A consistent approach to extensions
of moratorium periods for
Suspicious Activity Reports

17 November 2020

The Government has published a circular on extensions to the moratorium period for Suspicious Activity Reports (SARs), which acts as a restatement of the law and aims to ensure consistency in practice by law enforcement agencies in relation to the Defence Against Money Laundering (DAML) regime under section 335 of the Proceeds of Crime Act 2002 (POCA). The circular, published September 2020, sets out the responsibilities for the agencies involved in the process, and gives some indication of ways in which affected parties can play a part in the process.
 

The circular makes clear the responsibilities of the NCA’s UK Financial Intelligence Unit (UKFIU) in respect of their duties to the individual or business who has made the SAR (the reporter) and/or those parties affected by the refusal of consent and/or the moratorium period. These include actively monitoring ‘the decision on whether to grant a DAML throughout the initial moratorium period and any extension’ to ensure that any extension is justified if the DAML continues to be withheld. This means that UKFIU will periodically request meaningful updates from the investigative agency, to which a response must be made within two days unless otherwise specified. UKFIU can further use this power when an affected party (such as the beneficial owner of an affected asset) makes a request to it. Engaging with UKFIU could therefore enable affected parties to obtain valuable information.

When intending to seek an extension to a moratorium period, the investigative agency is required to send a copy of its application to UKFIU, which considers whether an application is justified. If it is, UKFIU will notify the reporter in writing that an application to extend is being considered by the investigative agency. The investigative agency will meanwhile consider, and seek to mitigate, any potential risks to the reporter or the investigation (for example if an affected party has previously destroyed evidence or has demonstrated violent behaviour).

Unless it seeks the exclusion of the respondent or an interested party from the hearing of the extension application, the investigative agency must give at least two business days’ notice of the hearing. Furthermore, the reporter or an affected party may make representations to the investigative agency, or indicate that they wish to make representations at the hearing, of which the investigative agency must notify UKFIU as soon as practicable before the hearing.

It is worth noting that when an application to extend is made, the POCA tipping off offence (section 333A) does not apply. It is therefore not an offence to disclose to a customer or client that the application is being made if they appear to the person making the disclosure to have an interest in the relevant property and the disclosure is only of such information ‘as is necessary for the purposes of notifying the customer or client that the application’ has been made.

The court can extend a moratorium period up to a maximum of 186 days beginning with the day after the initial 31 day moratorium period, but it can only do so for 31 days at a time, with a new application required at the expiry of each 31 day period. Both the reporter and affected party will be notified of the outcome of the application by the investigative agency, and the reporter will be further notified in writing by UKFIU if the application is granted.

If the moratorium period is extended, the investigative agency is responsible for managing questions from the reporter and affected party, and monitoring the grounds on which the extension was granted and any material change in circumstances. Again, engagement with the investigative agency is worthwhile as it must notify UKFIU within one working day if there has been any such material change. UKFIU will also consider whether the DAML refusal is maintained and will notify the reporter if the DAML is no longer withheld.

Where consent to a transaction is refused or an application to extend the moratorium period is made, there are several ways for affected parties to participate in the process. From engaging with UKFIU throughout the initial moratorium period, to making representations to the investigative agency and to maintaining open communication after any extension is granted, it may be possible to impact decisions made by the investigative agency and UKFIU.

Further information

For further information on issues raised within this blog, please contact a member of our criminal team.

 

About the authors

Ed Smyth is a Partner in the Criminal Litigation Department and represents individuals and corporates involved across the full spectrum of criminal and quasi-criminal matters. He has considerable experience of confiscation and asset forfeiture proceedings and of challenging the exercise of search and seizure powers. He has acted in cases involving the SFO, the NCA, HMRC, the Information Commissioner, the Electoral Commission and various professional disciplinary bodies.

This blog was co-authored by Radha Baan, Paralegal, in the Criminal Litigation Department.

 

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