Firms that act as financial gate-keepers have obligations to report suspicions or knowledge of money laundering via Suspicious Activity Reports to the National Crime Agency ("NCA"). SARs have been filed for almost 20 years and year-on-year the number filed is growing. The latest report from the NCA suggests that in the next reporting year, a million SARs will be filed. In this article, we look at the increase in SARs over time and the future of the regime.
On 24 January 2023, the NCA published its annual report on SARs for the 2021/2022 reporting period.1 This covers the 12 months from April 2021 to March 2022. During this period, 901,255 SARs were filed with the NCA. This is an increase on the previous year of 21%.
This follows the trend established over the previous 11 years. In 2012, 316,527 SARs were filed.2 The number of SARs filed has grown year on year.
Prior to 2015, the reporting period ran from October to September. In 2015, it was decided that the reporting period should align with the financial year, running from April to March. In order to achieve this, the reporting period ending in 2017 was extended by six months; and in this 18-month period, 634,113 SARs were filed. Put differently, in this extended period, approximately 250,000 less SARs were filed than in the 12-month period just reported on.
It seems likely that the million SAR threshold will be passed in the coming 2022/2023 reporting period.
What could be driving the increase?
All industries filed more reports in the period 2021/2022 than they did in the preceding period. Like every preceding year, financial institutions filed the majority of SARs. The biggest increase was seen by Building Societies, which filed 56,931 SARs in 2021/2022, an increase of 90% on the 29,838 reports filed in the previous period.3
Perhaps this increase across all industries is due to increased regulatory action – money service businesses, financial institutions, law firms and other types of financial gate-keeping firms have faced penalties for failures in their anti-money laundering compliance programmes. This is likely to lead to defensive filing of SARs. Additionally, the NCA says that the new SAR-reporting entities in the Fintech and Cryptocurrency sectors play a part in this.4
SARs may have a breach of sanctions as their genesis. Following the Russian invasion of Ukraine at the end of February 2022, extensive new sanctions were imposed on Russia by the UK and its allies. It is therefore likely that we will see an increase in the number of SARs filed in consequence of infractions of sanctions, something that appears to have been anticipated by the introduction of a SAR glossary code for sanctions for the first time in March 2022.
Too Many SARs?
The NCA says that as a consequence of its growing workload, it has increased its headcount to more than 150.5 Given that the number of SARs is rapidly approaching the million mark, it is legitimate to ask whether this is sufficient. The economic crime levy was charged in the financial period that follows the NCA’s latest report.6 It is to be hoped that the NCA will be able to use this to fund a further increase in staff.7 The NCA says that it will continue to grow its headcount and that it is aiming for a target of 201 members of staff. This will see the NCA gain an additional 50 members of staff in the coming financial year.
In 2019, the Law Commission issued a detailed report setting out potential reform of the SARs regime.8 So far, some relatively minor amendments have been made to the Proceeds of Crime Act 2002. As the number of SARs increases, the NCA can hire additional personnel, and upgrade its IT systems. However, law reform might be required to ensure that only SARs that have a value to Law Enforcement are filed.
Until this happens, there is a high likelihood that the million SAR threshold will be crossed in the next reporting period.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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