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NCA's Annual SARs report

  • United Kingdom
  • Fraud and financial crime
  • Litigation and dispute management

07-11-2019

Zia Ullah, Head of the Firm’s Corporate Crime & Investigations practice, and Ruth Paley, Of Counsel, take a look at the NCA’s annual SARs report published yesterday, and consider the key statistics including a huge, but predictable, increase in DAML SARs and some surprising successes in terms of restrained funds.

The NCA has published its annual Suspicious Activity Reports (SAR) Report for 2018/2019, showing another record increase in the number of SARs for the year, and in particular a staggering 52.72% uplift in requests for a Defence Against Money Laundering (DAML) SARS

Key statistics

- 478,437 SARs received between April 2018 and March 2019 (3.13% increase on 2017-18 [463,938])

- 34,543 DAML requests (52.72% increase on the previous year’s 22,619) DAML requests

- £131,667,477 denied to criminals as a result of DAML requests (refused and granted) – up 153.66% on the previous year’s £51,907,067.

The breakdown of SARs received is as follows:

 

Total SARs 478,437

DAML SARs 34,151

34,151
Defence Against Terrorism Financing (DATF) SARs 392
DAML SARs refused 1,332 1,332
DATF SARs refused 40 40
Breaches of confidentiality 3 3

DAML statistics

The report also discloses that the UKFIU made a decision on 69.81% of DAML requests without referral to law enforcement for a recommendation, providing examples where this approach may be justified including when the risk of assets being dissipated is not immediate; when there is unlikely to be law enforcement interest; or when the assets are likely to be impossible to recover. The NCA’s view is that this has assisted law enforcement in focussing its efforts on the highest priority cases, although regulated firms may well be surprised that the figure is so high, and that the detail of two in every three DAMLs is not even referred to a law enforcement agency.

The average turnaround time for reporters has risen by nearly an extra day – up to 5.12 days from 4.32 the previous year, a statistic which is hardly surprising in view of the volume increase in DAML requests during the reporting period.

Of the DAMLs refused, 70 moratorium extensions from 25 different LEAs were processed. Whilst this figure is very low as a percentage of overall DAMLs made, it nonetheless resulted in a total of £34,659,354 being restrained and £245,552 subject to indemnity procedures in these cases. In 12 of these cases there was no previous or existing law enforcement investigation and the value restrained was £25,779,271 (one case was for £25m). In three cases there were existing international investigations and asset denial was undertaken on behalf of the foreign jurisdiction.

The reason for the significant increase in funds restrained during the reporting period is likely down to the introduction of Account Freezing Orders (AFOs) and the extension to the moratorium period enacted by the Criminal Finances Act (CFA). Despite the low number of extensions, it’s hard to disagree with the NCA’s assessment that the figures on restraint demonstrates considerable value in this area and constitute a significant positive for the NCA this year to counter the usual dismay that accompanies news of yet another increase in SARs overall.

Confidentiality of SARs

Firms will be interested to note the NCA’s reference to the Government’s Economic Crime Plan flagging a commitment to protect the confidentiality of the SARs regime, in particular shielding SARs material from being disclosed in civil proceedings. Clarity in this area will be welcomed, given the pressure firms may face in civil cases to comply with disclosure orders and the uncertainty that this can create in terms of competing requirements. 

Sectoral breakdown

In terms of the sectoral breakdown of SARs, credit and financial institutions continue to account for more than 95% of the SARs lodged, with accountants and tax advisors submitting 1% of the total SARs for the period, and independent legal professionals providing just 0.58%. These figures will no doubt increase scrutiny on these sectors in view of Home Office comments over the past twelve months criticising ‘professional enablers,’ specifically calling out lawyers and accountants for a lack of activity in terms of SARs reporting.

Key messages

These new figures will not come as a surprise to those in the regulated sector, given the recent trend in significant year-on-year increases in SARs and DAMLs. Despite a boost to NCA staffing levels, questions remain as to the sustainability of the current model, particularly in view of the disclosure that two in three DAMLs are not referred to law enforcement for a recommendation.

The report’s statistics are in line with Law Commission’s report on SARs reform earlier this year which flagged the strain on the NCA created by these huge numbers. Many felt a sense of missed opportunity in terms of the Commission’s perceived lack of fundamental proposals to improve a regime which, many have long argued, is producing low-quality SARs which place an unmanageable burden on the UK FIU.

Whilst there are some significant positives amongst statistics figures including the impressive £35m restraint figure achieved through the effective interrogation of DAMLs and selective use of the moratorium period, the regulated sector will be rightly fatigued by the slow progress on promised guidance and reform. These marked increases in SARs create additional pressure on the system, and add to the sense that urgent action is needed, but with Brexit uncertainty taking up so much government attention, the prospect of any short-term movement and improvement looks unlikely.

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