering (DAML)?

 

Can you ask to see SARs submitted to the NCA?

Regulation 66(1A) MLR 2017, includes the power to “require the business to provide a copy of any suspicious activity disclosure made to the NCA”.

This means you can ask to see both internal reports made to the NO and review copies of SARs. However, if the SAR has been submitted to the NCA via the SAR Portal, this may prove difficult if the business has not retained a copy. You can still ask to see the information used by the NO when considering whether a SAR should be submitted, and the information which was reported to the NCA, to assure the quality of the SAR.

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What makes a good SAR

The following is a summary of what makes a good SAR and should help Officers evaluate the quality of the SARs submitted by businesses:

There are six key features to be sure to include on all SARs (where the information is available):

  • Who is the person? - Name, Date of Birth
  • What is being reported? - is the NO reporting a transaction that has already happened, or seeking consent (DAML) to allow a transaction to proceed?
  • When did the suspicious activity take place? - What period does the suspicion cover?
  • Where do the parties to the transaction live? - Address details (including postcode)
  • Why is there suspicion?
  • How is the suspicious activity taking place?

The NCA regularly publishes reports on their website relating to “SARs in Action” and “SARs reporter booklets” which you should review to increase your knowledge of the SARs regime.


What to consider when looking at SARs

You need to ensure that suspicious activity does not go unreported, and that information reported to the NCA can be used to investigate the matter. A business must not routinely report transactions without suspicion of ML/TF/PF or simply because a customer has reached a financial threshold.

Suspicion is not defined in law. The Court of Appeal (R v Da Silva) defined suspicion of money laundering as a possibility, which is more than fanciful, that the other person was or had been engaged in, or benefited from, criminal conduct. There does not need to be evidence of the suspected money laundering. The threshold for suspicion under POCA is generally considered to be low.

Ensure the NO has included all relevant information available to them. If you believe more information could have been provided to the NCA, discuss this with the NO to understand the reasons the information was excluded. Similarly, if the NO decided not to submit a SAR after considering an internal report, discuss the steps taken by the NO in making the decision that the person is not engaged in money laundering.

Consider the timing of the report in relation to the transaction. Has a report been submitted to the NO as soon as practical after the information came to light? Did the NO consider the report timely? Is there a valid reason for any delays in reporting?

Ask to the see other transactions carried out by the customer to establish and confirm if further transactions were carried out, or whether the business relationship was terminated as a result of the SAR. Discuss how the business withdrew its services and returned any funds to the customer, where applicable.


Defence against money laundering (DAML)

A DAML provides a defence to a principal money laundering offence should the business decide to carry on with a transaction, it is not permission to continue granted by the NCA. The business must decide for itself whether to continue dealing with the customer. The DAML only relates to the transaction on which it was raised.

Please read the NCA’s frequently asked questions to ensure you advise the business appropriately.

Guidance is also available on GOV.UK for exemptions to DAMLs introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCT).


Tipping off offences

It is a criminal offence for anyone, following a disclosure to a NO or to the NCA, to do or say anything that might either ‘tip off’ another person that a disclosure has been made or prejudice the investigation. If you become aware that a business or its employees have committed a tipping off offence under section 333A POCA, you should follow the guidance for criminal referral.


What if the business has not raised any SARs

You will need to consider whether the lack of SARs is reasonable for the business. The business may only be involved in relevant activity on a limited basis, meaning suspicious activity is unlikely.

However, you need to be mindful that a lack of SARs could also be because AML policies, controls or procedures or training is ineffective, leading to breaches under regulations 19/19A and 24 MLR 2017.

It may also indicate that the business is turning a blind eye to risk factors.

If you consider suspicious activity has occurred or is occurring, you will need to raise a SAR.

 

Failing to disclose knowledge or suspicion of money laundering

It is also important to consider whether there has been a breach of section 330 POCA for failing to disclose in the regulated sector.

A person commits an offence if all the following conditions are met:

  • They have reasonable grounds for knowing or suspecting that another person is engaged in money laundering,
  • The information on which the suspicion is based came to them in the course of a business in the regulated sector.
  • They can identify the other person or the whereabouts of any of the laundered property, or believe that the information may assist in identifying that other person or the whereabouts of any of the laundered property, and
  • They do not make the required disclosure to a NO as soon as is practicable after the information or other matter came to them.

An offence is not committed if:

  • They have a reasonable excuse for not making the disclosure.
  • Have not been provided with appropriate training.
  • Are a professional legal adviser or relevant professional adviser and the information came to them in privileged circumstances.

A “relevant professional adviser” is an accountant, auditor or tax adviser who is a member of a relevant professional body (which is established for accountants, auditors or tax advisers and tests the competence of its members and ensures professional and ethical standards are maintained).


Legal professional privilege and accountancy service providers

Failing to report suspicions of money laundering to the NCA should normally be referred as a criminal offence. However, Section 330(6)) of POCA provides a defence to professional advisers when the information giving rise to a suspicion comes to them in "privileged circumstances". This means an accountancy service provider (ASP) may be subject to legal professional privilege (LPP).

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Caseworkers should make themselves fully aware of the Consultative Committee of Accountancy Bodies (CCAB) guidance on reporting before visiting ASPs.