Suspicious Activity Reports - New guidance from SOCA
The Serious Organised Crime Agency (SOCA) have issued guidance on submission of a Suspicious Activity Report (SAR) and the process of obtaining ‘consent’. This replaces all previous similar guidance issued by SOCA, including the Top Ten Tips documents. MLRO’s should add these documents to their libraries.
The documents are:
• Submitting a Suspicious Activity Report (SAR) within the Regulated Sector which takes users through the reporting requirements, highlighting the information that SOCA would like to receive, and
• Obtaining consent from SOCA under Part 7 of the Proceeds of Crime Act (POCA) 2002 or under Part III of the Terrorism Act (TACT) 2000 which sets out the legislation on obtaining consent and the process for obtaining consent.
Guidance in Submitting a Suspicious Activity Report (SAR) within the Regulated Sector takes users through the reporting requirements, highlighting the information that SOCA would like to receive. They state in the introduction that the guidance “seeks to provide advice and relay best practice when making a Suspicious Activity Report (SAR), a piece of information that alerts Law Enforcement Agencies (LEAs) that certain client/customer activity is in some way suspicious and might indicate money laundering or terrorist financing.”
It also has a section on SAR Online. This provides guidance on, and highlights the benefits of using, the secure web based system to report. The benefits highlighted include that it will:
o provide you with an automated acknowledgement of receipt;
o help you structure your SAR in the most helpful way, thereby improving processing time in SOCA;
o give you the opportunity to flag the SAR as a consent issue.
The other guidance document Obtaining consent from SOCA under Part 7 of the Proceeds of Crime Act (POCA) 2002 or under Part III of the Terrorism Act (TACT) 2000 sets out the legislation on obtaining consent and the process for obtaining consent. It highlights the framework stating:
“Under the Proceeds of Crime Act (POCA) 2002:
1. The decision as to whether or not to obtain consent will come up in any of the following scenarios:
(A) concealing, disguising, converting, transferring or removing criminal property – as defined in section 327 of POCA;
(B) facilitation of the acquisition, retention, use or control of criminal property by or behalf of another person – as defined in section 328 of POCA; or
(C) acquisition, use or possession of criminal property - as defined in section 329 of POCA.
2. The law refers to these acts as “prohibited acts”.
3. In any of these scenarios, you have two choices. You could choose not to go ahead with the activity in question; or you may choose to proceed. A decision to proceed will mean that you may be committing a money laundering offence. However, if you have made an authorised disclosure and have appropriate consent, you would not be committing an offence.
Under Part III of the Terrorism Act (TACT) 2000:
4. The decision as to whether or not to obtain consent will come up in any of these scenarios:
(A) fund-raising for the purposes of terrorism – as defined in section 15;
(B) use or possession of money or other property for the purposes of terrorism – as defined in section 16;
(C) making available money or other property for the purposes of terrorism – as defined in section 17; or
(D) facilitating the retention or control by or on behalf of another person of terrorist property – as defined in section 18.”
The guidance goes on to stress that if you wish to apply to SOCA for a consent decision you should submit a SAR that provides appropriate information including:
o information which gives the grounds for your knowledge, suspicion or belief;
o a description of the property;
o a description of the prohibited act;
o the identity of the person or persons you know or suspect is involved in money laundering;
o the whereabouts of the property.
It also stresses that “you are strongly advised to make it explicit in your SAR that you are seeking consent from SOCA.”
Replying to professional clearance requests following reports ti SOCA
How to reply to professional clearance requests following reports to SOCAThe process of change in a professional appointment of accountants usually involves the prospective new accountant writing to the existing accountant requesting all the information which ought to be made available to enable the proposed accountant to decide whether or not to accept the appointment. With the clients’ authority the existing accountant should provide the information honestly and unambiguously.
However, if the existing accountant has or is about to make a Suspicious Activity Report to The Serious Organised Crime Agency (SOCA) then the possible offence of “tipping off” also needs to be taken into account.
The existing accountant may choose to rely on s333C of the Proceeds of Crime Act (POCA) 2002 which, subject to certain conditions, permits the existing accountant to disclose information to the new accountant if that disclosure is only made for the purpose of preventing a money laundering offence. Further explanation is provided later in this article. Alternatively if the existing accountant decides not to provide details relating to a SOCA report previously made then this is acceptable. The reply to the professional clearance letter, an example of which can be found at the end of this article in appendix 4, starts with the phrase “Insofar as our ethical and legislative responsibilities allow us to reply we can confirm that we are not aware of any professional reasons why you cannot accept the appointment".
Unless making disclosure as allowed by s333C, firms should use the above wording for all replies to professional clearance letters to avoid any possible charge of "tipping off".
