Reporting Suspicion

On 15th July 2021, the Commission issued its report on the thematic review on the reporting of suspicion of money laundering or terrorist financing. The thematic review comes after the Commission identified that some firms did not have effective policies, procedures and controls for the timely reporting of suspicion through their supervision process.

We have summarised the key takeaways of the thematic review:

Ensure that the firm’s AML/CFT policies and procedures around the reporting of suspicion cover the following areas:

Board Management Information | Maintenance of SAR Records | Interaction with FIS | Maintenance of Customers following SAR | Themis Functions | Sharing SAR information within Group

Firms are encouraged to review the level of SAR MI boards receive to ensure that at a minimum it meets Handbook requirements as outlined in Rule 13.78 of the Handbook

The Commission would encourage boards to ensure that their compliance monitoring programmes, at least annually, assess the effectiveness of the internal reporting processes and the quality and timeliness of reporting suspicion

Firms are recommended to undertake a review of their AML/CFT training

To assist the MLRO and nominated officer by providing the information to help them make an informed decision on whether there is a suspicion to report, and if so, to provide information which will assist the FIS, firms should ensure that their internal SAR form captures the information set out in the guidance issued by the FIS

  1. Knowledge, skill and experience of MLRO and MLCO: It is vital that MLRO and MLCO have the appropriate knowledge, skill and experience.
  2. Capacity, resources and independence of MLRO and MLCO: Boards should be mindful of emerging resourcing issues where key individuals occupy more than one key role
  3. Policies, procedures and controls:. Boards should ensure that there are appropriate and effective policies and procedures covering Board Management Information, Maintenance of SAR records, Themis functions, Sharing of SARs within the Group, Maintenance of customers following SAR and Interaction with FIS regarding consent.
  4. Management Information (“MI”) of Suspicious Activity Reporting: MI provided to the Board should contain the number of internal disclosures received by the MLRO or a nominated officer; the number of external disclosures reported onward to the FIS, an indication of the length of time taken by the MLRO or nominated officer in deciding whether or not to externalise an internal SAR and the nature of the disclosures. Firms should use the MI to identify and monitor AML/CFT trends and ensure that the appropriate policies and procedures are implemented to mitigate the risk identified.
  5. Review of compliance with the AML/CFT regulatory framework: The effectiveness of the SAR procedures and controls should be tested at least annually. Where a firm has one person responsible for compliance and reporting, Boards could mitigate the inherent conflict of interest by utilising the services of external party to test the appropriateness and effectiveness of their policies, procedures and controls on SARs. More information on how Aspida can help firms with this requirement.
  6. Training: All relevant employees should be provided comprehensive ongoing training that must include the reporting of suspicion, the criminal and regulatory sanctions that can be applied to both the firm and individuals for failing to report suspicion, and the identity and responsibilities of the MLRO, MLCO and NO.
  7. FIS guidance to improve suspicious activity reporting: All firms should ensure that they have incorporated the Guidance to Improve Suspicious Activity Reporting  into their internal policies, procedures and controls.
  8. Internal suspicious activity thresholds: The approach to internal reporting should be based on the size, nature and complexity of the business.
  9. Timeliness of suspicious activity reports: Firms should ensure that their staff receive training on typical financial crime red flags to enable prompt identification of suspicion and make the resulting internal or external SAR.
  10. Internal record keeping and controls: Firms are required to keep records of any internal SARs made to the MLRO or nominated officer and of any external SARs to the FIS. Records must include details of the actions taken by the MLRO and nominated officers, details of enquiries made and reasons for decisions not to externalise an internal SAR as well as reasons for making an external SAR.
  11. Information to be provided to the FIS: A full account of the circumstances and grounds for suspicion and relevant documentation should be submitted to the FIS to enable the FIS to fully understand the purpose and intended nature of the business relationship/occasional transaction and the reasons for the suspicion
  12. FIS requests for additional information: Firms should understand their responsibilities pertaining to providing information to the FIS upon receipt of formal notification from the FIS.
  13. Tipping off: Firms should ensure that their AML/CFT Training covers tipping off.

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