Law Commission Recommend Less Confusing AML Regulations
The Law Commission have called for more specific guidance to help improve anti-money laundering (AML) in the UK.
The UKFIU processed 463,938 Suspicious Activity Reports (SARs) between April 2017 and March 2018, a 9.8% increase on the volume of SARs received a year earlier.
Despite the increase in SARs suggesting that more organisations and sectors are taking their obligations in the prevention of money laundering seriously, the Law Commission found that huge inconsistencies in reporting seriously affected the usefulness of the reports.
High quality SARs were viewed as data rich, easy to process and one of the ‘primary methods of sharing information to produce intelligence for law enforcement agencies to investigate and prosecute crime more generally.’
Conversely, low quality SARs require too much time to process and contain limited intelligence in the fight against economic crime.
Having observed a sample size of at least 536 SARs, the Law Commission found evidence of a misunderstanding of legal obligations and cautious SARs applications being made to avoid accusations of negligence.
A large number of SARs made by the reporting sector (bank officials and those in law firms and estate agencies) were only made for fear of accountability with the threat of criminal liability levied at those failing to make a report leading to defensive reporting. This in turn clogs up the processing line with low quality SARs failing to meet the required threshold for reporting.
The report also found that many reporters did not fully understand their obligations under Part 7 of the Proceeds of Crime Act (POCA). The report found a lack of supervision and fragmented support has created conflicting interpretations of key AML principles which has created a clear lack of consistency in reporting. It is thought that a lack of clarity has exacerbated confusion.
The Law Commission have recommended the creation of an advisory board to ensure the continued effectiveness of the regime, suggesting a board of public and private sector experts could advise the Secretary of State on appropriate improvements.
A new online SAR form has also been recommended to make the reporting process easier to navigate and encourage consistency in the amount and quality of information being sent to UKFIU.
There has also bee a call for guidance to become a lot clearer and uniform. To achieve this, the Law Commission have suggested that all statutory guidance should be issued by the Secretary of State and will avoid the differing levels of support being sporadically supplied and enforced.
Professor David Ormerod QC, Criminal Law Commissioner at the Law Commission, said:
“Money laundering is a blight on the UK’s economy and damages our international reputation. We must have a regime in place that allows law enforcement agencies to investigate and disrupt money laundering at an early stage.
“But the reporting scheme isn’t working as well as it should. Enforcement agencies are struggling with a significant number of low-quality reports and criminals could be slipping through the net.
“We think our recommendations would help tackle money laundering more effectively in a more proportionate manner, by reducing the burdens on the UKFIU and reporters.”
Ian Mynot, Head of the UK Financial Intelligence Until, commented:
“The National Crime Agency welcomes the Law Commission report on the Suspicious Activity Reports process, and is grateful for the work of the Commission in producing it. This is a comprehensive report and we will now work with the Home Office, the regulated sectors and law enforcement agencies to consider its recommendations.”
How confusing do you find the current AML legislation? Will these recommendations improve the reporting process?