Preparing for the New SARs Regime

A sea change

Forensic & Litigation Consulting

March 17, 2016

Sunset Sea

The first UK National Risk Assessment of Money Laundering and Terrorist Financing (the “NRA”) published in 2015 saw the government commit to an AML Action Plan which addresses the risks identified in the report.

One of its priorities was to reform the Suspicious Activity Reports (SARs) regime, with the review due to take place in 2018 when the UK undergoes its mutual evaluation by the Financial Action Task Force (FATF). Here we explore the driving forces behind expected changes to the Suspicious Activity Reports (SARs) regime and how Money Laundering Reporting Officers (MLROs) can prepare for it now.

Background on the current regime
The existing UK SARs regime has attracted criticism from law enforcement bodies and the SARs submitting institutions, with general agreement that it needs to improve the effectiveness and efficiency of current arrangements.

A few key data points:

• The 2015 SARs Annual report states that the number of submissions increased by 20% during the preceding three years; with over 80% submitted by banks. A limited number have been filed by real estate agents which are deemed to be high risk.

• The UK Financial Intelligence Unit (FIU) received 380,882 SARs in 2014/2015 alone, with 14,672 consent requests which require decisions within 7 working days.

• Whilst the volume of items for review has increased, the number of FIU staff has decreased from 100 in 2007 to 80 in 2015. This means each FIU analyst has to review an average of 180 consent SARs in a year or roughly 1 consent SAR every two days.

• There is concern that some financial institutions file SARs as a defensive measure by taking advantage of the “consent request” mechanism so as to obtain “approval” from the authorities for risky transactions.

• There is a hidden cost as well. For every SAR that is filed a firm will perform a detailed evaluation on a much higher number of other transactions.

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