Money Laundering: Review of the Reporting ... - Dematerialised ID

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kpmg Review of the regime for handling Suspicious Activity Reports Report of recommendations KPMG LLP Quality of reporting 2.3.5 Good quality SARs have contributed to a number of LEA successes. Although the volume of SARs is increasing rapidly, the quality of a significant number of SARs remains poor both in content and in the form (e.g. handwritten) in which they are submitted. These poor quality SARs do not deliver what is desired and needed by the LEA community to recover assets or investigate money laundering or predicate offences. Feedback to disclosing entities 2.3.6 There is currently very little feedback provided to disclosing entities by either ECB or LEAs, in relation to the quality or results from specific SARs provided by that firm, or more generally on both typologies and ECB and LEA requirements. Value added by ECB processes 2.3.7 ECB does not have the right number of staff with the right skill sets to manage the more complex SARs. LEAs do not generally inform ECB of their key priorities or the successful use made of SARs. ECB cannot therefore ensure that the most appropriate SARs are developed through the “fast-track” system, i.e. those which are processed and disseminated to the relevant LEA within 24 hours of receipt. ECB do not run a search against either the Police National Computer or the Customs and Excise Data Repository and Information Computer. The intelligence package produced for LEAs does not therefore often include all the relevant information related to that SAR. Timeliness of processing SARs at ECB 2.3.8 The nature of the process at ECB, exacerbated by the significant number of poor quality SARs provided by disclosing entities, has led to significant delays in disseminating SARs which are not fast-tracked. There is now a work in progress backlog of c58,000 SARs which have not been disseminated to the LEAs, and the non fast-tracked SARs currently being disseminated by ECB are on average ten months old. LEAs indicate that this delay severely limits their ability to carry out successful investigations 6 . The extent of the work in progress and the constant increases in its size have had the effect of diminishing ECB staff morale. LEA activities and the use made of SARs 2.3.9 LEAs do not generally use the intelligence available through the Elmer system when conducting investigations. There are variations in the levels of commitment and resource applied by different LEAs to the SAR regime and some accord it a very low priority. LEA management information relating to the results from SARs is poor. There is no agreed best or standard practice at LEAs for taking forward developed SARs. Financial costs and benefits of the SAR regime 2.3.10 Determining the overall sums spent by either disclosing entities or LEAs on the SAR regime with any accuracy is extremely difficult. On a very rough estimate, and subject to very strong caveats, we believe that disclosing entities may spend around £90m each year in ongoing compliance costs (although a proportion of this would be spent regardless of 6 This is not the case for revenue agencies for which timeliness of dissemination is less important. jo/fh/519 16
kpmg Review of the regime for handling Suspicious Activity Reports Report of recommendations KPMG LLP the SAR regime), ECB’s annual running costs are c£6m, and the amount spent in relation to SARs annually by LEAs is of the order of £5m. Although the figures may not be accurate, we believe the order of magnitude of the difference between the private and public sector to be correct. In addition, competing priorities at LEAs mean the available resource is concentrated in a small number of LEAs and that, in many cases, relatively low levels of resource are devoted to SARs. 2.3.11 The figures available from LEAs of their successes using SARs are limited because of poor management information. Rough estimates that we have received from three of the largest users of SARs indicate that in the period since January 2001 at least £11.5m has been recovered and £70m restrained as a result of the use of SARs. This obviously only includes a short period during which the PoCA confiscation provisions have been in place. These amounts are significantly greater than our estimate of the amount of public sector spending on ECB and at LEAs in relation to the SAR regime over the same period. 2.4 Key challenges 2.4.1 The key challenge is to reproduce the regime’s successes across a wider population of SARs and the wider community of LEAs that handle them. This will require changes across all contributors to the regime and those that regulate it to improve both the quality of SARs entering the system and the use that is put to them. 2.4.2 The extra impetus given to SARs, and financial investigations generally, by PoCA creates greater potential for the SAR regime but brings issues with it which also need to be addressed. NCIS has shown flexibility and applied extra resource in adapting to meet the challenges, but there still remains a considerable amount of work to complete. It may therefore appear to ECB and law enforcement that they must tackle an ever-increasing number of SARs equipped only with the resources and processes designed to deal with a much lower level of disclosures. 2.5 Commitment to change 2.5.1 The package of recommendations taken together offers an opportunity to enhance significantly the performance of the SAR regime. It is therefore vital that all the recommendations in the report are taken forward together and they are not diluted or removed unilaterally by any stakeholder. 2.5.2 The implementation of our recommendations will require short-term increases in resources, both of people and money, at ECB and within LEAs. Delay in providing these resources will inevitably delay the overall improvement in the SAR regime. In particular, the benefits of increasing the quality of SARs and speed of processing of information through ECB to LEAs will be substantially reduced if LEAs do not also commit resources to using SARs for disruption and investigations. 2.5.3 A number of our recommendations are dependent upon various changes and enhancements to existing computer systems at NCIS. During our discussions with both the management of NCIS and its IT systems developers, no significant issues have been identified in implementing what we suggest. However, a clear IT implementation plan will be required to derive the benefits from these proposed enhancements and more IT systems developers may be required in order to achieve all the changes envisaged in the report together with the other improvements currently under way at NCIS. jo/fh/519 17
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