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Seven steps to SARs success

12 January 2012

Part VII of the Proceeds of Crime Act 2002 (POCA) imposes a reporting regime which is complex and, at times, confusing. Failure to comply may amount to a criminal offence. Solicitors trying to decipher the different disclosure obligations set out in Part VII may find it useful to remember the following:

1. Are the required elements to make a report present?

There are certain elements which must be present before you have a duty to make a SAR.

Do you know or suspect, or are there reasonable grounds for suspecting, that a person is engaged in money laundering (as prohibited by sections 327, 328 or 329 of Part VII - see point 4 below for further details) or in activities which would be money laundering if they occurred in the UK, or in a conspiracy or incitement to commit such an act, or in aiding, abetting, counselling or procuring such an act?

If so,

  1. can you identify such a person?; or
  2. do you know the whereabouts of the criminal proceeds?; or
  3. do you have information that will or may assist in identifying such a person or the criminal proceeds?

If you answer no to all these three questions (a) to (c) you do not have a duty to make a report.

2. Where did the criminal activity giving rise to the alleged criminal property take place?

If the acts took place wholly outside the UK, consider whether the overseas exemption might apply. Remember that conduct that is criminal in the country in which it was committed but would not be criminal in the UK is not "criminal conduct" for the purposes of POCA.

3. How did you obtain the information?

Did the information on which your knowledge or suspicion is based come to you 'during the course of a business in the regulated sector'? As a solicitor much of your work may be 'business in the regulated sector' although certain practice areas, including dispute resolution, fall outside the regulated sector.

Did the information come to you in 'privileged circumstances'? If so, there is no obligation for you to make a report.

However, if you are advising clients in the regulated sector on their own reporting obligations, remember that in most cases the privileged circumstances defence will not apply to them, so they may have a reporting obligation under POCA.

4. Do you need to get appropriate consent?

In cases where you suspect the presence of criminal property, do you intend to deal with or advise or be concerned in arrangements in respect of it (or property which in whole or in part represents it) in any way? If so, you may be at risk of committing an offence under sections 327, 328 and 329 of Part VII which prohibit the acquisition, possession, use of criminal property as well as the concealing, disguising and transferring of it or the entering into or becoming concerned in arrangements which you suspect may facilitate money laundering by another.

As a general rule, solicitors acting on matters involving criminal property should seek consent in advance to carry out the prohibited act save in the limited circumstances where Bowman v Fels applies.

Although the requirement to obtain consent is separate from the obligation to report suspicions of money laundering, in practice a single report containing a request for consent may be filed.

5. Try to be as accurate as possible while remaining succinct.

When reporting, provide all essential detail but avoid the temptation to clutter your report with extraneous information. The Serious Organised Crime Agency (SOCA) (now known as the National Crime Agency (NCA)) needs to know the nub of the matter without getting submerged in superflous detail (the NCA can always ask for further information if they need it).

Extensive knowledge of the predicate offence is not required but a reporter should be able to state the reasons for his or her suspicion, name the relevant person suspected of money laundering and/or point to the whereabouts of the proceeds of crime or give information that may enable the enforcement agencies to do so.

Make it clear on the face of the report if you are seeking consent to deal in criminal property - and draft your request carefully to cover all the activities you are proposing to carry out.

6. SARs should not be used as a means of establishing whether or not you can take on a client or even act on a particular matter.

The NCA is not an integrity check provider. Where you have reasons to be concerned about the integrity of your clients or the probity of the matter you are acting on you should conduct your own checks (and are required to do so under the Money Laundering Regulations 2007).

Routine requests to your clients for information about themselves or the source of their funds will not generally amount to a 'tipping off' offence.

7. Obtaining consent from the NCA will only protect you, by way of a defence, from committing a money laundering offence under Part VII POCA.

It will not protect you from committing or facilitation of any other criminal offence.

Julia Adams is a senior lawyer in Slaughter and May's Compliance Department and a member of the Money Laundering Taskforce

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