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Suspicious activity reports top FAQs answered


AML experts David Winch from Sedulo Accountants and Albert Goodman’s Sophie Parkhouse answer the most vexing questions on submitting suspicious activity reports.

14th Jun 2022
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This week’s episode of Any Answers Live focused on one of the biggest bugbears for accountants: anti-money laundering (AML). 

So why is it so difficult to get on top of the compliance? Almost half the audience (45%) blamed AML seeming like a futile tick-box exercise as the reason. Judging by the number of questions coming in from viewers, suspicious activity reports (SARs) create a lot of this futility.  

The government is seemingly in some agreement that something needs to be done. The accounting officer’s memorandum on the SARs reform programme listed our key weaknesses in the current arrangements: inconsistent compliance, insufficient human resource capacity, under-utilisation by law enforcement and legacy IT. 

Although the panellists could understand the frustration from those who spend a lot of time and effort putting together a SAR and not seeing any action, both encouraged accountants to do their bit to protect the profession and their name. 

“I have the view that I would rather submit it, and if the National Crime Agency (NCA) is not doing anything about it, then at least I know I’m not being an enabler in any negative kind of terrorist financing situations,” said Sophie Parkhouse from Albert Goodman.  

David Winch agreed: “It’s worth bearing in mind that I’ve talked about the 600,000 SARs going on every year, the number of reports from accountants is about 5,000 a year. So that’s about 100 a week, which isn’t a vast number, considering how involved we are with money laundering.

“There are certainly business-related criminalities, business-related fraud, employees who steal from their employers, and so on. All these things, one would think, would be generating reports, and yet we’re not seeing it.”

So what more can accountants do to stamp out anti-money laundering non-compliance? Parkhouse and Winch then answered the questions from the Any Answers Live viewers on refining their SARs. 

Suspicious activity reporting top FAQs

I told the NCA the exact name, address, NI number, DOB and exactly what is wrong, but they didn’t act on it. Was there anything else I should have included?

David Winch: Part of that part of the problem is that we know what we mean. If I’m talking to another accountant about the directors’ current account, they’ll know immediately what I’m on about, what I might be concerned about, if there’s a debit balance on that account, what the tax implications might be, what the possible Companies Act breaches might be, and so on. But if you say in a suspicious activity report, “We’ve got a debit balance on the directors’ current account”, it’s going to go to a police officer or an NCA officer who may not have any comprehension of what you’re talking about. And so unfortunately, I think we have to write for non-accountants. 

When I’m giving evidence in a crime court, and I’m talking to a jury, I know that if I start talking about debits and credits, I’ve lost them. I have to talk about receipts and payments; I have to keep it simple. In a perfect world, the NCA will be staffed with accountants, but it’s not a perfect world and so we have to tailor what we are saying and how we explain ourselves in a suspicious activity report to cover that. 

If you submit a suspicious activity report on a client, do you feel that you should always resign as their accountant? If you do resign, how do you advise a client without tipping them off? 

Sophie Parkhouse: I think it depends on the circumstances, as always. So I think there are circumstances where, absolutely, you may need to resign. But there are also cases when you may be able to continue to act. So if we’re still able to produce the accounts or whatever we’re engaged for, and we’re confident that what we’re submitting is still true and correct and that there’s nothing around that that’s false. If we’re submitting legitimate information that we’ve got confidence in, then we can still continue to be engaged in that area that we’re working upon. 

The problem comes when there’s a disagreement on something, and we can’t get to a position whereby we’re submitting information that’s true and fair. And that’s the point where the conversation would need to be had. But equally, you don’t need to talk about the AML implications and the fact that you might make a report. You’re simply talking about, “You’ve engaged me to do X. I believe it should look like this. But you want it to look like that. And therefore we’ve got such a conflict here that I can’t do what you’re asking me to do.” So then you’re disengaging over a point of fact with the client, rather than being anything specifically to do with the AML.

When I filed an SAR, I was told by the NCA that I had to stop working with a client but couldn’t tell him why more people asked him for clarification. 

David Winch: When the legislation was first enacted in 2002, tipping off was so widely defined that it was totally unworkable and that legislation was repealed and replaced with new, more specific legislation about tipping off. So you’re going to be tipping off if you tell your client or indeed the wider world that you have made a SAR about Mr Bloggs. 

