Written by Jake Plenderleith on Monday August 9, 2021
What could you be doing to file more effective suspicious activity reports (SARs)?
That was the focus of a recent ICA roundtable for compliance officers in Asia-Pacific, which saw a fascinating exchange of ideas and experience from industry practitioners.
Hosted in partnership with Galvanize, the discussion was chaired by Martin Woods, Chair of Advisory Board for the Global Compliance Institute, whose knowledge and expertise left delegates with plenty of guidance and advice on everything SARs-related.
‘There is a constant misunderstanding of SARs and it’s a very difficult job filing them – you are asked to do immense things with limited information, so you have my sympathy’, Martin said.
Delegates agreed that there are too many SARs in the system, and, with almost 600,000 a year filed in the UK, stressed that the solution was adopting a holistic approach, covering every angle before filing to gain as accurate a picture as possible.
A poll then sought to divine the anxieties and concerns of the delegates. Asked what they thought presented the greatest pressure to an AML analyst, most opted for a lack of data, which came out on top ahead of volume of alerts, fear of getting it wrong and protests from customers and relationship managers.
What followed were solutions to these problems, resulting in five key tips to hep you file more effective suspicious activity reports (SARs)
To salve anxieties, it was agreed that it is vital that those working in AML have pride in their profession, and that they use it as a form of sustenance.
‘The key thing about AML is that it’s about protection’, Martin said. ‘We can stop money laundering and save lives. But if we get it wrong, we can damage relationships’.
To illustrate this point, a discussion was struck up on a famous case, Shah vs HSBC. Training was the reason the case failed: the nominated officer hadn’t done enough, demonstrating that a lack of training can have a significant impact.
The lessons from Shah vs HSBC are informative, as the money in the case actually came from HSBC. In the case, the nominated officer thought he couldn’t get that data, but only thought so because he hadn’t been trained to be an ‘AML detective’.
Like any detective, an AML detective should be asking inquisitive questions, and work to a structured investigative process. At the beginning, conversations with a customer should not be adversarial; the consensus among delegates was that it is essential to be an inquisitor, gathering information to help the firm come to the right decision.
The importance of staying calm and in control was underlined, as well as the talking to the relationship manager, who will know the customer better than anyone. It must be remembered that though most customers are not money launderers, some of them will be.
A failure to talk to customers means it will be difficult to progress beyond the starting point of not having enough data to make an accurate decision. This led neatly on to the concern most will have about talking to customers: tipping off.
Delegates then sought to ameliorate each other’s concerns over tipping off, pointing out that, though it is a crime, it requires two components: the actual act and the intent to tip off.
Tipping off requires the intent to ensure someone gains from the information provided. Merely requesting information is not tipping off – so those in AML shouldn’t be scared to talk to customers, as the vast majority are legitimate. Customers must be given the chance to explain themselves.
But when you do talk to them, you should do so with an AML detective mindset.
It was acknowledged that this can be intimidating, as the situation can be confrontational and because your interlocutor may actually be a money launderer. Nevertheless, the importance of staying calm was repeatedly underlined.
‘Remember that you are doing the right thing and to follow your own processes’, Martin said. ‘Some people are filing SARs because of fear – because it’s easier to file a SAR than not’.
This, it was agreed, is exactly what can get firms into trouble.
As compliance officers, delegates stated that they tended not to talk to clients for fearing of scaring them off and harming customer relationships.
The remedy, delegates said, was to have a policy; to inform customers that it is company policy not to talk to customers about money laundering.
It is vital that compliance officers remember that AML is their business and language, and that can pick up on things a relationship manager wouldn’t.
A hypothetical situation followed. Would you tell a customer you are questioning that you are making a routine call? Martin stressed that you shouldn’t.
‘None of these laws make you lie, but they might make you feel uncomfortable’, he said. ‘We have been riddled with this fear factor, but we are seeking risk information’.
Viewed in this light, the task of attaining that information is less intimidating.
The roundtable drew to close by discussing the threat posed by fraud, and the challenges faced by those in compliance.
Delegates concluded by agreeing that filing a SAR is not always enough. If it’s fraud, there will be a third party, as well as relationship mangers, owning the risk.
The easy way out is to forge ahead and allow the transaction. But delegates recognised that this is a false security.
‘SARs define you and your AML programme. But don’t be intimidated: be knowledgeable and confident, and keep filing,’ Martin said. ‘That way, we can move beyond reporting and intelligence gathering to stopping money laundering and saving lives’.
The importance of filing a SAR brought the discussion to a close.
It was acknowledged that lots of people will read a SARs narrative, and so it is very important that it is accurate, clearly articulating suspicion. Following this advice, as well as the other takeaways, will help those in AML produce better quality SARs, as well as leaving them more confident in their role.
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