A professional accountant in public practice needs to avoid the offence of “tipping off”. The offence of tipping off was previously set out in s333 of POCA. Section 333 was replaced by s333A POCA, which applies only to the regulated sector, with effect from 26 December 2007. The criminal offence of tipping off in s333A, POCA arises where a person in the regulated sector discloses either:
(a) That a disclosure has been made by a person of information obtained in the course of a regulated sector business either to an MLRO or to SOCA (under either s337 or s338, POCA) or to any other person authorized by SOCA to receive disclosures, or to the police or HMRC and the disclosure is likely to prejudice any investigation that might be conducted following the disclosure referred to; or
(b) That an investigation into allegations that a money laundering offence has been committed, is being contemplated or is being carried out and the disclosure is likely to prejudice that investigation and the information disclosed came to the person in the course of a business in the regulated sector.
A tipping off offence will not be committed under s333A, POCA if the person did not know or suspect that the disclosure was likely to prejudice any investigation that followed.
The penalty for this offence on summary conviction is a maximum of three months imprisonment, or a fine on scale 5, or both and on conviction on indictment to imprisonment for a term not exceeding two years, or a fine or both.
There are three exceptions to this prohibition on revealing the existence of a report or an actual or contemplated investigation which are as follows:
1. Disclosure within an undertaking or group etc (s333B)
A person does not commit an offence if he makes a disclosure to another person employed by the same undertaking as him, and nor does an independent legal professional or a relevant professional adviser commit an offence if the disclosure is made to another independent legal professional or a relevant professional adviser where both the person making the disclosure and the person to whom it is made are in either an EEA state or a state imposing equivalent anti-money laundering requirements and those persons perform their professional activities within different undertakings that shares common ownership, management or control.
2. Other permitted disclosure between institutions etc (s333C)
An independent legal professional or a relevant professional adviser does not commit an offence if he makes a disclosure to another person of the same kind from a different undertaking but of the same professional standing as himself (including as to duties of professional confidentiality and the protection of personal data) where the disclosure relates to the same client or former client of both advisers and involves a transaction or provisions of a service that involved them both, the disclosure is only made for the purpose of preventing a money laundering offence and the disclosure is made to a person in an EU Member State or a State imposing an equivalent money laundering requirements. This means that e.g. an accountant may only disclose to another accountant, and not to a lawyer or another kind of relevant professional adviser.
3. Other permitted disclosures (general) (S333D)
An offence is not committed if a disclosure is made to a anti-money laundering supervisory authority by virtue of the Money Laundering Regulations 2007 or for the purpose of the prevention, investigation or prosecution of a criminal offence in the UK or elsewhere, an investigation under POCA, or enforcement of any order of a court under POCA. In addition, and of the importance to those who are relevant professional advisers, an offence is not committed by a relevant professional adviser if he makes the disclosure to his client for the purpose of dissuading the client from engaging in conduct amounting to an offence.
There is also an offence of Prejudicing an Investigation (s342, POCA). The offence is committed where a person:
(i) Knows or suspects that a money laundering, confiscation or civil recovery investigation is being conducted or is about to be conducted; and
(ii) Makes a disclosure which is likely to prejudice the investigation; or
(iii) Falsifies, conceals or destroys documents relevant to the investigation, or causes that to happen.
As with tipping off offences, the person making the disclosure does not have to intend to prejudice an investigation for this offence to apply. However, there is a defence available if the person making the disclosure did not know or suspect the disclosure would be prejudicial, did not know or suspect the documents were relevant, or did not intend to conceal any facts from the person carrying out the investigation.
Audit resignations require statements to be filed at Companies House and the contents of such statements require careful consideration to ensure that statutory and professional duties are met, without including such information as may constitute tipping off. There is no legal mechanism for obtaining clearance from SOCA for the contents of such statements or other documents relating to resignation. However, businesses may well wish in cases of complexity to discuss the matter with SOCA or the relevant law enforcement agency in order to understand their perspective and document such discussion.
Requests arising from a change of a professional advisor
The prospective new accountant may request copies of identification evidence from the existing accountant in order to assist them in satisfying their own identification procedures. Such confidential documentation should not be released without the client’s authorisation to do so.
Reliance on third parties
The prospective new accountant may request for information regarding suspicious activity. In general, it is recommended that such requests are declined as the tipping off offence in the regulated sector greatly restricts the ability to make such disclosures. However, to the extent that the request is within the provisions of s333C, POCA information may be provided (but there is no obligation to do so).
The above guidance was included in guidance issued by The Consultative Committee of Accountancy Bodies, which included the ACCA, in August 2008, and can be found in section 5.36 of this document.
Please see the attached related documents for the following appebndices:
1. Letter from client to outgoing advisers giving authority to provide information to prospective new advisers.
2. Clearance letter. Request from prospective new adviser ti outgoing adviser for information.
3. Clearance letter if no reply from earlier letters.
4. Reply to clearance letter from outgoing adviser.
5. Extracts from the ACCA Rulebook 2013, section 210 dealing woth professional appointment.