The Law Commission has released a consultation paper regarding Anti-Money Laundering and the Suspicious Activity Reports (SARs) Regime. The consultation sets out a variety of proposals to improve the SARs regime and mitigate its detrimental impact on the regulated financial sector.
The paper identifies a number of issues hindering the SARs regime in practice including:
▪ the large volume of disclosures to the UK Financial Intelligence Unit (UKFIU);
▪ the low intelligence value and poor quality of many of the disclosures that are made in accordance with the present legal obligations;
▪ the misunderstanding of the authorised disclosure exemption by some reporters;
▪ the abuse of the authorised disclosure exemption by a small number of dishonest businesses and individuals;
▪ the defensive reporting of suspicious transactions leading to high volume reporting and poor-quality disclosures;
▪ the overall burden of compliance on entities under duties to report suspicious activity; and
▪ the impact of the suspension of transactions on reporting entities and those that are the subject of a SAR.
The consultation offers numerous proposals to address the issues identified within the SARs regime. Notable proposals include:
▪ altering the reporting threshold to require a subjective suspicion and objective supporting grounds (and whether such a change would comply with the provisions of the 4MLD);
▪ altering the Proceeds of Crime Act to contain a statutory requirement that Government produce guidance on the suspicion threshold;
▪ issuing statutory guidance to indicate that where a transaction has no UK nexus, this may amount to a reasonable excuse not to make a required or authorised disclosure; and to consider introducing an offence for a commercial organisation to fail to take reasonable measures to ensure its associates reported suspicions of criminal property.
The deadline for comments on the consultation is 5th October 2018.
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Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.
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