On 20 July 2018, the Law Commission published a consultation paper on anti-money laundering and the Suspicious Activity Reports (SARs) regime.

The Law Commission is seeking consultees for their views on a ranged of proposed solutions to remedy the detrimental impact of the SARs regime on the financial sector. The consultation paper has three principal aims: to identify the most pressing problems; to consult on reforming the consent regime; and to generate and consider ideas for long-term reform.

The paper identifies a number of issues hindering the SARs regime in practice including:

  • the large volume of disclosures to the UK Financial Intelligence Unit;
  • the low intelligence value and poor quality of many of the disclosures that are made in accordance with the present legal obligations; and
  • the overall burden of compliance on entities under duties to report suspicious activity.

The thirty-eight consultation questions are broad ranging and offer numerous proposals to address the issues identified within the SARs regime. Noteworthy proposals include:

  • altering the reporting threshold to require a subjective suspicion and objective supporting grounds (and whether such a change would comply with the provisions of the 4AMLD);
  • altering the Proceeds of Crime Act to contain a statutory requirement that Government produce guidance on the suspicion threshold;
  • issuing statutory guidance to indicate that where a transaction has no UK nexus, this may amount to a reasonable excuse not to make a required or authorised disclosure; and
  • to consider introducing an offence for a commercial organisation to fail to take reasonable measures to ensure its associates reported suspicions of criminal property.

Responses to the consultation are invited to be submitted before 5 October 2018.