Suspicious Activity Reports: When and How to report?

A Suspicious Activity Report (SAR) is an important piece of information for regulators and legal authorities. It is the report used to warn the authorities about any kind of money laundering or financial crime suspicion caused by a customer or client. The SAR is to be submitted when you ‘know’ and ‘suspect’ that there is a crime. Part 7 of the Proceeds of Crime Act, which we discussed in one of our earlier posts, talks about knowledge and suspicion.

Anything less than actual knowledge will not be adequate in this regard. Suspicion would be if a person thinks there is a likelihood that something exists. A mere vague feeling of unease wouldn’t be sufficient and reasonable grounds need to be provided for the suspicion to be clear. Although these two terms are subjective in nature, actual knowledge and suspicion are important elements that decide the fate of the offence committed by the criminal. Whether it is a basic Money laundering offence or a principal money laundering offence, the dependability on knowledge and suspicion is a major component. If the person (employee in charge) knows or suspects that the property is criminal or that there is criminal activity involved, it amounts to a principal offence. These are the two components that make or break an offence.

The duty to report such unusual activities lies on not only the banks, but solicitors (legal privilege is an exception to this rule), accountants and anyone who knows about a client that participates in unusual financial crimes or even tax related frauds or criminal conducts. Part 7 talks about failure to report to be considered an offence in the UK and the maximum penalty for the same is 5 years imprisonment or a fine payment. The act takes forward the practice of reporting such offences on a universal level and makes it compulsory to report such unusual events. Now that we know when to report such offences, let’s look at how these offences should be reported.

Explain the purpose

An SAR should be specific with regards to the purpose of writing the report. It is important to be able to know what the SAR entails from a compliance perspective, and that’s why it must be written in a comprehensible manner. The report should be issue centric and written in an uncomplicated manner with all the relevant information rather than creating a lengthy report filled with unnecessary details. Mentioning details of the individual or the group in question, the transactions, focussing on actual facts, reasons for suspicion and due diligence measures taken by the compliance team of your firm are some of the necessary factors to be written.

Using simple language

Using simple words and sentences is important when it comes to an SAR. Unnecessary jargons, puns or rhetorical questions will only make your report complex. Limiting the use of big words, long sentences or even figures of speech will ensure that there is no ambiguity and the report will be perceived directly without any alternative interpretations. Writing a concise and direct report is a crucial part of the process.

Confidentiality

The information mentioned in a SAR shall not be disclosed by the individual writing the report or the organisation authorising it (Bank secrecy Act duties are exempt from this rule). Any person who made the transaction or is related to the individual in question should not be informed about it at any cost.

An efficiently written SRA could really help curb the issue of fraud or the financial offences under consideration. Knowledge, suspicion and a well written report are some of the most important elements of fighting anti-money laundering and financial crimes.

Hope you enjoy this post and the weekend!

Please note that all opinions made on this blog should be treated as a guide and not legal advice.