The Government has recently published Circular 003/2021 (the Circular) clarifying how Anti-Money Laundering Suspicious Activity Reports (SARs) should be disclosed in civil litigation. The Circular provides important guidance for institutions who raise SARs (reporters) to the National Crime Agency (NCA) and need to disclose the SAR in litigation. However, the guidance is in very general of terms and leaves some specific circumstances unaddressed.
Disclosure of SARs (or even the fact that a SAR has been filed) is a difficult issue for Reporters involved in litigation. On the one hand, a Reporter must comply with its duty to disclose all relevant documents. On the other hand, disclosing that a SAR has been filed or that a money laundering investigation is being undertaken may amount to the offences of tipping off or prejudicing an investigation under sections 333A or 342 of the Proceeds of Crime Act 2002.
The importance of separate internal processes
The issue is best dealt with if a Reporter can avoid a SAR becoming a relevant document at all. The Circular recommends that, to the extent possible, Reporters avoid references to SARs in internal documentation about decisions to terminate or exit a customer. It is more prudent to focus on other factors to end a relationship with a customer – such as commercial factors, risk appetites, contractual breaches and/or the inability for a Reporter to complete its due diligence measures.
Relying on other commercial reasons may help to explain to a customer why the relationship was terminated and to prevent litigation in the first place. If a former customer brings proceedings relating to the termination of their relationship, internal documentation justifying the Reporter’s commercial rationale for its decision may be sufficient to avoid relying on or disclosing the SAR altogether.
Litigants subject to the Disclosure Pilot are expected to agree upon the parameters for disclosure early on. A Reporter should work closely with their legal representatives to avoid any SAR falling within the scope of any disclosure issue if possible. This will always be dependent on the particular facts and circumstances of a case. However, it will be easier where there are sufficient other internal documents which explain the Reporter’s actions and which can be relied upon as part of its defence in place of a SAR.
Where a SAR may disclosable
Inevitably, there will be some instances where a SAR will be a relevant issue in the litigation and potentially disclosable. In such circumstances the Circular sets out a process that Reporters should follow.
A Reporter should contact the NCA at the earliest opportunity after realising that the SAR is disclosable.
Reporters should list:
- 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 then consider any potential risks to the public interest from disclosure (eg. to the Reporter or to any ongoing money laundering investigations) and endeavour to respond to the Reporter within a reasonable timeframe. The NCA may make representations to a Reporter or the Court as to how it may be possible to mitigate such risks.
Where a Reporter receives a view from the NCA, the Circular states that it will be able to take that view (or the fact of not having a view) into account when making its decision as to whether to proceed with the proposed disclosure. However, the NCA will not provide Reporters with assurances regarding the offences of tipping off or prejudicing an investigation.
To the extent not already in place, we urge Reporters to put in place internal processes which make a clear distinction between a SAR and the other commercial reasons to exit customers or to suspend account access where money laundering is suspected.
The Circular does not provide a timeframe for a response by the NCA and even contemplates that the NCA may not respond to an approach from a Reporter. This may prove challenging for Reporters coming up against Court timetables and disclosure hearings where no response from the NCA had been received. While extensions to Court deadlines may be possible, Reporters will need to tread carefully so as to not inadvertently commit a tipping off offence when negotiating any extensions with the other litigants or seeking the permission of the court.
Even where the NCA does respond, it may not resolve a Reporter’s difficulties. For instance if the NCA’s view is that disclosure would prejudice an investigation, but it is nevertheless a highly relevant document in the proceedings, the Circular gives Reporters no guidance as to how to proceed.
If such circumstances were to arise or expected to arise, we would recommend speaking to our Financial Crime team at an early stage in the matter as there are steps which could be taken to mitigate the risk of disclosure and the likelihood of an offence being committed.
Finally, the Circular does not cover SARs made under the Terrorism Act 2000, but early engagement with the NCA in litigation concerning such matters is recommended.