Money laundering: reforms would scrap consent regime
The government has pledged radical reform of the suspicious activity reports (SARs) regime and its replacement with an intelligence-led, risk-based focus.
The proposals include removal of the existing consent regime, and with it the scrapping of the existing statutory money laundering defence.
If this happens, the Proceeds of Crime Act (POCA) will be amended to ensure that reporters are not criminalised.
The changes were outlined in an Action plan for anti-money laundering and counter-terrorist finance, published last week jointly by the Home Office and HM Treasury. It said it aimed, among other things, to ensure that the regulated sector focused its anti-money laundering efforts “on the highest risks, without troubling low-risk clients with unnecessary red-tape”.
Estimating that serious and organised crime cost the UK at least £24bn, the plan said it aimed “to make the UK a more hostile place” for criminals and “a much more effective public-private partnership” was central.
It highlighted as among “the most significant money laundering threats” the role of lawyers and other professionals in enabling “the laundering of the proceeds of UK and overseas crime into, though and out of the UK”.
A Home Office review of the SARs regime – which in 2014-15 received 381,882 reports from nearly 5,000 reporters, more than eight out of 10 of which were retail banks – found last year that “at present, too much resource in both the public and private sectors is devoted to dealing reactively with relatively low-risk transactions”.
To make it operate effectively, the government would help “business to focus reports on areas of concern rather than taking a box-ticking approach”.
The action plan included the findings from a 2015 ‘call for information’ on SARs, which received more than 60 responses, including from the legal sector. They included concerns about POCA’s reporting requirement, which it was said “drives a significant level of defensive reporting where reports are made more because of concerns regarding a failure to comply with [the Act] that because of genuine suspicion”.
Respondents also felt the consent regime was “problematic”, the plan reported. They said it caused “delays, and difficulties with customers”.
The action plan said the SARs regime would be reformed to focus on the highest-risk entities “rather than targeting transactions”. Reporters would still need to provide reports when they had suspicion, “but the government will enable the reporting sector to work with the [National Crime Agency (NCA)] and other law enforcement agencies to provide more effective SARs where there are strong suspicions of criminal activity, through new information sharing legal gateways”.
The government would consult on whether the “inefficient” consent regime should be removed and replaced with an intelligence-led approach.
It added: “The statutory money laundering defence provided by the current consent regime would also be removed, although the POCA would be amended to ensure that reporters who fulfil their legal and regulatory obligations would not be criminalised.
“The government would create powers to enable reporters to be granted immunity for taking specified courses of action (e.g. maintaining a customer relationship when to terminate it would alert the subject to the existence of a law enforcement investigation).”
The government would also examine powers under the US Patriot Act and “would consider legislation to permit the reporting sector to share information, under legal safe harbour, on money laundering and terrorist finance risks”.
In a written statement to the House of Commons, the home secretary, Theresa May, said the reforms would “make better use of public and private sector resources against the highest threats, target the entities who carry out money laundering instead of individual transactions, and provide the [NCA] with a suite of new powers, including one to oblige SARs reporters to provide additional information when requested”.
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