Suspicious Activity Reports

IPA Insolvency Practitioner newsletter AML Digest, April 2025

One of the main non-compliance issues that the IPA finds in relation to AML work is in relation to the failure to report suspicions to the NCA.

Failings in dealing with SARs effectively have led to several allegations of misconduct against IPs, with the Regulation & Conduct Committee (RCC) making findings resulting in Consent Order including both non-financial and a financial sanction against members. The average fine for SARs failures is £6,000. The RCC aggravate the level of sanction where a member is also the Money Laundering Reporting Officer (MLRO), as the failure to report is seen as a more fundamental failure.

So, to assist in this Digest we look at:

What is a SAR?
What is the role of the Nominated Officer/MLRO?
What is the role of staff?
What should be in a good SARs policy?
What is a DAML and when are they needed?
Should you use a SARs form?
What is the IPA finding on visits and reviews?
Ten steps to help you evidence effective SARs compliance

What is a SAR?

A SAR is a ‘Suspicious Activity Report’. SARs alert law enforcement and other agencies to potential money laundering or terrorist financing issues as well as providing information and intelligence to those agencies that they may not be aware of.

A SAR is NOT a crime or a fraud report. Crime is still reportable to the police and fraud alerts should be sent to Action Fraud.

As IPs are part of a regulated sector, the requirement to report suspicions was embedded in Part 7 of the Proceeds of Crime Act 2002. IPs are required to submit a SAR to the NCA where you have knowledge or have reasonable grounds for suspecting that a person is engaged in, or attempting money laundering or terrorist financing. The information is detail that comes to your attention in the course of your business.

What is the role of the Nominated Officer/MLRO?

The Nominated Officer (NO) is a requirement of all regulated firms under Reg21(3) of the MLR17. The NO is also regularly known as the Money Laundering Reporting Officer (MLRO). We will use NO for this newsletter as it is the term used in the MLR17.

Firstly, the appointment of an NO (or new NO) must be advised to your AML Supervisory Authority within 14 days as per Reg 21(4).

Secondly, the NO is a BOOM, a Business Owner, Officer or Manager, of a firm. As per Reg 26 MLR17 and the CCAB AML Guidance p3.2.25, no person can act as a BOOM of a firm unless they have been approved.

Therefore, it is important that any change in NO is advised to your Supervisory Authority and that your NO provides the requisite information to ensure that they are approved to act.

In respect of SARs, the NO’s role is outlined in Reg21(5). It is that ‘Where a disclosure is made to the nominated officer, that officer must consider it in the light of any relevant information which is available to the relevant person and determine whether it gives rise to knowledge or suspicion or reasonable grounds for knowledge or suspicion that a person is engaged in money laundering or terrorist financing’.

As a result, the NO has the duty to consider all reports made to them. If they consider that the disclosure made does indicate or provides a suspicion of money laundering or terrorist financing, the NO must make a report to the NCA via their SAR portal.

If the NO fails to make the report to the NCA where they have a knowledge of suspicion they may commit an offence of failure to report under p331 POCA 2002.

The IPA therefore recommends that the NO have clear records of disclosures made to them and the considerations of the NO when reaching a reporting decision with clear reasons for their conclusion.

What is the role of staff?

Simply, staff need to report their suspicions to their appointed NO.

A failure to report suspicions by staff to their NO is a potential offence of failure to disclose under S330 POCA 2002. This is a potential personal offence to the individual staff member.

It is therefore vital that all members of staff are aware of their role and duties in reporting suspicions and your staff must be aware of and understand your internal SARs policy.

The CCAB guidance has a useful guide for staff on when they should report:

Step 1

Do I have knowledge of suspicion of criminal activity, or
Am I aware of an activity so unusual or lacking in normal commercial rationale that it causes suspicion of money laundering or terrorist financing

Step 2

Do I know or suspect that a benefit arose from the activity in step 1?

Step 3

Do I think that someone involved in the activity, or in the possession of the proceeds of that activity, knew or suspected that it was criminal?

Step 4

Can I identify the person(s) in possession of that benefit, or
Do I know the location of the benefit, or
Do I have information that will help identify the person(s), or
Do I have information that will help locate the benefits?

What should be in a good SARs policy?

Firstly, if you do not have a SARs policy, the IPA would highly recommend that you and your NO draft a policy for circulation to your members of staff. This is important to ensure that all staff (not just new members of staff) are aware of what a SAR is and what their responsibilities are.

S330(7) POCA 2002 advises that a member of staff who has not been provided by their employer with such training has a defence if they have failed to report suspicions to their NO. The policy and AML training remains key in ensuring that you and your staff are prepared and able to deal effectively with reporting suspicions.

A good SARs policy therefore should include:

What a SAR is
Reminder that there is no definition of ‘suspicion’ but it is a pattern of events or observations that cause concern
What is required from staff members in relation to reporting suspicions and what the potential personal consequences are if they fail to report
Who staff should report suspicions to (also if there is a deputy NO, provide their details and/or details of what staff should do if the NO is away from the office)
The identity of the firm’s NO (and deputy NO where appointed)
What the NO’s role is
What information is useful to provide to the NO in relation to suspicions
Details on tipping-off and ensuring that suspicions reported to the NO (or the SAR itself) is not kept on case files, or details included in reports
Details on DAML requests; what these are and when they may be required

You can add further information and detail as you consider relevant for your firm and work undertaken. But it is important the policy is reviewed, at least annually, circulated around the team, again at least annually, and checks made to ensure that staff have read and understand the policy.

