Protecting UK stability through suspicious activity detection

UK is often seen as an attractive destination for criminals to invest in due to its status as a global financial centre. As a regulated professional, you have a legal obligation to prevent them from doing so by reporting any suspicions you have regarding your clients’ activities.

According to the National Crime Agency's 2022 Annual Report on Suspicious Activity Reports (SARs), 901,255 SARs were filed in the UK during the 2021/2022 reporting period, which covers the 12 months from April 2021 to March 2022. This represents a 21% increase from the previous year. As for the impact of SARs: in 2020 alone, HMRC obtained £56m through matching SARs with other data sets for criminal and civil intervention.

SARs are so important to the detection of criminal activity that the primary reason AML regulations dictate that client due diligence must be carried out on every client, including a client risk assessment, is so you can submit a correct and detailed report.

What constitutes suspicious activity?

There are a number of red flags that accountants, bookkeepers, auditors, insolvency practitioners and tax professionals should be on the lookout for. These include:

• Transactions that are unusually large or complex, or that involve countries or individuals with a history of financial crime
• Suspicious deposits made into bank accounts
• Transactions that involve unusual or suspicious payment methods, such as cash, wire transfers or crypto
• Your client acting dishonestly in their business and benefiting as a result
• Unusual or unexplained levels of income relative to your understanding of a business (its purpose, staff levels, premises etc.)

It doesn’t matter whether the figures involved total hundreds, thousands or millions of pounds. A SAR must be submitted if you’ve formed a suspicion of criminal activity that has already, or may, generate proceeds from that crime. Don’t forget that a reduction in a liability is as much the proceeds of crime as the generation of funds.

When to report

Though ‘suspicion’ is referred to in case law, it’s not defined in AML legislation. From my personal experience working as an insolvency practitioner, and from my discussions with accountancy professionals, if you need to ask yourself whether you’ve formed a suspicion, you probably have.

Put another way: Imagine that someone of the same experience and qualifications as you is sitting next to you and considering the same set of information that you have. What view would they form?

It’s important to note that you don’t need to have evidence of criminal activity to submit a SAR. You only need to have reasonable grounds. You also need to know that not submitting a SAR when you should is a neglect of your legal obligations as a regulated professional. You’ll be committing a criminal offence. As a result, you could go to prison for up to five years or face a sizable fine, or both.

Finally, if you’re still not sure please seek guidance from your firm's Money Laundering Reporting Officer (MLRO).

How to submit a SAR

If you’re an employee of a business, you must make a written internal SAR to your MLRO. SARs should be detailed and fact-based, and include names, addresses and account details of your clients, as well as the reasoning behind your suspicions.

AMLCC offers an internal SAR tool integrated into its platform. This walks employees through the reporting process and provides guidance about what information to submit to create a comprehensive SAR.

It’s your MLRO’s role to receive and consider internal reports, and to submit an external SAR to the National Crime Agency (NCA) where appropriate. If your MLRO decides not to make an external SAR, they must document why this decision has been made. This is so that, if an investigation by law enforcement does take place, your business can prove that everything was considered and the report was not made for good reasons.

More than fulfilling your legal obligations

Reporting suspicious activity is not just a legal obligation. It’s also a moral one.

As I mentioned at the start of this article, the UK is an attractive prospect for money launderers. Money laundering is a global problem. But its position as a leading financial centre, its political stability, and its favourable legal and regulatory environment, all make the UK a particular target.

SARs serve as an important tool for stopping criminal activity and preventing harm to others. On a wider scale, SARs play a critical role in enhancing national security. They feed valuable intelligence to law enforcement agencies. By reporting suspicious activity, you may help to prevent criminal gangs continuing, terrorist attacks and other threats to our country’s peace. Your information may be the piece of the jigsaw puzzle the National Crime Agency has been looking for, however inconsequential it may seem to you.

Regulated businesses and professions have a duty to help maintain the integrity of the financial system and prevent criminal activity from taking place. By reporting suspicious activity, you can help to protect not only your clients but also the wider community.

Richard Simms is Managing Director, AMLCC.