But no accountant in his right mind is going to do that. You simply wouldn’t. But it’s not tipping off if you say to Mr Bloggs: “I’m sorry, this relationship just isn’t working for us. We haven’t got the right chemistry anymore. And I think you should go to a new accountant.” That’s not tipping off. 

Mr Bloggs might think: “Oh, heck, I bet he’s reported me to the taxman or something.” But that’s not tipping off. So yes, you can disengage without tipping off. 

What would you say to the proposed new accountants? Could this be a tip off? But David, you’re kind of saying you could – there’s other things that you can actually mention?

David Winch: I’d say what’s gone wrong There’s no problem with saying what’s going on. Thinking about it logically, it’d be crazy if the law stopped you actually warning the new accountant of the difficulties that you’ve had with Mr Bloggs. But you don’t actually say: “and I’ve reported it.”

Sophie Parkhouse: Some of the professional bodies have example paragraphs that you can put directly into your professional clearance letter in that regard, as well. So I’d also recommend going to them and just checking what their guidance is, because often they first pick paragraphs that you can use in that regard to help you.

If your client is investigated following a SAR and my suspicion was wrong, is the investigation treated as routine investigation rather than someone who has reported them? 

David Winch: So HMRC and the police are not going to walk in and say, “We’ve got a suspicious activity report about you.” They're just going to treat it in that sense as a routine investigation. 

You can have a suspicion and somebody’s not been prosecuted because there’s insufficient evidence due to insufficient time on the part of the authorities. There’s a fairly high bar to pass before they will prosecute, and they have to be confident of getting a conviction. They have to more than think he’s done it, and think he’s a wrong ’un, and hoping they’d be able to prove it; they’ve actually got to think that we can actually take it to court, and we’re confident of getting a conviction. Without that they won’t prosecute. 

Just because somebody’s made a suspicious activity report, there’s been an investigation, and there is no prosecution, doesn’t necessarily mean that the suspicion was unfounded.

Winch and Parkhouse talked about a range of other topics on this webinar including professional scepticism, knowing your client, what counts as face to face and much more. You can catch up and watch this episode of Any Answers Live on-demand.

Replies (7)

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By Hometing
14th Jun 2022 11:42

"both encouraged accountants to do their bit to protect the profession and their name"

No comment....

Thanks (1)
14th Jun 2022 11:43

The wording of the form could be better. The article refers to the confusion caused when accountants refer to debits and credits, but what do they expect when the form asks you to indicate if the transaction is a debit or a credit? I presume the form was designed by someone who doesn't understand double entry.

As we all know, with double entry bookkeeping there will be both a debit and a credit also a debit on the bank statement will be shown as a credit in the clients books. What do the NCA expect as an answer? wouldn't it be clearer to refer to receipts and payments.

Thanks (1)
Replying to GW:
David Winch
By David Winch
14th Jun 2022 15:05

The vast majority of reports are made by banks. So a debit means a payment from the customer's account - but I take your point!

Thanks (0)
By Rgab1947
14th Jun 2022 14:37

Only had ever to do one SARS. Kept it simple but detailed as fully expecting an idiot to read it. Gave amounts, contact details the works (£50k tax) . Nothing happened. The guy still doing very well (Well not so well with Covid).

Then we must now worry how we word a disengagement.

Then we read about banks money laundering in the £ billions and no one goes to jails. Just fines (admittedly heavy) which they recover from their fees.

Not a fan on AML I am

Thanks (0)
By Roland195
14th Jun 2022 15:31

So now we all know what it means when a potential new client approaches us and says he requires our services because his prior agent wrote to say It's not you, it's me, the chemistry isn't right".

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By CJaneH
14th Jun 2022 15:45

I find it weird if the report is a tax only offence, refusing to report capital gains on transfer of let property from mother to daughter, we cannot report to HMRC who could quickly check the land registry and investigate tax payer, but must make an SAR report.
SAR - being a responsible accountant
Inform HMRC - breach of confidentiality.

Thanks (1)
Replying to CJaneH:
David Winch
By David Winch
14th Jun 2022 16:03

It may be weird - it flows from s337 Proceeds of Crime Act 2002 - but you are correct that submitting a SAR gets a thumbs up, but making a disclosure direct to HMRC gets a thumbs down. (Use glossary codes XXTEUKXX and XXF4XX for this one.)

Thanks (0)