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Building an intelligence picture

Author: ICAEW

Published: 07 Jun 2023

Insolvency practitioners (IPs) play a key role in identifying bounce back loan (BBL) fraud and misuse of other COVID support schemes. If you know how to submit a good-quality suspicious activity report (SAR), it helps investigation and enforcement agencies bring criminals to justice. Find out what a good SAR looks like.

During a recent webinar hosted by ICAEW’s Restructuring and Insolvency Community, representatives from the National Crime Agency (NCA) Financial Intelligence Unit (UKFIU) and the National Investigation Service (NATIS) offered some tips on how to create a fit-for-purpose SAR. 

They also explained how SARs often provide crucial data necessary to build an intelligence picture, and highlighted some red flags IPs should be looking out for in relation to BBL fraud.   

SARs are a vital source of intelligence not only on economic crime but for other types of criminal activity. They provide information from the private sector that otherwise wouldn’t be visible to law enforcement.

“Our SARs database holds between three and four million SARs at any given moment,” explains Sian Brown, Senior Officer, NCA. “And the reporter engagement function within the UKFIU was set up to ensure that all of these SARs are written in a way that allows law enforcement to exploit the intelligence effectively.”

Fit for purpose

The UKFIU has produced guidance to help reporters submit better quality SARs, and this was updated in February 2023. “This document helps you create well-written SARs that are fit for purpose,” says Sian. “And it would be great if you could familiarise yourselves with it.”

“We are usually asked for our top tips for a good SAR,” she adds. “And number one is glossary codes.” These are the codes the UKFIU circulates to all reporters. They indicate what threat your SAR relates to, as well as whether you are submitting a defence against money laundering (DAML) SAR.

When you include the relevant glossary codes, the UKFIU can allocate the information to the correct team or to law enforcement more effectively and quickly.

“Second, we ask that you consider your structure,” says Sian. “What we look for is a really clear reason for suspicion, really clear criminal property and, if it’s a DAML, clearly defined appropriate acts you are seeking a defence to.”

“Finally, we also ask you to consider what’s useful data – so for example, account numbers, their unique identifiers and, if funds are moving overseas or coming from overseas, from what jurisdiction.”

“This is where you can really make a difference,” she stresses. “You can put yourself in an investigator’s shoes and ask: if I was an investigator, what piece of information would I find really useful to develop my investigation?”

Using SARs intelligence

“We value SARs and recognise how important they are to our investigations,” emphasises Emma Barker, Lead Accredited Financial Investigator at NATIS, "which has developed since 2014 and helps protect the government from serious and organised crime. Our work does tend to cross over with the Insolvency Service and the presentation is made with key reference to the Dear Insolvency Practitioner - Guidance - GOV.UK (www.gov.uk) resource.”

NATIS now has over 100 staff around the country in various departments working in partnership with other law enforcement agencies, including the NCA, UK policing and HMRC.

“We’re here to target serious and organised crime against the government and, in particular, pursuing criminals and recovering money,” says Emma. “Our predominate focus in the last couple of years has been around BBL fraud and other COVID-19 scheme misuse. SARS provide a key source of information and intelligence for the investigations we progress.”

What to provide

She outlines a list of information that NATIS would like to see on a SAR. “It’s not an exhaustive list,” she stresses. But it does give an indication of what IPs should be thinking about:

  • full name, date of birth and nationality;
  • company information, addresses, and director and shareholder information;
  • business turnover and information as to how the business is operating;
  • information on business structure;
  • personal and business bank account details;
  • occupation;
  • accountant information;
  • car details;
  • passport and National Insurance numbers; and
  • telephone and email address (personal and business).

Emma points to a couple of particularly key areas: business operation and structure. “Most of our investigators and financial investigators have access to limited information about a company,” she explains. “We can look at open-source information via Companies House or an organisation’s online presence, but ultimately we don’t actually know much about the business itself – how it’s trading.”

“So, when you’re looking at filing SARs, the more information in there about the business and how it is operating, the better it is for us as the investigators.”

Information about the structure of the business is also highly valued. “We’ve seen some cases where a company has subsidiary businesses,” she says. “Again, it’s difficult for us to know the ins and outs of that. And I think that is perhaps where IPs may be able to assist us.”

Including bank sort codes and account numbers is also very helpful “says Emma. “It’s very difficult for us as financial investigators to know exactly what accounts are out there for either individuals or a company.”

What to look out for

The main indicators of fraud that NATIS comes across are:

  • businesses overstating turnover by more than 25% or a loan of more than 25% of turnover;
  • funds not being used for the benefit of businesses;
  • dormant companies claiming BBLs;
  • businesses claiming multiple loans from different lenders;
  • businesses not trading in the UK;
  • businesses not trading as of 1 March 2020;
  • no indication that there was any intention to repay the BBL or continue trading after receiving the BBL; and
  • false declaration of the trading start date.

There are several other indicators particularly relevant to IPs. These include failure to disclose BBLs in the statement of affairs, where the company looks to have minimal creditors, and where there may be knowledge of insolvency prior to the BBL application being submitted.

“These are the main indicators that we’re seeing around fraud and abuse of the BBL scheme,” says Emma.

The bigger picture

SARs can be especially useful in helping financial investigators build a broader picture of criminal activity. “A company on its own applying for one BBL may look standalone,” says Emma. “But what we’re finding is that a lot of these companies are connected to other companies and organised crime criminals.”

Visual charts drawn on the back of SARs can provide an indication of where the flow of money is and how companies and individuals are connected.

“It’s not always certain, but it gives us a good intelligence picture,” she explains. “And this is why the information in a SAR – about the operation of the business, the movement of funds, the individuals involved, the names and addresses of the companies – is really important in helping us look into the way these organised crime criminals are operating.”

“We want to work with IPs and accountants across the board,” she emphasises. “We want to work with you – ultimately we don’t want criminals to benefit from bounce back loan fraud.”

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