Too many low-value SARs deflect from true risk
The overreporting of SARs in the U.K. continues to be a problem, one that swamps authorities with too much information of little value and a lack of focus on true risk. A U.K. commission is recommending changes to SAR reporting requirements to improve their value, according to a Wall Street Journal report.
In the period from April 2017 to March 2018, for example, U.K. institutions filed 463,000 SARs, but many of the filings are due to overreporting tied to vague guidelines and a desire not to be caught on the wrong side of activity that should have been reported.
But when financial institutions overreport activity that is not truly suspicious, law enforcement becomes overwhelmed with mountains of reports that yield little of value. Commission recommendations to improve the quality and usefulness of SAR reporting in the U.K. include standardizing the reporting form, requiring electronic reporting on a standard form, and improving the quality and usefulness of the information required in a SAR.
Commission recommends nine main points to improve SAR requirements to help fight financial crime
The U.K. Commission describes its main recommendations as the following [verbatim]:
- An advisory board with oversight for the regime, with a remit to oversee the drafting of guidance, to measure the effectiveness of the regime and advise the Secretary of State on way to improve it.
- Retaining the consent regime, subject to amendments to improve effectiveness.
- Statutory guidance on a number of key legislative concepts underpinning the reporting regime, to assist the regulated sector in complying with their legal obligations. This includes guidance on: suspicion, appropriate consent and arrangements with prior consent and what may amount to a reasonable excuse.
- Prescribing the form in which suspicious activity is reported, making use of technology to devise an online interactive form.
- An exemption to allow ringfencing of suspected criminal property by a credit of financial institution. This provides for a more proportionate response to the reporting of (suspected) criminal property. Supplementary to this, we recommend funds to be released by a Crown Court Judge when an application for an extension of the moratorium period is made.
- Maintaining the status quo for the reporting of “all crimes.”
- Extending the circumstances in which a reporter may have a reasonable excuse not to make a voluntary disclosure.
- Further research into the utility of thematic reporting or geographical targeting orders, which remove the reporter’s discretion to assess suspicion.
The impetus for action is attributed in part to a FATF recommendation urging the U.K. to modernize and improve its SAR reporting. The U.K. has also been in the spotlight for other money laundering issues and enforcement efforts.
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