Suspicious activity reports

You do not automatically have a suspicion because a concern is raised by an employee.

The High Court confirmed in Shah v HSBC [2012] EWHC 1283 (QB) that, where concerns are raised by an employee, you should form your own view about whether you have a suspicion. It’s appropriate for you to:

• ask questions about those concerns
• review information held on the client

There’s no requirement for you to carry out extensive investigations to form or test a suspicion.

In order to form a suspicion, there must be existing criminal property.

‘Criminal property’ is defined in the Anti-money laundering guidance for the legal sector as:

“property which is, or represents, a person’s benefit from criminal conduct, where the alleged offender knows or suspects that it is such.”

Following the decision in Anwoir and others [2008] EWCA Crim 1354, you may form a suspicion of existing criminal property if:

• you know or suspect that a specific type of criminal conduct is occurring (such as fraud or tax evasion) and you suspect this generated property
• there are several warning signs that cannot be satisfactorily explained, giving rise to an ‘irresistible inference’ that the property you’re being asked to handle must be criminal

In the former case, you’re more likely to have direct information from the client, law enforcement agencies, media or other third parties.

For the latter, you’re more likely to be looking at warning signs of money laundering.

Suspicion is not automatically transferred if, for example, a police officer advises you that your client is under investigation for a criminal offence.

However, you should consider any investigation in light of all the information that you have on the client’s file.

You may have information that clearly demonstrates the client’s innocence, which would mean that you do not have a suspicion of money laundering.

If not, you should carefully consider the facts given to you by the police or other law enforcement agencies to support any allegation of wrongdoing.

A court may be unsympathetic to a solicitor who disregarded specific warnings from law enforcement about a client.

If you decide that you have a suspicion as a result of contact from the police or other agencies, you should carefully consider what you put in your SAR.

You cannot include any privileged information and, for the crime/fraud exemption to apply, you’ll need strong prima facie evidence that you’re being involved in a criminal offence.

Any requests by law enforcement agencies for client files should be accompanied by an appropriate court order or notice. For more information, read our practice note on responding to a financial crime investigation.

You should include the subject’s:

• full name and other names they’re known by
• date of birth
• occupation
• phone numbers
• passport or driving licence number

If the subject is a legal entity, you should include the business’:

• company registration number
• VAT number
• business type
• addresses (including postcodes)

If you do not know any of these details, enter the word ‘UNKNOWN’. Do not use other words or symbols (such as question marks or asterisks).

It’s good practice to include any relevant glossary codes when you write a SAR. These help the NCA to:

• process your SAR accurately and efficiently
• allocate your SAR to the appropriate law enforcement agency
• analyse trends in suspected money laundering

Consult the NCA’s SAR glossary codes booklet (PDF 14.5 KB)

There are glossary codes for particular criminal offences and for particular types of SARs.

For example, when submitting a DAML, you should use the code XXS99XX where the value of the suspected criminal property is greater than £3,000.

Glossary codes should be inserted at the start of the reason for suspicion section.

The free text section of the report is where you give a clear and concise explanation of the reason(s) for your knowledge or suspicion.

Your reason for suspicion should set out (in non-legal language):

• who – the identity of the party/parties involved and their connection with you
• what – the transaction that you’re involved in
• where – a description of the criminal property
• how – a description of the prohibited act(s)
• why – the criminal activity that you know or suspect they’re engaging in
• when – any critical deadlines

If you’re an MLRO working in the regulated sector, you must also give the:

• identity of the person(s) you know or suspect is involved in money laundering
• whereabouts of the known or suspected criminal property

The NCA may take longer to consider your request if you:

• send or attach files
• include unnecessary details
• supply privileged information
• ask the NCA to verify your client’s identity for you
• use complicated legal language
• ask for consent to take on a client when you haven’t carried out, or have been unable to carry out, client due diligence

When you submit a DAML SAR, make sure you:

• tick the consent box and use the appropriate glossary code
• clearly identify the ‘criminal property’
• state your reason(s) for suspecting the property is criminal
• explicitly describe the prohibited act(s) you plan to undertake involving the property
• identify the other party/parties involved in dealing with the property, including their dates of birth and addresses
• fully describe your reason for suspicion in relation to money laundering

It’s important to make explicit, where necessary, where a DAML is for both yourself and your client, and which steps will be taken by each of you.

