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An innocent loan or questionable funds?

21 January 13

The first of a new series from the Society's Professional Practice Team advises on suspicious activity reports

by Alison Mackay

Every month a member from the Society’s Professional Practice team will provide advice and guidance to a real question that has come to them. Questions featured here are based on real enquiries, with identities changed to protect members’ confidentiality. The confidentiality protocol is critical to the service the team provides. Callers are not required to give their name, although most do, and, subject only to the exception of an admission of dishonesty or money laundering, the team will not disclose information to anyone outwith the immediate Professional Practice team.

Coral Riddell is the new head of the team and she will be joined by Alison Mackay, John Scott, Stella McCraw and Fiona J Robb, the team’s experienced solicitors, in answering your queries.

Question

A client has instructed me to purchase a property in Edinburgh which is to be funded partly by a building society mortgage, with the balance being provided by his parents who live in China. The client’s parents are insisting on sending the funds for the balance directly to me, but I have been unable to obtain a proper explanation for the source of the funds. I think this is suspicious and need to submit a suspicious activity report (SAR) to the Serious Organised Crime Agency (SOCA). Can you give me any practical tips on how to submit a SAR?

Answer

Section 328 of the Proceeds of Crime Act 2002 puts solicitors under a duty to report the activities of their client to the Serious Organised Crime Agency (SOCA) if the solicitor knows or suspects that the client is involved in an arrangement which facilitates the acquisition, retention, use or control of criminal property. Examples of “arrangements” under s 328 would include the purchase of property funded with the proceeds of crime, and executries where there are reasonable grounds to suspect that part of the estate comprises money derived from tax evasion or benefit fraud.

The method of reporting is to submit a SAR to SOCA online via their website: https://www.ukciu.gov.uk/(zli0qn2ssfk5bni2k54ubsmf)/saronline.aspx

The Professional Practice team at the Society regularly receive calls in relation to SARs and are happy to discuss your concerns and queries.

Who should make the SAR?

It is the firm’s money laundering reporting officer (MLRO) who should make the SAR – not the fee earner dealing with the transaction. The MLRO should obtain all relevant information from the fee earner and also review the file.

What should the SAR contain?

It is important when drafting the reason for the suspicion that all key information is given to SOCA. It is a good idea to prepare a written draft as it will help assess if you have enough information or if you need to ask more questions. The SAR should set out in non-legal language the background to the matter, who is involved, a concise explanation of the suspicion, the timescale/urgency, and whether you are requesting consent to proceed. If you require consent tick the consent box.

Don’ts

  • Do not send the file or privileged information to SOCA, or report everything “just in case”.
  • Do not ask SOCA to verify your client’s ID, as this is your responsibility.
  • Do not tell your client that you have made a SAR, as this constitutes tipping off which is a criminal offence.

Liaison with SOCA

The telephone number of SOCA’s helpdesk is 0207 238 8282. SOCA can give guidance on what you can say to the client and the fee earners in cases of delay on the file. If you think the confidentiality of your SAR has been breached, you should phone the confidentiality breach line 0800 234 6657.

If new information comes to light you either need to update the SAR or submit a new SAR.

The Professional Practice team can help

Remember, the Society’s Professional Practice team has the knowledge and experience to advise you, if you have any queries.

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