The Law Commission published its Anti-money laundering: the SARs regime report on 18 June.
The report reviews and makes recommendations for the improvement of the consent regime in Part 7 of the Proceeds of Crime Act 2002 (POCA) and Part 3 of the Terrorism Act 2000.
The report identifies the high volume of low-quality suspicious activity reports (SARs) as a major problem with the current regime.
According to the Law Commission and our 2018 submission, the primary causes of this problem are:
- the broad definition of ‘criminal property’ contained in POCA
- the threat of criminal liability for individuals in the regulated sector who fail to make a report
The Law Commission also identifies a lack of understanding among some reporters of their legal obligations as a cause of potentially unnecessary SARs.
In line with our submission, the Law Commission has recommended that the consent regime should be retained.
It has, however, made a range of recommendations designed to improve the consent regime’s effectiveness.
The Commission’s overarching recommendation is for the creation of an advisory board that would:
- oversee the drafting of guidance
- continue measuring the effectiveness of the regime
- advise the secretary of state on ways the regime could be improved further
Other notable recommendations include:
- a new online prescribed form for the submission of SARs
- a legislative obligation on the secretary of state to issue guidance on the consent regime that deals with the key statutory concepts of suspicion, appropriate consent, the reasonable excuse exemption and ringfencing
- amendments to POCA to allow criminal property to be ringfenced by credit and financial institutions in certain circumstances and to allow funds to be released when an application to extend the moratorium period is made
We are disappointed that the Law Commission has not recommended reforms to the current ‘all crimes for all time’ approach to reporting in POCA.
In our view, limiting the scope of the reporting requirement could significantly reduce the number of low intelligence value and ‘technical’ SARs, producing a benefit for law enforcement agencies and reducing the compliance burden on legitimate businesses.
We do, however, agree with the Commission’s conclusion that the case has not yet been made out for the introduction of new forms of reporting such as Geographical Targeting Orders.
Read the report on the Law Commission website
Read our submission to the Law Commission