Suspicious activity reports: law firms are doing well, but not well enough
It appears that suspicious activity reports (SARs) made to the Serious Organised Crime Agency are on the increase, according to SOCA's latest report. Does this show an increase in due diligence, or merely that crime is on the up?
I believe that the necessary money laundering checks have hit home on law firms to a degree, but it was interesting to note that barristers made very few reports. Only 11 SARs were from barristers - 301 were made from licensed conveyancers and 4,600 were from solicitors, out of the total of 240,000 for the year.
The majority of the reports are made electronically. I'm not sure why SOCA's report is keen to tell us this or what significance it may have. SOCA is also keen to tell us about a new interrogation and analytical tool known as Arena, which is being rolled out to 'end users' of SARs across the country. This tool will allow trained and accredited staff in police forces and other law enforcement agencies to use submitted SARs more effectively.
This is all very well - but I have some concerns, despite SOCA's progress.
The burden of monitoring legislation is still onerous for small and even medium-sized law firms. Couple this with the probability that they are targets for criminals, and that they may be lulled into more dubious transactions, especially in hard times, and that the requirement to check or report is, I am afraid, less likely to be carried out.
Surely this is where help is needed. Criminals will know that the smaller firms are more vulnerable and less likely to have the resources to ensure that risk is managed well.
But managed well it has to be. However, the process seems, from the report, to be a little one-sided, to me.
I am not sure anyway how or if the new analytical tool (Arena) will help solicitors. SOCA does not say it is intended to. It is intended to help the end user, i.e. the police.
But Arena relies on reports returned - and if these are not delivered from those less able to produce them, there will still be a gap in SOCA's intelligence. How would this be addressed?
In many firms, intentions may be honourable - but perhaps some firms are still complacent in believing that they discharge their responsibility for anti-money laundering by checking IDs and addresses of clients and nothing else.
While the need to do these checks has hit home, the necessary full understanding of the need to make other checks has not. I cite politically exposed persons (PEPs) checks as an example. Do firms see the importance and know how to make the check? It is not possible without access to the relevant IT, and at the smaller end of the legal market this is another expensive piece of technology to add to current financial woes.
So I say: well done to the legal profession. So far so good. But there is quite a way to go yet.