National Crime Agency publishes suspicious activity reports (SARs) Annual Report
The National Crime Agency has published its latest report into the volume and nature of SARs, the reporters and their supervisors.
Covering the period from October 2014 to September 2015, the report indicates that the total number of SARs submitted was 381,882, an increase of 7.82% on the previous year. By far the largest number of reports came from the banks (83.39%) while other financial and credit institutions accounted for 11.94% leaving all the other sectors within the scope of the Money Laundering Regulations 2007 responsible for less than 5% of all reports. Of the other sectors, accountants and tax advisors lead the way albeit with only 1.21% of reports.
The report notes that the UK Financial Intelligence Unit, which sits at the heart of the UK’s response to money laundering and terrorist financing, makes no comment as to the relative volume of reports from the different sectors stating that it is for the sectors and their supervisors to assess if the volume of reports submitted is proportionate to the risks in their sectors.
The report does note specifically though that of the 4,618 SARs made by accountants and tax advisors, these were submitted by a total of 1,487 individual entity reporters. Simple maths then gives an average of just over 3 reports per reporter. However, these numbers have to be taken in context. In the UK, taking all the accounting and tax bodies together and adding in all the other accounting service providers who are supervised by default by HMRC, there are probably in the region of 25,000 entities in the sector. The number of SARs made therefore represents about 1 per annum for every 6 firms or, alternatively, almost 95% of firms do not make any reports.
It is for the reader to judge if that is good or bad. Reports from the banks and other sectors are largely based on concerns over current transactions and are more likely to be made in ‘real time’. Reports from the accountancy sector, in our experience, are not so closely linked to individual transactions and more likely to be made some time after the event. There may be many reasons, including excellent risk assessment, client engagement and other procedures that a firm may have in place, that explain why a firm never finds itself in the position of having to submit a SAR. Another interpretation might be that principals and the firm’s staff are not as diligent as they should be, haven’t kept up to date with their training in this area, and may be leaving themselves exposed to penalties by failing to report when they have, or ought to have had, knowledge or reasonable suspicion of money laundering.
Late in 2015, the Home Office published the UK’s National Risk Assessment (NRA) of Money Laundering and Terrorist Financing. The accountancy sector is listed as high risk, second only to the banks. One of the vulnerabilities identified in the NRA was a failure to identify suspicion and make SARs. The Action Plan arising from the NRA is expected to be published in March 2016 and it would be a surprise if there is not a specific action to address the perceived lack of reporting by the sector.