Originally called a ‘criminal referral form’, a Suspicious Activity Report (SAR) is a way for individuals working in the regulated sector to flag instances where they know, suspect, or have reasonable grounds for knowing or suspecting, that someone is involved in, or is attempting to engage in, money laundering or terrorist financing.
Part 7 of the Proceeds of Crime Act 2002 (POCA) terrorist financing and part 3 of the Terrorism Act 2000 (TACT) makes this a requirement for regulated firms.
A SAR is the document that financial institutions and certain other regulated entities are required to file whenever there is a suspected case of financial crime. These reports are sent to financial regulatory bodies and law enforcement agencies. Here in the UK, SARs are submitted to the National Crime Agency (NCA) and received by the UK Financial Intelligence Unit (UKFIU).
In this article, we take a look at what a SAR is, why they are important and what is involved in submitting one.
What is a SAR?
According to the NCA, a SAR “alerts law enforcement to potential instances of money laundering or terrorist financing. SARs are made by financial institutions and other professionals such as solicitors, accountants and estate agents and are a vital source of intelligence not only on economic crime but on a wide range of criminal activity.”
The primary purpose of SARs is to identify and report potential suspicious activities that could be indicative of criminal activities, particularly those related to money laundering, terrorism financing, and other financial crimes.
In the year to December 2022, the UKFIU reported that:
- Over 3,000 SARs are received every single day
- 901,255 SARs were received and processed up 21% on the previous year
- More the £300m has been denied to criminals as a result of Defence Against Money Laundering (DAML) requests
Why are SARs important?
SARs help in identifying patterns and trends of suspicious activities that might be indicative of money laundering, fraud, or other financial crimes, and they are an integral component of modern Anti-Money Laundering (AML) frameworks.
“SARs are a critical intelligence resource for law enforcement […] They have been instrumental in identifying sex offenders, fraud victims, murder suspects, missing persons, people traffickers, fugitives and terrorist financing.”
SARs Reporter Booklet, UK Financial Intelligence Unit, June 2023
At their core, SARs represent a proactive measure used by firms to alert regulators and law enforcement agencies about potential illicit financial activities. They play a pivotal role in the early detection of money laundering schemes, enabling swift intervention and the prevention of further illegal transfers or actions. Without such reports, many subtle or complex money laundering activities might go unnoticed until they’ve caused significant harm or facilitated other criminal or terrorist activities.
When firms notice unusual or suspicious activity, filing SARs can then trigger a closer examination or even a full-blown investigation by the appropriate authorities. This early detection can prevent criminals from further exploiting the financial system, nipping potential criminal activities in the bud, and even resulting in the seizure of illicit funds.
Additionally, SARs not only aid in the immediate detection of potential financial crimes but also contribute to the broader efforts in understanding money laundering trends and patterns. When financial intelligence units, regulators, and law enforcement agencies aggregate and analyse data from multiple SARs, they can gain deeper insights into larger networks of illicit activities or emerging methods of money laundering. This, in turn, allows for the development of more effective AML strategies, better training for compliance professionals, and the fine-tuning of regulatory frameworks to address new challenges.
Furthermore, from the perspective of financial institutions themselves, SARs serve as a mechanism to demonstrate compliance with AML obligations. In an environment where regulatory oversight is stringent, and non-compliance can result in heavy penalties and reputational damage, the proper filing of SARs provides institutions with a record of their vigilance against financial crimes. This not only safeguards them from potential legal repercussions but also bolsters their image in the eyes of customers, stakeholders, and the wider public as responsible and diligent entities in the fight against money laundering.
What is involved in submitting a SAR?
A SAR contains detailed information about transactions or patterns of behaviour that might signify money laundering, fraud, or other financial crimes, known associates.
In the UK, SARs are submitted to the NCA with details about known or suspected money laundering via an online portal or by using a form for manual reporting.
A typical report submitted to the NCA will contain information on suspected victims or perpetrators of financial crime, fraud or money laundering such as phone numbers, addresses, company details, investment activity, bank accounts and details of any assets, along with details of any transactions, known associates, and the reasons for the suspicion or knowledge of financial crime.
