Partner - Business Crime and Regulatory
Suspicious Activity Reports (SARS) may be familiar to solicitors (although not as familiar as the National Crime Agency (NCA) would like according to Donald Troon), but they mean nothing to the average client. However as the latest available statistics show that 354,186 SARS were made in 2014, the chances are that a client is going to face one at some point in the not too distant future. So what do they mean and what effect do they have?
The first thing most clients know about a SAR is when they try and take money out of their accounts and discover they can’t. Having banked in the same place for years they assume a quick call to the relationship manger will sort things out. Except it doesn’t, even if they agree to talk to him. ‘Regulatory issues’ is likely to be the most he will be told.
As there is a big commercial deal about to go through the client instructs you to sue the @@@@ off the bank. So that is what you do pursuant to your instructions, isn’t it?
Well not really; especially when the client tells you that he has just had an abnormally large amount of money, from an unusual jurisdiction into his bank account (he operates only in the UK), which he has then paid to a number of different creditors, also in strange jurisdictions. Oh, and he has just tried to buy a supercar. And then his account has been “frozen”.
The bank won’t tell you anything when you call and the client is screaming and shouting with every day that passes. So what can you do?
Not much is the answer. The regime is called draconian for good reason. The bank will have formed a suspicion that somebody is involved in money laundering and as it is in the regulated sector it has to report its concerns to the NCA (make a SAR) and ask for consent to complete the transaction that the client has asked it to make. The NCA has seven working days to deal with the SAR and if it refuses consent there are a further 31 calendar days for law enforcement to work out what it is going to do i.e. restrain or seize the funds, or nothing. And during that period the account cannot be used and the bank cannot give any reason for the inactivity to avoid tipping off. So for 40 days or so the client’s account is effectively frozen.
And at the end of the moratorium period if law enforcement does nothing, that is not always the end of the story, even if left free to deal with the monies, banks are very risk adverse these days and often then tell customers to take their business elsewhere.
So the whole affair can be very time consuming, expensive, and frustrating for the client and with no redress against the bank (see the recent case of Parvizi v Barclays Bank Plc (2014) where the bank although criticised was not held liable, a position now enshrined in statute – POCA Section 338(4A)).
The best advice for the client is probably to cooperate as much as possible with the bank and to try to deal with any concerns you think it might have, and to understand that the bank holds all the cards in this particular scenario. Whatever you or the client do, make sure it doesn’t enable the bank to claim the client is in breach of his banking conditions (yes it was drugs money!) as then the bank can refuse to complete a transaction even outside the time periods above, on the basis that it would involve the bank in knowingly breaking the law. Which obviously a bank would never do….