The nca gets tough on sars _ expert insights _ berwin leighton paisner money laundering sentence uk

From 1 october 2014 the national crime agency (‘NCA’) introduced guidance outlining a new approach to suspicious activity reports (“sars”) filed under proceeds of crime act 2002 (“POCA”) seeking consent. In summary, any SAR which is deemed by the NCA to not contain a reason for suspicion or which fails to identify the nature of the criminal property “will be closed without further engagement”. Thereafter, the reporter will be notified that the case is closed. Previously, the NCA had entered into dialogue with reporters to resolve matters.

The NCA maintains that a change in approach is required because of delays caused by the failure to include the following in consent SAR’s:-

• ‘the information or other matter which gives the grounds for knowledge, suspicion or belief

• A description of the property that is known, suspected or believed to be criminal property

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• A description of the prohibited act for which consent is sought

• the identity of the person or persons known or suspected to be involved in money laundering

• the whereabouts of the property that is known or suspected to be criminal property’

At first blush, the NCA’s approach might seem uncontroversial. After all the NCA can only provide consent to reporters in circumstances where the request for consent meets the conditions set down in POCA. In practice, however, as compliance professionals will know, the consent regime is fraught with difficulties and this change has the potential to exacerbate problems.

The consent regime places a burden on firms and individuals in the regulated sector to submit sars in circumstances where a failure to do so might give rise to criminal liability. In these circumstances, it is little wonder that money laundering reporting officers err on the side of caution.Money laundering sentence uk the guidance issued by the NCA fails to recognise that in many instances because of the wide definition of “criminal property” and the subjective nature of suspicion consent requests are often complex in nature. For this reason, dialogue between the firm and the NCA may be appropriate and helpful to ensure a full understanding.

To illustrate how the change in approach may impact firms, consider a situation where:

• a customer of a bank acts in a way which is suspicious and there is a concern that funds in an account may be tainted;

• the firm makes a consent SAR and freezes the customer’s account, pending a response from the NCA;

• the NCA forms the view that the SAR does not satisfy its requirements and closes the case.

In a number of reported cases where firms have sought consent and frozen accounts the firms in question have been able to defend themselves (in a claim for damages by the customer) by referring to the legal requirement to make a SAR and by asserting that it was unable to deal with funds on the account until consent had been received.Money laundering sentence uk in circumstances where the NCA asserts that the consent request is not in compliance with requirements, the bank would be unable to assert that it was complying with the requirements of POCA and would have no defence to a claim for damages brought by the customer.

Implications for firms

A decision to make a request for consent under POCA is rarely taken lightly. The NCA’s change in approach, however, will require firms to think very carefully about the nature of the suspicion and whether it is able to comply with the requirements.

Given the complexity of some of the issues that arise when seeking consent there will be a huge amount of pressure on individuals at the NCA who evaluate requests to get it right and it would not be surprising if mistakes occur. As such, the change in approach is likely to have the following consequences:

• firms will increasingly seek external advice on the wording of consent SAR’s and advice on the extent to which a SAR is likely to be regarded by the NCA as an appropriate consent request.Money laundering sentence uk

• firms may need to challenge decisions made by the NCA. Many consent requests are not straightforward and in the event that the NCA has incorrectly rejected a request for consent and closed the case it may be appropriate to challenge the decision by way of judicial review. It is, of course, unlikely that firms will want to routinely seek to challenge decisions but a consideration of recent cases (for example, the shah v HSBC private bank case where the bank faced a claim for damages of US$300 million) would suggest that firms may have no choice where it considers that a consent request has been wrongly rejected.

• customers will seek damages in circumstances where an account has been frozen but where the NCA has refused to treat the SAR as a consent request and closes the case.

In the last 12 years there has been much debate concerning the consent regime and the pressure it places on those in the regulated sector in terms of potential criminal and civil liability.Money laundering sentence uk throughout, however, law enforcement has reiterated the importance of the public private partnership. Definitions of “partnership”, however, usually contain a reference to cooperation, relationship and collaboration. The recent approach by the NCA seems to be the antithesis of ‘partnership’.

The change in approach will require MLRO’s to be even more careful in ensuring that consent sars tick all the boxes and it is likely, in relation to complex matters, that firms will need to challenge decisions in judicial review proceedings. It is difficult to see how this will assist in combating crime and many in both the public and private sectors will regard this as a step backwards.