ECSH34225 - Referrals: suspicious activity reports

The regulatory requirement for submitting a suspicious activity report (SAR)

Under regulation 46(5) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), where HMRC, in the course of carrying out any of its supervisory functions or otherwise, knows or suspects, or has reasonable grounds for knowing or suspecting, that a person is, or has, engaged in money laundering or terrorist financing must as soon as practicable inform the National Crime Agency (NCA).

Therefore, if you suspect that money laundering may be taking place you must raise a suspicious activity report (SAR) following the guidance below.

SARs must relate to money laundering or terrorist financing as defined by Proceed of Crime Act 2002 (POCA) or Terrorist Act 2000 (TACT).

 

When are you required to submit a SAR?

When you suspect a person, or an entity is engaged in money laundering or dealing with criminal property you must submit a SAR.

A SAR should be submitted as soon as it is practical to do so after you have formed a suspicion.

Before making a SAR, you should consider:

  • who are you reporting?
  • why you’re suspicious?
  • what is the transaction?
  • what is the criminal property? (see below)
  • whether the person or entity is a suspect or a victim?

You can submit multiple SARs on the same issue as and when new information comes to light, simply refer to previous SAR.

A SAR should contain an element of criminal property or criminality. The term criminal property does not mean you must have evidence that the cash or asset is criminally derived or obtained. Criminal property can be an item about which you are suspicious. It could be as small as £1 ledger entries or £1m undeclared cash kept in a safe.

How is suspicion defined, what is a sufficient level of suspicion to submit a SAR

The level of suspicion required for submitting a SAR is low and your reasons for suspicion should be based on a reasonable possibility. It does not need to be a certainty; it must simply be ‘more than fanciful’. Suspicion is subjective and may differ from person to person, however your suspicions should be more than just vague feelings of unease or what could be considered fanciful.

You must submit a SAR if you know or suspect or have grounds for knowing or suspecting a person or entity is or has engaged in money laundering or terrorist financing. You should detail this in your SAR under reasons for suspicion.

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Your suspicion will be formed from a wide variety of sources, be that behaviours, lack of cooperation, observations, paperwork checks, data analysis and formed at different points of your contact with businesses. Your suspicions should be formed from the knowledge you gain during the normal course of your primary role as a compliance investigator.

 

What information is required

As a minimum you require the name of the person or entity that is the subject of the SAR, the reasons for your suspicion and if applicable a glossary code –           

Give a clear and concise explanation of the reason(s) for the suspicion, identifying:

  • who – the identity of the party, or parties involved
  • what – the transaction they are involved in
  • where – a description of the criminal property 
  • how – a description of the prohibited act(s)
  • why – the criminal activity suspected
  • when – any critical deadlines

The more detail on the SAR the greater value it will have. A good quality SAR will include a variety of information gained from your case work or observations. If available, you should include:

Occupations, addresses (including postal codes), telephone numbers, email addresses, websites, bank account details, debit/credit card numbers, IP addresses, company registration, VAT numbers, business type, transaction details (dates, values, beneficiaries, etc), known associates, linked legal entities/ businesses, passport, or other ID details.

Structure the SAR in a logical format and keep your explanation clear, concise and in plain English. Focus on what is suspicious, your reasons for suspecting and summarise them chronologically. Limit it to about 1500 words and avoid using anacronyms or jargon.

Consider the fact that the reader may not be as familiar as you with the subject matter. Your name will not appear on a SAR submitted to the NCA and should not be included under this section or elsewhere.

 

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(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

 

Tipping off

It’s an offence to tell the business or person you’ve submitted a SAR about that you’ve submitted a SAR about them. You must never disclose outside of HMRC that you have submitted a SAR on a firm or person.

Once a SAR is made, you must consider if and how HMRC should change the way it interacts with the business to avoid committing the offences of ‘tipping off’ and ‘prejudicing an investigation’.

Under section 333A of the Proceeds of Crime Act 2002 (POCA), it’s a criminal offence that could result in imprisonment or a fine for:

  • telling a person that: a report has been made (if you know or suspect that you’re likely to prejudice an investigation by disclosing this information); or
  • an investigation into money laundering is being considered or carried out (if that disclosure will prejudice the investigation).

If you know or suspect that a money laundering investigation is being or is about to be concluded, it’s a criminal offence under section 342 POCA to make a disclosure that’s likely to prejudice the investigation. 

SARs are not the same as Intelligence Reports (IR). You may need to submit a SAR and an IR, but this will be dependent on the specifics of each situation.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)