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

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kpmg Figure 2.2: Timetable of key events Sept 03 Dec 03 Review of the regime for handling Suspicious Activity Reports Report of recommendations KPMG LLP Mar 04 June 04 Sept 04 Dec 04 Mar 05 • Creation of a Task Force • Introduction of a standard form of reporting and a higher volume of SARs reported electronically • ARA Centre of Excellence to issue national guidelines to maximise the benefits of high quality SARs in LEAs • Task Force to assess regulatory measures in place to ensure sectoral compliance with SAR regime • Task Force to assess the success of the SAR regime based on the performance monitoring of LEAs • Proactive management of backlog • Development of a minority of SARs • LEAs to have direct access to Elmer • Division of ECB into three core functions • • DMC to conduct searches of core databases including PNC and CEDRIC • Developed SARs to include full details of all valid search results • DMC outside London staffed by clerical personnel • LU staffed by core expertise supported by LEA and FI secondees • Automatic allocation and scoring of SARs • LU divided into teams with specialist industry and product knowledge • IDU to undertake analysis of Elmer • Selective annual review of the quality of submissions by institutions • Monitoring of LEA outcomes • LU to identify persistently low quality reporting and notify the regulators • LEAs to have direct access to Elmer and access protocols agreed with ECB • New Service Level Agreements established between the LEAs and ECB • LEAs able to manage their own queues in Elmer, including direct updates of the reasons for decisions and SAR feedback • LEAs able to conduct specific searches of Elmer • LEA FIUs merged and resourced appropriately for the purposes of receipt and investigation of SARs • Use of Elmer intelligence promoted outside the FIUs • Best practice information and methodologies used as part of training modules for all entrants to law enforcement Government, regulators and other stakeholders to make clear public statements about the importance of high quality SARs and advertise the successes of the SAR regime LEAs provide regular feedback to the LU in order to allow the LU to communicate typologies and methodologies to industry Education relating to the SAR regime through feedback on market wide issues Providers of SARs to improve quality of SARs submitted to ECB, and prioritise fast-track and high impact SARs Responsibility of Government, the Task Force and other stakeholders Responsibility of NCIS ECB Responsibility of LEAs jo/fh/519 Responsibility of providers of SARs 22
kpmg Review of the regime for handling Suspicious Activity Reports Report of recommendations KPMG LLP 3 History, aims and successes of the current SAR regime 3.1 Summary 3.1.1 This section of our report provides background to the SAR regime, a discussion of its aims and some details of existing successes derived from the use of SARs: • A brief history of the legislative background to the regime and those international developments which influenced it (section 3.2). • An indication of the various recent developments which have affected the implementation and practice of the regime (section 3.3). • An outline of the aims of the SAR regime as it stands today (section 3.4). • An indication of the existing successes arising from use of SARs (section 3.5). 3.2 The history of the regime 3.2.1 The framework providing support to the SAR regime has developed through a series of Acts of Parliament, associated Regulations, external reports and recommendations. These have built upon one another as understanding of the scope of money laundering activities and the need for wider legal tools to combat them has developed. The initial focus was on the proceeds of drug trafficking and terrorist finance, but this has been widened to capture the proceeds of other forms of criminal activity and all assets of those identified as having a criminal lifestyle. The Drug Trafficking Offences Act 1986 3.2.2 The Drug Trafficking Offences Act 1986 (“DTOA”) first codified the requirement for individuals to report suspicions by creating a potential criminal liability for those who knew or suspected that their clients or customers were involved in laundering the proceeds of drug trafficking and failed to disclose this to the authorities. It established the first drug money laundering offence, although the legislation was primarily used by LEAs in relation to the related predicate drugs offences. It also permitted the confiscation of assets, property and other benefits which derived from drug trafficking. There has therefore been a regime in place relating to the reporting of suspicion of money laundering for 17 years. The Financial Action Task Force 3.2.3 The Financial Action Task Force (“FATF”) was established by the 1989 Paris G-7 summit following recognition of mounting international concern over money laundering and the threat it posed (initially) to the banking system and individual financial institutions. FATF produced its Forty Recommendations in 1990 7 , setting out an international framework for Anti-Money Laundering (“AML”) efforts and a set of recommended counter-measures. Recommendation 15 states “If financial institutions 7 The FATF Forty Recommendations are available at www.oecd.org/fatf. jo/fh/519 23
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