The Making of a Super-SAR

The Government has continued to develop the existing anti-money laundering (“AML”) framework, both in response to EU driven initiatives, but also as part of its own national strategy.

The Criminal Finances Act 2017¹ (“CFA”) has significantly bolstered the UK regime and reformed the suspicious activity report (“SAR”) regime to allow for the voluntary sharing of information in connection with suspicions of money laundering in the regulated sector², which may then lead to the filing of a joint SAR (or ‘Super-SAR’) with the National Crime Agency (“NCA”) and potentially provide more useful intelligence to the NCA. This alert discusses the introduction of Super-SARs via a case study.

Background

The volume of SARs filed in the UK has been increasing year-on-year. The NCA’s 2017 SARs Annual Report states that the NCA received 419,451 SARs between October 2015 and September 2016. There are concerns that the volume of SARs has become unmanageable and that a large number of “defensive” SARs are being filed, which have little utility for the NCA, but are a product of the current framework under the Proceeds of Crime Act 2002 (“POCA“). The UK Government is considering further amendments to the current POCA regime³, but in the meantime, the new Super-SAR regime is a mechanism for consolidated reports to be made to the NCA. This will allow the NCA to examine several stages of a money laundering scheme without extensive cross-referencing. The Super-SAR regime is expected to facilitate the sharing of information within the Joint Money Laundering and Intelligence Taskforce (“JMLIT“), a partnership that has been set up between certain firms in the financial sector and UK law enforcement. JMLIT has been seen as a success.

The New Regime

The existing ‘failure to disclose’ offences under POCA remain in place under the new regime.⁴ These offences impose obligations on firms in the regulated sector (“Regulated Firms“), their employees and their nominated officers (i.e. those nominated to receive internal reports such as the Money Laundering Reporting Officer “MLRO“) to make an internal or external disclosure in certain circumstances. The rationale for these offences, and related legislative AML requirements for Regulated Firms, is that those in the regulated sector are gatekeepers to the financial system and are therefore required to protect it.

The CFA amends POCA⁵ to set out procedures for: (i) submitting a disclosure request to a Regulated Firm (“Disclosure Request“); (ii) responding to a Disclosure Request; and (iii) submitting a report to the NCA jointly with another Regulated Firm i.e. a Super-SAR.⁶ The new regime is complicated and the drafting within the amended sections of POCA is not clear.

Never has a legal problem so vast and complex been resolved in such a unique manner. The team at Squared Law knew exactly the right strategy to pursue to get the result we needed to move forward.

Horatio Ornanthal, CEO

Submitting a Disclosure Request

A Disclosure Request can only be made by either an NCA authorised officer, or by a regulated firm⁷ (a “Requesting Firm“).⁸ The recipient of the Disclosure Request must also be a firm that is carrying on a business in the regulated sector as a relevant undertaking (the “Recipient“).⁹

All Disclosure Requests must contain the following:¹⁰

1. A statement that the request is made in connection with a suspicion that a person is engaged in money laundering and identify the person suspected (if known);

2. A description of the information that is sought from the Recipient; and

3. Identify the person or persons to whom it is requested that the information is disclosed.

Additionally, where the Disclosure Request is made by a Requesting Firm, rather than the NCA, it must also:¹¹

4. Set out the grounds for the suspicion that a person is engaged in money laundering; and

5. Provide such other information as the person making the Disclosure Request thinks appropriate for the purposes of enabling the Recipient to determine whether the information requested ought to be disclosed.

Where a Disclosure Request is made by a Requesting Firm, they must also make a notification to the NCA (the “Required Notification“),¹² which discharges the Requesting Firm’s disclosure obligations under section 330 and the nominated officer’s obligations under 331 POCA.¹³

This Required Notification to the NCA must:¹⁴ (a) state that a Disclosure Request has been made; (b) specify the firm to whom the Disclosure Request was made; (c) identify any persons (if known) suspected of being engaged in money laundering, in connection with the Disclosure Request; (d) provide all such other information as would be required for making a disclosure to the NCA in filing a traditional SAR¹⁵, in particular, the information which forms the basis for such knowledge or suspicion, and the whereabouts of the laundered property (if known).¹⁶

Webinar: The Making of a Super-SAR