The UK Law Commission said it wants to see fewer, better quality suspicious activity reports (SAR) on the most serious instances of money laundering, and it is consulting on the best way to achieve this.
According to the Commission the problem is widespread; between 0.7 and 1.28% of annual European Union gross domestic product is connected to suspect financial activity.
“The reporting scheme isn’t working as well as it should,” Law Commissioner professor David Ormerod QC said.
“Enforcement agencies are struggling with a significant number of low-quality reports and criminals could be slipping through the net.
“We’re determined to make the law work for everyone and find a balance which will tackle money laundering more effectively and help keep the UK at the centre of the financial world,” he said.
How it works now
Under the current system, set out in the Proceeds of Crime Act 2002, a SAR is sent to the UK Financial Investigation Unit in the National Crime Agency before it is referred for civil or criminal action or allowed to pass.
The Commission says the banks alone spend £5bn ($6.5bn €5.6bn) annually on core compliance building SAR reports.
Between October 2015 and March 2017 the NCA received 27,471 SARs, creating too much work for officers.
Clients also cannot be told why their transaction is held up for fear of triggering a tipping off offence and substantial fine.
Proposals
The independent Law Commission proposals include:
- statutory guidance on what to look for and a set format for submitting suspicious activity reports
- asking whether new tools could help enforcement like US-style Geographic Targeting Orders
- a new power to require additional detail and record keeping requirements targeted at specific transactions
- cutting back on low quality reports by focussing on accounts where there are reasonable grounds to suspect property is criminal property
- legal protection for banks which choose to lock into an account the suspected criminal funds but leave the rest of the account open to trade thereby minimising the risk of severe financial loss for those who are the subject of a disclosure providing detail as to what amounts to a defence of ‘reasonable excuse’ for not making a suspicious activity report
- asking whether commercial organisations, rather than the individual employees, should be liable for failure to prevent a criminal offence when an employee fails to disclose a suspicion
The consultation will run until 5 October 2018.
