Suspicious activity reporting and consent procedures

Everyone within the regulated sector and nominated officers have obligations under the Proceeds of Crime Act 2002 to disclose suspicions of money laundering via the National Crime Agency (NCA) suspicious activity reports (SARs) regime.

In addition, anyone may need to make an authorised disclosure about criminal property and everyone is required to make disclosures to the NCA of suspected terrorist financing.

A useful starting point for information on making a suspicious activity report is the national crime agency (NCA) website, in particular, the guide to completing disclosure forms.

NCA guidance on submitting better quality suspicious activity reports - Sept 2016

Read the useful guidance from the NCA for all money laundering reporting officers submitting suspicious activity reports (SARs).

The guidance covers how to submit a SAR, requesting and obtaining a defence against money laundering or terrorist financing charges (consent regime), through to the required content and structure of a SAR. The document also contains examples and tips regarding good practice, along with further more general guidance and contact details.

We would advise all money laundering reporting officers to review, and where necessary revise, processes and procedures to reflect this guidance.

The UK Financial Intelligence Unit is the section of NCA that receives and analyses SARs.

Guidance on the submission of suspicious activity reports (SARs) is available within the accounts rules guidance at rule B6.23.

Financial sanctions

Financial and economic sanctions are commercial and financial penalties applied by one or more countries against a targeted country, group or individual.

Economic sanctions

Economic sanctions may include various forms of trade barriers, tariffs, and restrictions on financial transactions. They are not necessarily imposed because of economic circumstances and may also be imposed for a variety of political, military, and social issues. Economic sanctions can be used for achieving domestic and international purposes.

Law firms are prohibited from entering into a business relationship with any natural or legal entity named on the consolidated list of targets, without specific license from HM Treasury.

The Office of Financial Sanctions Implementations has also published a quick guide to help you understand and comply with the financial sanctions. Areas include:

  • what are financial sanctions
  • when and how to comply with financial sanctions
  • where to find further information and guidance

OFSI's full Guide to Financial Sanctions can also be found here.

As part of a practice unit's client on-boarding and ongoing due diligence, the practice unit must undertake appropriate screening against this list.

Other useful links:
Current FATF high risk jurisdiction list

The Financial Action Task Force (FATF) identifies jurisdictions with weak anti-money laundering and terrorist financing measures in two FATF public documents that are updated and issued three times a year.

Please note:

  • When acquiring new business, or risk-assessing potential transactions, practice units should consider and assess the risk of undertaking business with, through or on behalf of countries deemed of high money laundering concern on the FAFT website.
  • Where a practice unit chooses to enter into such business, enhanced and on-going due diligence measures should be applied.
'Politically exposed persons' (PEPs)

A "politically exposed person" (PEP) is a term describing someone who has been entrusted with a prominent public function. They generally present a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence that they may hold.

Such positions may include:

  • Head of state, heads of government, ministers and deputy or assistant ministers
  • Members of parliament
  • Members of supreme courts, of constitutional courts, or of other high-level judicial bodies - members of courts of auditors or of the boards of central banks
  • Ambassadors, charges d'affairs and high-ranking officers in the armed forces
  • Members of the administrative, management or supervisory bodies of state-owned enterprises

The definition of a PEP also extends to:

  • family members of a PEP - spouse, partner, children and their spouses or partners, and parents
  • known close associates of a PEP - persons with whom joint beneficial ownership of a legal entity or legal arrangement is held, with whom there are close business relationships, or who is a sole beneficial owner of a legal entity or arrangement set up by the primary PEP

Currently the regulations only apply to people appointed by governments and authorities outside the UK (overseas PEPs), but it may be appropriate, on a risk-based approach, to apply some or all of the enhanced due diligence requirements to UK domestic PEPs. And the 4th money laundering directive will officially extend regulation to domestic PEPs.

The identification of PEP status should form part of client onboarding and ongoing due diligence. Practice units should consider and assess the heightened risk of undertaking business with or on behalf of PEPs, particularly the risk of laundering the proceeds of corruption.

Where a practice unit chooses to enter into such business, enhanced and on-going due diligence measures should be applied.