Routinely and aggressively pursuing money-laundering investigations: the verdict on the UK’s AML regime
At the end of last year the National Crime Agency published its annual report on Suspicious Activity Reports (SARs) for 2018. Media reporting (such as in the FT, subscription required), on the annual report has focussed, amongst other things, on the relatively small proportion of SARs made by lawyers. Is this a fair criticism and, if so, what is the reason for it?
The purported role of professionals as “facilitators” of money laundering is a current theme. The 2018 National Strategic Assessment of Serious and Organised Crime stated:
“Professional enablers can be complicit, negligent or unwitting but are key facilitators in the money laundering process and often crucial in integrating illicit funds into the UK and global banking systems.”
This notion was repeated in a speech by Ben Wallace, Minister for Security and Economic Crime, who warned of organised criminals who:
“employ facilitators to give themselves a veil of legitimacy and to allow them to enjoy their wealth. Lawyers, accountants and estate agents are too often woven into their web”.
Recently a solicitor was subject to a significant custodial sentence for offences of money laundering relating to property transactions lending some credence to the notion of the professional enabler (see our blog: AML: targeting the professional enablers – action not just talk).
In terms of numbers, the report states that UK Financial Intelligence Unit (UKFIU) processed a 463,938 SARs in 2018 - 10 per cent more than the preceding year. Of these only 1.68% of reports originated from accountants and lawyers. For lawyers the 2,660 SARs filed were a 12 % decline on the previous year. On the face of the report therefore it would appear that lawyers have more to do.
The overall increase in SARs has been driven by the ever increasing number of reports generated by the financial sector. For example Building Societies made 36% more reports than in the previous period, whilst for MSBs the increase was 81%. Many thousand more SARs are being generated by the financial sector as against the previous period. Common sense suggests that this is more likely to reflect a change to a more defensive form of reporting than a sudden increase in the number of occasions when genuine suspicions have been identified. Conversely, the decline by 300 in the number of SARs made by the legal sector is, statistically speaking, almost meaningless, and reflects the reality – that the number of occasions on which lawyers are required to report suspicions is fairly stable.
The concern about the cost created by overly defensive SARs is one under consideration by a Law Commission review. Launched in February 2018 with the consultation period now closed, the Law Commission will produce recommendations this coming year. These are likely to focus on the quality of the SARs being submitted.
Lawyers can certainly not afford to be complacent – the legal sector is clearly a target and must continue to be vigilant if it is to avoid the kind of problems that other sectors have faced. That said, it should not simply aim to emulate the approach of the financial sector and thereby generate an ever increasing number of low quality SARs.
Jonathan is a partner in the criminal litigation team specialising in serious and complex criminal cases. His practice includes all areas of financial services and business crime as well as health and safety and related areas. He also continues to advise in a wide variety of other criminal law matters with a particular emphasis on international crime cases, including war crimes and related work.
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