The Law Commission’s most significant proposal is to effectively raise the reporting threshold to require reporting only where there are reasonable grounds to suspect money laundering rather than the current lower standard of a “more than fanciful” subjective suspicion (i.e. the Da Silva suspicion5). This proposal is designed to cut down on the number of defensive SARs. Together with the proposal to move away from individual liability for reporting (see below) it should help to reduce instances of individuals filing a SAR because money laundering cannot be ruled out and should lead to fewer and higher quality SARs.
The Law Commission does not suggest raising the threshold of suspicion in relation to the money laundering offences under sections 327 – 329 POCA because it considers the low level of suspicion necessary in order to facilitate prosecution of money laundering offences. Rather, a new defence for the regulated sector is proposed: where an individual has no reasonable grounds to suspect that property is criminal property, they would not commit an offence by not reporting their suspicion.
Raising the threshold is potentially more onerous for regulated entities as it places the onus on the reporter to have grounds that are objectively justifiable. Businesses in the regulated sector would therefore need to produce clear guidance and additional training to ensure that employees can make informed decisions as to whether or not to report their concerns. While raising the threshold of suspicion may create additional work for regulated entities in the short term, in the long term (and with clear guidance from the government) it should lead to fewer reports and resources being focused on substantive issues.
The Law Commission suggests amending POCA to include a statutory requirement that the Government produce guidance on the suspicion threshold. Similar requirements for statutory guidance are included in the Bribery Act 2010 and the Criminal Finances Act 2017. In both cases the guidance produced is designed to be of general application and includes commentary and examples.
Guidance on the suspicion threshold would ideally contain examples of factors capable of founding suspicion and those which should be excluded in the absence of any other aggravating factors. Clear, comprehensive and common sense guidance would be well received within the financial sector, particularly if it contains best practice in relation to the types of issues commonly encountered by major banks and if it is updated periodically to deal with particular issues as they arise. Such guidance should result in an improved quality (and reduced quantity) of reports.