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Disclosure of SARs in civil proceedings: What is the position?

The Proceeds of Crime Act 2002 (“POCA”) requires banks and other businesses in the regulated sector to report knowledge or suspicion of money laundering to the National Crime Agency (“NCA”) (indeed it is an offence not to make a required disclosure without reasonable excuse). These reports are commonly known as Suspicious Activity Reports (“SARs”). Separately, any person can seek a defence against committing a money laundering offence by making an authorised disclosure to the NCA (known as ‘Defence Against Money Laundering’ (“DAMLs”). [1]

The SARs regime is at the heart of the UK’s fight against money laundering and terrorist financing with nearly one million SARs submitted per year. Crucially, SARs are highly confidential, and this is critical to the effective operation of the reporting regime. There may be limited situations which call for the disclosure of SARs such as in private civil proceedings, but which is the overriding obligation – the obligation of confidentiality or disclosure?

Summary

  • SARs are highly confidential, and this is critical to the effective operation of the reporting regime.
  • The disclosure of a SAR risks committing an offence of tipping off or prejudicing an investigation.
  • Decisions will need to be made on a case-by-case basis, but the disclosure of a SAR should be avoided wherever possible.
  • There is a procedure to follow where the disclosure of a SAR cannot be avoided (see Government Circular 004/2021).

Why are SARs confidential?

SARs are submitted to the NCA in order to provide information that may assist law enforcement with the detection and prevention of crime and therefore contain potentially sensitive information. The disclosure of SARs has the potential to prejudice current or future investigations, reducing law enforcement’s ability to effectively disrupt criminal activity. This is because the disclosure may prompt the alleged offender to dispose of evidence or change their behaviour thereby making it more difficult to detect or prosecute alleged offences.

In addition, those who submit a SAR (“reporters”) have an assurance of confidentiality. If a SAR were to be disclosed, then the identity of the reporter would also be disclosed potentially placing reporters or their staff at serious risk of harm.

Finally, SARs may also contain details of third parties innocently caught up in the alleged wrongdoing, and for whom there may be serious consequences resulting from being linked to potentially criminal activity. The integrity of the reporting regime relies upon the confidentiality of SARs.

What are the risks associated with disclosure?

The disclosure of either the existence of a SAR or the details behind it may indicate that a money laundering investigation is being contemplated or carried out, and therefore may constitute tipping off (an offence under section 333A of POCA) or prejudicing an investigation (an offence under s.342 of POCA).

Those within the regulated sector will be all too aware of the risks of committing such offences, and therefore, when faced with suspicions of fraud/money laundering or other criminality, banks give very little detail away to their customer about why, for example, an account has been frozen, a transaction delayed or funds withheld.

Given the confidential nature of SARs and the considerations set out above, banks and other financial institutions should not refer to the fact that a SAR has been submitted. Further still, those within the regulated sector should avoid referring to SARs in the documentation of their internal decision-making process. Such documentation should focus on the basis for a decision rather than relying on the necessity to submit a SAR to demonstrate the issue. This may help to explain decisions to a customer in such a way that litigation can be avoided altogether, and if not, may remove the need to subsequently rely on the SAR in any future litigation.

Procedure where disclosure is necessary

Despite taking the precautions outlined above, there may be circumstances where the reporter’s obligations under the Civil Procedure Rules require it to disclose a SAR. Disclosure obligations apply to all parties to civil litigation in England and Wales and require parties to conduct a reasonable search for documents and to disclosure those presently or formerly within their control which assist or damage any party’s case. Decisions as to whether a document would need to be disclosed for inspection by an opponent will need to be made on a case-by-case basis and should be taken with the assistance of specialist legal advice.

In circumstances where it is determined that a SAR must be disclosed, the reporter should contact the NCA at their first opportunity [2], at UKFIUSARs@nca.gov.uk setting out the following details:

  • all of the SARs they anticipate will be disclosable;
  • a summary of any claim/defence;
  • the reason why it is anticipated that SARs will be required to be disclosed;
  • relevant court deadlines; and
  • any other relevant material.

The NCA will provide a response detailing any relevant potential risks to the public interest. However, the NCA is not able to provide assurances regarding the offences of tipping off or prejudicing an investigation and is unlikely to comment on the existence of any operational matters.

SARs exist on the NCA’s database for six years and could become relevant to a current or future investigation at any point during those six years; SARs could also remain relevant to ongoing investigations after this time.

Conclusion

A decision to disclose a SAR within civil proceedings does not come without risk, and therefore, specialist legal advice should be sought on a case-by-case basis. Tenet is well-placed to assist with enquiries of this nature having experience of advising our Fintech clients on such issues.

We hope this article has provided valuable insight and information on the disclosure of SARs within civil proceedings. Our team of specialist fraud and financial crime lawyers are dedicated to providing up to date and engaging content on disputes and compliance law relating to fraud and financial crime from a legal perspective. If you have any specific topics or interests that you would like to see covered in The Tenet Fraud Hub or if you have a specific query regarding the disclosure of SARs then Tenet can help. Please email hello@tenetlaw.co.uk.

For more information about this article please contact the author: Esther Phillips

How can we help?

Our expertise as fraud solicitors focuses solely on helping those targeted by or victims or fraud. Our team can offer professional legal advice and help you gather evidence to support your case and provide the vital legal support you need.  To discuss your circumstances and learn more about how we can help please contact the author: Esther Phillips

Esther Phillips is an experienced litigator specialising in fraud and financial crime with expertise across a wide breadth of commercial litigation matters ranging from straightforward breach of contract claims to complex cross-border litigation.

We hope this article has provided valuable insights and information on the possibility of enforcing judgment against a fraudster’s pension. Tenet is a multi-award winning disputes and compliance law firm with an experienced team of specialist fraud and financial crime lawyers, who are dedicated to providing up to date and engaging content on disputes and compliance law relating to fraud and financial crime from a legal perspective.

If you have any specific topics or interests that you would like to see covered in future articles or would like to contribute your own perspectives to our Tenet Fraud Hub, please reach out to Paula Crowther.

[1] References in this article to SARs will also include DAMLs.
[2] See Government Circular 004/2021

Published on June 12, 2024

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