In the UK Anti-Corruption Plan, published on 18 December 2014, the Government committed to carrying out a review of the suspicious activity reports (SARs) regime contained in the Proceeds of Crime Act 2002 (PoCA) and the Terrorism Act 2000 by July 2015. The purpose of which is to develop ways of better identifying money laundering and the financing of terrorism, and to prevent the movement and use of the proceeds of crime. The Home Office has, therefore, launched a ‘Call for Information’ in relation to SARs and firms are invited to respond to various questions.
The scope of this Call for Information is the overall operation of the SARs regime, including its legislative foundation, and the way the system operates in practice, which seems sensible given the year on year increase in the number of SARs filed - in 2013/14 more than 350,000 SARs were raised, of which more than 14,000 were raised seeking consent to proceed.
Since the inception of the PoCA 2002, the suspicious activity reporting regime has caused some interesting conundrums for firms and led to case law being established following some very high profile challenges to the SARs regime by private individuals who have found themselves ‘inconvenienced’ by firms’ application of their obligations to avoid s. 330 and 331 offences and while this has led to some clarity and comfort for firms, a review of the whole regime is long past due. So it is with great disappointment that I view the questions being posed. Given the scope of the Call for Information the actual questions seem somewhat parochial and my overriding impression is that the exercise does not have any particular focus. This is, after all, a glorified market research exercise and having spent time in that industry I know what a bad questionnaire looks like i.e. despite the preamble, I do not see anything in these questions that challenges the legislative process other than some fairly generic questions about the consent regime, the problems with which are already well known. The most important rule of any research exercise is to define exactly what you are trying to achieve. Unfortunately this Call for Information appears to have adopted a rather ‘scattergun’ approach of ‘ask and let’s see what comes back….’ and I personally see this as a missed opportunity.
One area, though, where a question has been posed that I would like to make specific mention of is around the reporting form itself:
Is the right sort of information being collected? Should the form on which SARs are made be more structured, and if so, what fields would be helpful?
To put some context around my interest in this particular area, during 15 years as an AML practitioner I have seen, as have many others, various incarnations of the UK competent authority for receiving SARs as it morphed from the NCIS, to the SOCA and, more recently, to the NCA. What hasn’t fundamentally changed in that time is the SAR form and problems with the SAR form have been well known since its creation. Indeed, as someone who was directly involved in the original Elmer testing programme I can distinctly remember raising issues with the form (e.g. its particular bias to retail banking and forcing the use of drop down boxes which held irrelevant choices) which were not dealt with in order to meet the project deadline. For the last 13 or so years, firms have been forced to shoehorn information into a collection medium that has, in fact, never been fit for purpose. It is any wonder then, that there have been adverse comments from the UK FIU in relation to the quality of SARs it receives?
The question in relation to the appropriateness of the SAR form is long overdue and what is required this time around is for the UKFIU to apply consistency to its interpretation of the responses and take notice of and act on the comments that come back as part of this exercise rather than, as previously, apparently paying lip service to a consultation process that only ever seemed to put a tick in the ‘industry consulted’ box. It is very difficult to get a one-size fits all reporting form that will elicit the appropriate quality of information so more flexibility is required in the way information can be entered and at the very least, a recognition that, although they form the bulk of reporting entities, retail banks are not the only entities that are required to, and do, file SARs.
Areas where improvement could certainly be seen, and where I have struggled in the past, are in making the form more relevant to stock broking, prime brokerage and investment banking so I would certainly urge representatives from such firms to respond to this Call for Information to carefully consider what information they can provide to the UKFIU within the scope of their PoCA obligations and how best this can be provided and to make sure their views are represented.