Anti-Money Laundering: Suspicious Activity Reports update

IPA Insolvency Practitioner newsletter, March 2022

Contents

• Paul Smith, CEO
• Kevin Hellard, President
• Insolvency Service Future of Insolvency Regulation Consultation: IPA Response
• IPA Volume Provider Regulation Scheme 2021 Benchmark Report
• Russian sanctions
• A call for successor IPs
• Upcoming events: Annual Conference selling fast; plus, get the competing requirements of insolvency and employment law right!
• Exclusive discounts on training from the IPA and our partners
• IPA Board Elections
• Case law update

With the fast-changing position on sanctions in relation to Russian entities and individuals, it is vitally important that all members have a clear Suspicious Activity Reports (SARs) policy and that the policy is circulated around your team so that everyone understands their responsibility in reporting knowledge or suspicions of money laundering. SARs are not part of the 2017 Money Laundering Regulations. SARs originate from the S330 of the Proceeds of Crime Act 2002 (POCA).

There is nothing defined in the 2017 Money Laundering Regulations or POCA on what is ‘suspicious activity’ which may require a SAR to be submitted. It remains therefore important that you also have clear due diligence procedures and policy so that there is an understanding of the client for which you are appointed.

The policy should be clear about your team’s responsibility, which is to report their knowledge or suspicions to the firm’s Nominated Officer (NO) and that it is the NO who will consider the information supplied and decide if a report is to be made to the National Crime Agency (NCA).

We often see SARs policies that do not have details on Defence Against Money Laundering (DAML) requests to the NCA. DAMLs are necessary where you are holding potentially tainted funds or assets and wish to dispose of or distribute them. DAMLs are not approval from the NCA that the funds/assets are free from money laundering but provide a defence for you that you have notified and received consent from the NCA to deal with them.

The SARs policy should highlight that, when a DAML is requested, action to deal with funds or assets must not proceed for up to seven business days to await NCA consent to the DAML, noting that if the NCA do not provide consent in that time, the DAML can be taken to be granted and action can then commence. However, the IPA would recommend that you highlight that if the NCA advise that the NCA do not consent to the DAML, the relevant matter must be held for a period of 31 calendar days (and the NCA can extend this for a further five 31 calendar day periods).

Where necessary for the work your firm carry out, you should also consider if the policy advises of the ‘emergency DAML’ requests that IPs can made to the NCA, which are only for cases where there is an emergency payment required in a hostile or trading case to pay wages or an essential supplier for potentially tainted funds. For these cases only, the NCA will turn around a DAML within 48 hours.

Your SARs policy should therefore include the following points:

• Confirm the requirement to make a report if there is a suspicion or knowledge of money laundering
• Reminder that the staff do not have to act as an investigator but should be alert to the warning signs of money laundering that you have highlighted in your Reg 18 risk assessment and due diligence policy
• Confirm that your team’s requirement under S330 POCA is to report suspicions to the firm’s Nominated Officer (NO/MLRO)
• Who the firm’s Nominated Officer (NO) is
• Who the deputy NO is who can deal with a colleague’s suspicion if the NO is absent
• How the information is to be provided to the NO (encrypted email?)
• Details of tipping-off
• Information on Defence Against Money Laundering (DAML) requests
• If required for your firm – details on the emergency DAML requests that can be made
• Confirm that no details of the SAR should appear on case files
• Confirm that the NO will remain in communication with the person making the report on action they can and cannot take

 The IPA would also recommend the use of a ‘SARs form’. The form should provide space for the team member to be able to provide details of their knowledge or suspicion and allow the NO to note when a SAR is made, and also when it is decided a SAR is not to be lodged with the NCA. The form should also confirm when a DAML request is made so that the time period to hold action can be clearly monitored.

Please remember – if you had a suspicion or knowledge and failed to report to your firm’s NO, you may be open to prosecution under POCA for failing to report. We all have a part to play in ensuring that we raise suspicions and report – where relevant – to the NCA to help in the fight against money laundering.