Suspicious Activity Reports: The present and the future

5th November 2019 Business Crime

A major accountancy firm has very recently hidden evidence of smuggling by an organised crime gang that was laundering British drug money, an investigation has revealed. Twenty-seven members of the money laundering gang were jailed in France in 2017.

EY failed to file a Suspicious Activity Report (“SAR”) in respect of one of the world's largest gold refineries. Under the current regime, all members of the regulated sectors, including the banking, accountancy, legal and property sectors must report suspicions about potential money laundering and terrorist financing to the National Crime Agency (NCA). To report such a suspicion, they create a SAR.

The number of SARs soared to 463,938 during 2017-18. At that time, it was initially estimated that the annual number of SARs would be round 20,000. The driving force behind the enormous number of SARs is the criminal liability attaching to Money Laundering Reporting Officers (MLROs) for a number of offences, including non-reporting. This has led to a non-risk culture within many organisations’ to report everything irrespective of whether there may be valid grounds for not doing so. This makes EY’s failure to file the SAR even more surprising.

In order to reduce the number of SARs to a manageable number, many commentators have advocated for the criminal liability of MLROs to be removed. However, the counter argument is that to remove liability would present a real risk that very serious organised crimes would go unreported.

EY’s case will reopen the debate on how the SARs regime. What is highly likely now however is that the number of SARs will spike, at least in the short term owing to the very high profile of EY’s case and its extensive reporting.

If you are facing a money laundering investigation or charges, or if you need an expert defence team, please do not hesitate to contact our business crime and regulation team on 0800 652 5559.

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Peter Grogan is a Head of Department located in Manchester in our Business Crime, Regulation & Driving Offences department

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