Be specific about the work you think you’ll need a DAML for. Outline all the remaining steps in the transaction that could be prohibited, for example:

• the release of funds in account C to party D
• the drawing up of contracts between parties A and B, transferring of ownership of the property from A to B and transferring of value of the funds

Avoid using vague terms like ‘we wish consent to proceed’ or ‘we wish to maintain a business relationship’.

The NCA cannot interpret or assume the proposed money laundering offence(s) from your report, so you need to be as explicit as possible.

The UK Financial Intelligence Unit (UKFIU) has provided a summary DAML template for solicitors. It shows the key elements to describe when constructing a DAML:

• purpose of report
• prohibited act
• reason for suspicion
• criminal property
• background
• summary

You're not obliged to carry out the specified activity or activities you described in your report if the NCA grants you a DAML.

For example, you may choose to:

• continue with the transaction
• carry out some but not all the activities described, or
• terminate the retainer

If you choose to continue, you have a defence against the principal offence(s) described in your report, but you may put yourself and your firm at risk of other criminal and/or civil consequences.

If you’ve had to file a DAML SAR for the same client on multiple occasions, you should consider your obligations under the MLR 2017 and whether you wish to continue the business relationship.

A 31-day moratorium period will begin if your DAML request is refused within the seven-day notice period.

You must not carry out the prohibited act(s), but you can carry out other activities on the file.

The NCA will use this time to gather evidence and decide whether further action, such as restraint of funds, should take place.

A senior law enforcement officer can apply to the court for an extension of this moratorium period for up to 186 days. This will be granted if the criteria in section 336A POCA are met.

If you choose to continue with the prohibited transactions, you risk committing a principal money laundering offence under POCA.

You do not commit an offence if you have a ‘reasonable excuse’ for not making a report. The scope of the defence has not been defined in POCA or by the courts.

You may be able to rely on the defence where, for example:

• the information that you’d be providing is already in the public domain
• your knowledge or suspicion is based on privileged information and the crime/fraud exception does not apply
• the suspected offending takes place entirely outside the UK and there’s no UK connection to the suspected criminal property

Clearly document your reasons for deciding that you have a reasonable excuse. You may want to seek independent legal advice before relying on the defence.

See section 6.7.1 of the Anti-money laundering guidance for the legal sector for more information.

Legal professional privilege

You must consider whether the information that your suspicion is based on is subject to legal professional privilege (LPP).

You cannot make a SAR if the information is covered by LPP and the crime/fraud exemption does not apply.

Privileged circumstances

You must also consider whether the information that your suspicion is based on came to you in ‘privileged circumstances’. This applies where:

• you're a professional legal adviser
• the information or material is communicated to you by:
  • your client/their representative in connection with you giving legal advice
  • the client/their representative in connection with them seeking legal advice
  • any person for the purpose of/in connection with actual or contemplated legal proceedings
• the information cannot be communicated or given to you with a view to furthering a criminal purpose

You cannot make a SAR if you received the communication in privileged circumstances and the crime/fraud exemption does not apply.

Crime/fraud exemption

Under the ‘crime/fraud exemption’, you cannot disclose privileged information unless either:

• the documents themselves form part of the criminal act
• communications take place in order to obtain advice with the intention of carrying out an offence

You do not need to be aware that you’re being used for a criminal or fraudulent purpose.

If the exemption applies, the information will still be confidential, but you can make a SAR.

Section 7.4.5 of the Anti-money laundering guidance for the legal sector describes this in more detail.