What is a DAML and when are they needed?

A ‘DAML’ is a Defence Against Money Laundering under S338 POCA2002. A DAML can be requested from the NCA where the NO making a SAR submission to the NCA has a suspicion that property which the firm intends to deal with is, in some way, criminal or tainted, and that by dealing with the property the firm/IP would commit one of the money laundering offences under POCA 2002.

An offence is not committed if the NCA have provided consent to the action that is to be undertaken in relation to the tainted/potential criminal property.

A DAML request is included as part of a SAR submission to the NCA. It is important therefore that your NO is given details of any property/funds held that may be tainted and whether a disposal/distribution of the property is required so that your NO can consider if a DAML request is required.

The CCAB guidance provided details of common situations in which a DAML may be required:

Acting as an insolvency office holder when there is knowledge or a suspicion that either:
- All or some assets in the insolvency are criminal property; or
- The insolvent entity may enter into, or become concerned in, an arrangement under Section 328 of POCA;
Designing and implementing trust or company structures (including acting as trustee or company officer) when a suspicion arises that the client is, or will be, using them to launder money;
Acting on behalf of a client in the negotiation or implementation of a transaction (such as a corporate acquisition) in which there is an element of criminal property being bought or sold by the client;
Handling, through client accounts, money that is suspected of being criminal in origin; and
Providing outsourced business processing services to clients, when the money is suspected of having criminal origins.

The DAML request should clearly state the nature and extent of the potentially criminal/tainted property and clear details of what the activity regarding this property is required to be undertaken (i.e. payment of a fee, distribution to creditors etc.).

The NCA have seven working days to grant, or refuse, a DAML request. If you do not hear from the NCA after seven working days (for the start day, count the date after submission!) then you have deemed DAML consent.

If the NCA refuse consent within this seven working day period, the DAML is extended for a maximum of 31 calendar days and if no civil recovery order is granted, then the DAML is given after this further 31 calendar days. UNLESS the NCA advise that the period has been further extended.

If you believe that you have tainted property and you deal with it without a DAML this will constitute an offence. This also means that if the detail of what you wish to do with the property changes, you will need to ensure a fresh DAML is applied for.

You can also not make a ‘pre-emptive’ DAML request. A DAML is only for when you have or believe you have or are dealing/need to deal with tainted property. If no such property is held, the NCA will reject a DAML request.

Should you use a SARs form?

There is no regulatory requirement for you to do so. However, the IPA would strongly recommend that you do so. The form allows staff to outline details of their suspicions and for your NO to provide their conclusions and actions undertaken in respect of suspicions they receive.

The form also allows for monitoring of any DAML requests made to ensure that no actions regarding the potentially tainted property are taken until consent is received.

The IPA also has a duty to report via a SAR where it has suspicions of money laundering and criminal activity and our NO issues a SARs form to staff that advise of suspicions.

A copy of a similar form with guidance as to its use is provided in the Appendix below.

The IPA also utilises an electronic filing system. For all internal SAR reports, our NO opens up a new file with access to that file being limited to the NO, the Deputy NO and the reporter of the suspicions to add in relevant documents. The SAR form, any report to the NCA and follow-up documents are held in the file and are not available to any other member of IPA staff to ensure that tipping-off does not occur.

What is the IPA finding on visits and reviews?

The main issues are:

No or an inadequate SAR policy. Discussions with staff to assess their understanding of their responsibility in reporting suspicions and who to, has been found to be poor.
Failure to report via a SAR to the NCA. This tends to arise where a report has been made under CDDA to the Insolvency Service and the reported activity should have led to a suspicion being raised. The reason often given is that it is considered that the Insolvency Service will report to the NCA. They may report, but it is your NO’s responsibility to report your firm’s suspicions to the NCA and your responsibility to ensure that suspicions are reported to your NO.
Tipping-off. Details that a suspicion has been sent to the NO, or even that a SAR has been lodged with the NCA is held in the case file (in some cases the actual SAR submission acknowledgement is held). In addition, details of a SAR submission made is found within annual reports. It is important that the risk of tipping-off is reduced. A SAR form which is held in a file only held by the NO, either physically or on a restricted electronic file, is key to avoiding tipping-off.

Ten steps to help you evidence effective SARs compliance

1. Ensure you have an NO appointed

Make sure that your NO is senior to the organisation and/or has the knowledge and ability to deal with SARs submissions effectively.

2. Ensure that your NO (and any deputy) details are reported to your Supervisory Authority

This should be within 14 days of appointment. Make sure that the notification is held as part of any AML files.

3. If the NO is newly appointed, is BOOM approval needed?

If it is, contact your Supervisory Authority and as part of the notification of the NO, ask what is needed to receive BOOM approval.

4. Have a clear, effective SAR policy

Ensure the policy is circulated around your staff, that they acknowledge receiving and reading the policy and that the policy is understood.

5. Regularly review your SAR policy

At least annually and ensure it is circulated after each review.

6. Training

Details on SARs should be part of your regular AML training for all staff.

7. NO training

Also ensure that your NO (and deputy) receive further training, and refresher training, on their role and responsibilities.

8. SARs details

Ask your NO for an overview of SARs submissions and consider if there are any issues which indicate a higher risk for your firm and which may need to be included on your Reg18 firm wide risk assessment.

9. Use a SARs form and ensure SARs are securely held

The SARs form is not a requirement but a recommendation. Ensuring access to SARs is limited is key to mitigate tipping-off risks.