On 7 July 2021, the UK Home Office published a circular (the Circular) setting out the Government’s position on the use of Suspicious Activity Reports (SARs) in civil litigation. There is a tension between the fact that SARs can be disclosable in civil litigation (see previous blog here) and that disclosing that a SAR has been made or that a money laundering investigation is being contemplated or ongoing may constitute an offence of tipping off or prejudicing an investigation under sections 333A or 342 of the Proceeds of Crime Act 2002 (POCA). The Circular provides guidance to reporters of SARs, including financial institutions and professional services firms, to help mitigate the risk of committing an offence through the disclosure of sensitive information.
The Circular recommends that, as far as possible, reporters should avoid referring to SARs in the documentation of their internal decision-making processes. Instead, in cases of a decision to exit or terminate a customer or counterparty, the documents prepared for the purpose of that decision should focus upon the basis for the decision e.g. risk appetite reasons, commercial factors etc., rather than the SAR itself. Civil litigation may arise between a customer and a reporter, where the reporter has filed a SAR, but the reporter’s defence to the customer’s civil claim does not rely on the SAR itself. Reporters should seek to defend any challenge based on the processes that gave rise to the decision to terminate the relationship, rather than upon the fact that a SAR was submitted.
If a reporter is compelled to disclose a SAR in civil proceedings, whether under the Civil Procedure Rules or by court order, the reporter should contact the National Crime Agency (NCA) at the first opportunity listing all of the SARs they anticipate will be disclosable together with a summary of any claim/defence and other information prescribed at paragraph 11 of the Circular. The NCA will consider any potential risks to the public interest (e.g. the risk of impeding any ongoing investigatioannns) and can make representations to the reporter and/or to the court as to how to mitigate such risks. The Circular notes that the NCA is not able to provide reporters with assurances regarding section 333A (tipping off offence) or section 342 (prejudicing investigation offences) of POCA.
The Circular additionally notes that a reporter that receives a Data Subject Access Request under the Data Protection Act 2018 (DPA) will need to consider their disclosure obligations. Reporters will need to be aware of the available exemptions under the DPA when considering whether to make the subject of a SAR aware that a SAR has been submitted in relation to them; and reporters may also wish to consider whether any of the exemptions apply to the SARs related material that they hold.