21% annual increase in Suspicious Activity Reports

With a view to help property professionals stay on top of their Anti-Money Laundering (AML) obligations, Credas Technologies, the leading identity verification provider, has produced a practical guide to Suspicious Activity Reports (SARs) which form a central part of alerting the necessary authorities of any individuals or organisations that agents suspect might be trying to manipulate the UK property market to support criminal endeavours.

Criminals who are trying to launder money or finance nefarious activity commonly turn to the property market in the hope of using real estate assets to cloak their illegal activity. As such, estate agents frequently come face to face with the front line of financial crime in the UK.

When they suspect someone of operating outside the law, agents need to submit a Suspicious Activity Report to the National Crime Agency (NCA) to alert them of their concerns.

The two major areas of concern are money laundering (under part 7 of the Proceeds of Crime Act 2002) and terrorist financing (under part 3 of the Terrorism Act 2000).

• In 2021-22, there were a total of 901,255 SAR submissions in the UK. This is 21.4% more than in 2020-21 and a massive 94.3% increase since 2017-18.

It is clear, therefore, that professionals are rapidly becoming much more vigilant against suspicious activity and increasingly making efforts to report such activity to the NCA.

Who can submit an SAR?

Any person who is working in regulated sector, such as estate agency, is required under the Proceeds of Crime Act 2002 or the Terrorism Act 2000 to submit an SAR if, during the course of their work, they come to either know or suspect that a person is engaged with, or attempting to engage with, laundering or terrorist activity.

When should an SAR be submitted?

You must submit an SAR if you know or suspect, or have reasonable grounds for knowing or suspecting, that a person is engaged in money laundering or terrorism.

As soon as you have formed any sort of suspicion that illegal activity is under way, you are obliged to submit an SAR.

If you do have suspicion or proof of criminal action gained through your professional work, and have, also through your work, assisted in that criminal activity – such as helping them towards purchasing a property – you must submit an SAR or else you’re committing a criminal offence of your own.

However, you cannot unwittingly fall foul of this obligation. In other words, you are not obliged to do anything until you have actively started to suspect something is awry.

But as soon as you’ve formed a suspicion, best practice dictates that you should properly document your reasons for this suspicion because this will help to avoid any future allegations that you are fabricating your report in bad faith.

What does an SAR need to contain?

Agents must make clear who they suspect and what they suspect them of doing. This means naming the suspect and describing exactly what it is you think they’ve done (in as much detail as you can reasonably provide). If the matter pertains to a client of yours, it’s vital you make it perfectly clear whether you believe they are the suspect or the victim.

Submitting an SAR and considering DAMLs or DATFs

SARs can be submitted online via the NCA submission tool, or by post or fax using the NCA’s designated forms. Once an SAR is submitted, it is processed and checked against relevant databases, and if an investigation is needed the appropriate law enforcement agency will get involved.

While a general SAR must be submitted when you know of or have reasonable grounds to suspect money laundering, a Defence Against Money Laundering (DAML) or Defence Against Terrorist Financing (DATF) can also be requested from the NCA.

These should be submitted in the same circumstances as an SAR, but when looking to complete an action which may have the potential for a money laundering offence. In essence, a reporter may submit a DAML or a DATF when they wish to request a defence to one of these offences before dealing with the criminal property in question.

For example, as an agent or solicitor, if you are about to complete an action that might result in a money laundering offence, such as holding funds and wishing to return them due to suspicion, you need to obtain a DAML before any further action. If the funds are criminal property, transferring them may amount to a money laundering offence.

A DAML or DATF cannot be granted retrospectively, so you must do it before processing any actions, deals, or transactions that may have implications with respect to money laundering and await confirmation from the NCA.

Consequences of failing to disclose suspicions

Failure to disclose suspicions or knowledge of criminal activity is a serious offence and is treated as such by law enforcement.

If you fail to appropriately submit either an SAR or DAML, you can be charged with a primary money laundering offence.

For estate agents, failure to disclose is all too common, often because they don’t have the appropriate tools in place to identify suspicious activity at the earliest possible moment.

Tim Barnett, CEO of Credas Technologies, said: “It can seem quite daunting for professionals such as estate agents to be told that they have a key role in thwarting the endeavours of criminals and terrorists operating in the UK, not least when there is the underlying threat of facing criminal charges themselves for letting potential crimes go unnoticed on their watch.

“In reality, however, suspicious activity of individuals or groups on the housing market can often be spotted through routine ID and AML checks that are now part and parcel of an agent’s day to day due diligence. If they have reliable AML tools at their disposal, red flags are easy to spot.

“Once suspicions have arisen, SARs are quick and easy to submit after which it’s up to the NCA to chase and check into any possible criminal activity.

“Through a lack of understanding and awareness agents can easily find themselves on the wrong side of the law, but if appropriate steps have been taken to implement good AML and ID practices, the possibility of being accused of negligence can largely be mitigated.”