Suspicious activity reports (SARs) regime: reforming institutional culture

Published date12 November 2020
Date12 November 2020
Subject MatterAccounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime
AuthorXiaoTong Loh
Suspicious activity reports
(SARs) regime: reforming
institutional culture
XiaoTong Loh
Centre for Commercial Law Studies, Queen Mary University of London,
London, UK
Purpose Against a backdrop of money launderingscandals in the banking industry, this study aims to
assess anti-money laundering (AML) reporting obligations of bankers in the UK. By evaluating the
effectiveness of the current suspicious activity report (SAR) regime, this study seeks to use the senior
management functionsof the Senior Managers and Certif‌ication Regime (SMCR) to achievethe goals of AML
law within the bankingsector.
Design/methodology/approach This study f‌irstly evaluates the eff‌iciencies of the available risk-
based sanctions aimed at makingthe banks the gatekeeper for money laundering. It points out the three-fold
def‌iciencies of the SAR regime in the UK. Lastly,it discusses and examines the merits of multiple proposals
for reformation.
Findings It is argued that the risk-based sanctionshave failed to achieve their goals to deter banks from
abusing their products and services to facilitate money laundering activities. In revealing the three-fold
def‌iciencies of the SAR regime theoretical f‌laws, practical inapplicability and institutional culture this
study argues for both the retainment of the current regime and the repositioning of regulation focus on the
reformation of institutional culture, particularly within large or multinational corporates, in terms of their
commitmentto fulf‌illing AML obligations.
Originality/value This essay has concluded that the regime has correct tools under the Proceeds of
Crime Act 2002, the Money LaunderingRegulations 2017 and the SMCR to address problems associated with
AML reportingobligations imposed on the banking sector.
Keywords Banking industry, AML reporting obligations, Anti-money laundering (AML),
SAR regime, Senior management functions of the Senior Managers and Certif‌ication Regime
Paper type Research paper
Money laundering is def‌ined in the Proceeds of Crime Act (POCA)2002. The Act sanctions
the primary money laundering offences of concealment [1], arrangements [2], acquisition,
use and possession of proceeds of crime [3]. Owing to the serious implications of money
laundering, countrieshave come together to tackle money laundering problems.At the inter-
governmental level, the Financial Action Task Forces (FATF) 40 Recommendations are
recognised as the international standard for anti-money laundering (AML) regulations
(FATF, 2012/2018). In terms of regional effort, the European Unions (EU) Fifth Money
Laundering Directive will come into force in early January [4]. These initiatives have
important implicationsfor the shaping of the UKs AML framework.
The AML regime extends beyond the punishment for the main conduct of money
laundering. Because of the application of a risk-based approach (RBA), the regime also
focuses on sectors that are exposed to substantialmoney laundering risks. Particularly, the
banking sector is one of the high-risk-prof‌ile industries as it is where criminals often inject
Journalof Money Laundering
Vol.24 No. 3, 2021
pp. 514-524
© Emerald Publishing Limited
DOI 10.1108/JMLC-07-2020-0078
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