If you suspect an individual or organisation of money laundering, you have a legal obligation to make a SAR to the National Crime Agency (NCA). Every year, the UKFIU receives, analyses, and shares hundreds of thousands of these reports with law enforcement agencies to help prevent serious criminal activities.
What at face value might seem like an insignificant report about financial irregularities can provide critical data that can assist in everything from protecting at-risk children and tackling modern slavery to identifying organised crime syndicates and cutting off terrorist activities.
“Behind almost every suspicion of money laundering there is a predicate crime,” explains Cox. “And SARs have been used extensively in helping law enforcement to solve these – from murder through to child exploitation.”
Last year, information from the SARs database Elmer contributed to the seizure of £172 million in funds from criminals. And nearly £100 million of that came from investigations that only started because a SAR was raised.
During the pandemic, intelligence from SARs on potential fraud relating to PPE (personal protective equipment) and government loan schemes has also been vital in providing real time data to the Otello Covid-19 Fusion Cell, which was set up to stop criminals exploiting the virus for financial gain.
Make it accurate
To stand the best chance of preventing and tackling crime, SARs need to be timely and accurate. The SARs that accountants are most likely to deal with are those that are legally required where you suspect money laundering; and defence against money laundering (DAML) SARs, which are used to seek a defence from the NCA against money laundering offences.
If you are suspicious that property you intend to deal with is criminal and you risk committing an offence under the Proceeds of Crime Act (POCA), you can submit a DAML SAR. For example, your firm might wish to transfer client money to another account but is concerned about the source of the funds. If a DAML is granted, you will not be committing an offence under POCA.
“In the last reporting year, we had over 730,000 SARs,” says Cox. “This was a massive increase on the year before.” Teams within the UKFIU physically read half of these, but all the reports are searched for keywords and glossary codes and then data-washed across different datasets within the NCA and police.
The clearer the information firms provide in their SARs, the easier it is for the different agencies to act on it. One of the biggest problem areas is the description of reasons for suspicion. “This is where it’s sometimes not quite clear for us,” says Cox, “particularly on DAMLs, and that’s why we sometimes have to go back for clarification.”
SARs from the accountancy sector, and particularly DAMLs, tend to run into many more pages than those received, for example, from the banking sector. “So the clearer you can make it, the easier we can understand it,” emphasises Cox, “particularly where you are talking about things like insolvency.”
“What we’re after is a good description of the reason for suspicion,” says Cox. “For us it’s really helpful if you can, where possible, use the glossary codes because it helps us to pick out things more quickly.” Glossary codes identify specific categories of suspicious activity, which helps to signpost the information to the appropriate law enforcement or government agency.
“If you can be as accurate as possible, then it helps with all our data searching,” says Cox. “And if you don’t know, then please say you don’t, by using ‘unknown’. Then we are clear, so we aren’t coming back to you saying: ‘Have you got this; have you got that piece of data? The clearer you can make your submission, the quicker we can respond.’”
From its side, the NCA is also aware it needs to do more to support improvements in reporting. Under the Home Office-led SARs reform programme, replacement of the core SARs IT infrastructure should be completed by the end of 2021/beginning of 2022.
The new SARs online portal will be more user-friendly and will, for the first time, include a SARs template that can be made sector-specific. The portal will actively guide users as they submit reports. For example if you fail to enter something correctly, the system will flag it and you will be able to scroll over and find out exactly why and how you need to enter the data. And where you don’t know something, there will be a simple drop-down box for “unknown”.
Other elements of the IT transformation include a new law enforcement agency portal and system for analysing SARs, and changes to Elmer. More broadly the programme is increasing feedback and engagement with reporters and law enforcement agencies, increasing UKFIU staff numbers (already up from 80 to 150 this year), reviewing DAML reporting, and improving guidance.
Engaging with, and informing, reporters across all sectors is key to improving the quality of SARs and obtaining data that is most useful for law enforcement. As well as continuing to deliver webinars and podcasts, which have helped raise awareness during the pandemic, the UKFIU plans to increase its use of social media, such as Twitter, LinkedIn and TikTok.
“Where there are trends, we want to get the message out to more people, more quickly,” explains Cox. He hopes that seeing a video clip, reading an article or receiving a social media alert will mean more people recognise the issues and think: “Oh, I’ve come across something like that; perhaps I should have put in a SAR.” And next time they will do that.
More than you think
ICAEW is also driving home the importance of making SARs and ensuring firms and members have the policies, procedures and training necessary to facilitate submission. “From our perspective, firms will see an increased focus on SARs when we do our Quality Assurance monitoring reviews,” says Sandy Price, Manager, Professional Standards, ICAEW. “For example, we are now going to ask to see examples of any SARs they’ve submitted, so we can give advice and help improve quality where necessary.”
“Accountants aren’t always aware of how much information they really have,” she explains. “But our firms have an inordinate amount of information about every client because they have to understand the whole environment in which that client operates,” she says. “So if they’ve got a suspicion and put a SAR in, there’s an awful lot of data they can provide that could at some point make a difference.”
“It’s all about looking for that unusual activity,” adds Cox, “or requests that just don’t make commercial sense or don’t fit the norms of that particular client.” He also urges firms to “always ask questions about the source of funds or wealth”.
Engaging more with regional firms is currently a priority for UKFIU. Cox acknowledges that it’s all too easy just to focus on the bigger, national firms who have the time and people to deal with reporting. “But actually we need to get the message out to smaller firms so they understand what the red flags are in their local areas,” he explains. “So we’re trying to come out to regional meetings more.”
“If we can reach just one reporter who suddenly thinks, actually I should put in a SAR on that, and then that goes all the way through to law enforcement and someone recognises that’s just the piece of information they’ve been waiting for, then that’s what it’s all about,” he stresses.
No black hole
Cox is also keen to point out that these reports are not disappearing into some sort of black hole. He knows of reporters who have put in SARs, forgotten about them, and then later discovered that a piece of data they provided has helped an investigation. One reporter told him that he had submitted a SAR, and then out of the blue about three years later received a call from the police in another area of the country where the subject of the SAR was carrying out the same suspicious activities.
“Just one telephone number or address could prove vital for law enforcement, somewhere down the line within the six-year life of the SAR,” says Cox. Most reporters, however, will never know the results of the information they provide. “You aren’t necessarily going to get anything back from us,” he emphasises. Just the sheer number of reports makes that unfeasible. But, he adds, if what you put in contained useful information, then it will be picked up. “You will probably never know, but rest assured it is making a difference.”
In our next article on SARs, we will look at the rapidly changing landscape of economic crime, and discuss with Cox some of the emerging threats ICAEW firms and members need to look out for.
If you have any doubts about whether to submit a SAR, contact ICAEW’s technical and ethics helpline or the anonymous Anti-Money Laundering helpline.