The Law Society of Scotland’s Anti-Money Laundering (AML) team has published initial findings from its thematic review of Suspicious Activity Reports (SARs), indicating robust procedures in many firms but also highlighting areas needing improvement. The review, which examined 50 legal practices via a questionnaire, aimed to gauge the profession’s grasp of the SAR regime and identify potential enhancements in training and understanding the thresholds for suspicion.
Key findings from the review reveal that while an overwhelming majority (90%) of Money Laundering Reporting Officers (MLROs) maintain written internal SAR procedures, about 20% do not have current logins to the National Crime Agency (NCA) SARs portal, which could delay report filings. Around 84% of MLROs document their decisions when opting not to file a SAR with the NCA, adhering to the Legal Sector Affinity Group (LSAG) guidance that mandates thorough record-keeping of such decisions. But this also means that 16% of MLROs do not follow industry guidance.
Training also remains an area of concern, with 55% of MLROs indicating they have never received specific training related to SAR reporting. While specific training is not mandated, it is viewed as beneficial for enhancing MLRO capabilities in detecting suspicious activities and effectively training other staff. The review notes that 80% of practices reported providing SAR-related training to relevant staff within the last year, showcasing a commitment to compliance education.
The review also touched on the criteria for filing SARs, noting that 50% of MLROs reported not disclosing an internal SAR because the threshold for suspicion was not met, referencing the legal definition which requires a reasonable likelihood rather than mere unease.
Discrepancies in SAR submissions were also highlighted, with 28% of MLROs incorrectly filing iSARs when a Defence Against Money Laundering (DAML) was necessary, indicating a misunderstanding of the appropriate circumstances for each type of report.
The Law Society of Scotland plans to continue this review by assessing the quality of SARs submitted and will publish detailed findings and additional guidance to support legal practices in strengthening their AML efforts. This initiative underscores the importance of ongoing education and precise adherence to AML regulations to effectively combat money laundering within the legal sector.