Суббота, 10 августа 2019

5. Consultation

5.91 The response to these provisional proposals was mixed. Of the 40 consultees who responded, 20 were in favour of our proposal to amend the threshold, 18 were against it and two consultees were undecided. This amounted to 50% in favour, 45% against and 5% who did not express a firm view.

5.92 Some consultees fully supported this proposal. The Law Society of Scotland stated that «including the requirement for.. .an objective element to the suspicion required, would create greater clarity and proportionality.». Professor Liz Campbell was supportive of the proposal and the rationale for it, describing it as a «sensible» proposal. The Investment and Life Insurance Group also agreed with such a change on the basis that a suspicion must have a basis that can be articulated and is not wholly subjective.

5.93 The CPS also agreed with the proposal subject to their proposed definition of suspicion and that the fault element, «should more explicitly be knowledge of the facts giving rise to the reasonable grounds to suspect or the reasonable suspicion itself».

5.94 The City of London Police stated that it made sense for the regulated sector to benefit from the additional defence that we proposed where a reporter did not have reasonable grounds for their suspicion. It recommended that any such change be supported by clear guidance around what constitutes reasonable grounds to suspect. The EMA also responded positively regarding a requirement for objective evidence to support any subjective suspicion. It believed that this would prevent banks from, for example, reporting a suspicion merely on the basis that cryptocurrencies were used in the transaction.

5.95 American Express agreed with the proposal to amend the threshold for required disclosures:

Amending the threshold to «reasonable grounds to suspect» in sections 330-332 of POCA would be very beneficial as the threshold for merely «suspicion» is too low, and a requirement for the objective obligation that a suspicion is based on reasonable grounds should reduce low value and defensive reporting.

5.96 Allen & Overy also agreed with the proposal to move to reasonable grounds to suspect:

If implemented, the proposals are likely to provide greater clarity in relation to the current requirements to report suspected money laundering and terrorist financing, as well as introduce mechanisms which are likely to result in a smaller number of higher quality SARs being received by the NCA's Financial Intelligence Unit.

5.97 UK Finance noted that there was no consensus amongst its members on whether the proposed change would be beneficial and offered no decided view. Some members supported the proposal as «high value transactions currently were being delayed in a way that was disproportionate to the concern.» UK Finance responded that these members thought that amending the threshold would produce better quality disclosures. It would result in more relevant reports being made to law enforcement, particularly where the reporter wished to highlight opportunities for law enforcement intervention.

5.98 Other members of UK Finance had reservations about such a change. Three broad arguments were put forward against it:

(1) it would generate far too many issues and inconsistencies on what constitutes «reasonable»;

(2) it would be likely to lead to a spike in litigation to address this question - for example, affected parties alleging that a relevant suspicion was not reasonably held; and

(3) it would not necessarily have the desired effects of prioritising cases where intervention would be most helpful, or reducing low intelligence value reporting as a suspicion could still be of low intelligence value but based on reasonable grounds.

5.99 A significant number of consultees disagreed with our provisional proposal. The Law Society of England and Wales objection was based principally on the lack of protection from potential civil litigation commenced by the subject of a disclosure:

There are clearly difficulties with a threshold for required disclosures which relies upon a subjective element of ‘suspect'... a change to ‘reasonable grounds' might even expose reporters to civil action by customers who believe that the grounds were not objectively ‘reasonable'. As a result, amending the threshold to ‘reasonable grounds' would necessitate the introduction of a new statutory defence to a civil action for having reported in good faith. Without this additional protection, the Law Society of England and Wales would strongly object to amending the threshold.

5.100 Additionally, the Law Society of England and Wales stated:

We believe that the practical effect of the change would be very limited. There are likely to be very few occasions where a reporter subjectively suspects money laundering but has no reasonable basis for their submissions.

5.101 Corruption Watch strongly disagreed with the proposal to move to reasonable grounds to suspect if the consent regime were maintained. In their view, introducing a defence to sections 327 to 329 for the regulated sector where they did not have reasonable grounds to suspect would place an unnecessary barrier to achieving convictions. They highlighted that prosecution rates were already relatively low. Conversely, Corruption Watch also contended that it was highly unlikely that a prosecution would be initiated if there were no reasonable grounds to suspect that the property was criminal. These responses effectively cancel each other out.

5.102 Some had concerns that the flow of intelligence might be affected by such a change. Tristram Hicks (former Detective Superintendent on the national Criminal Finance Board), in collaboration with Ian Davidson (former Detective Superintendent with national financial investigation responsibility) and Professor Mike Levi (Cardiff University) submitted a joint response in which they disagreed with the proposals to amend the reporting threshold. In their response they argue that the provisional proposal to amend the threshold for required disclosures to reasonable grounds to suspect «significantly weakens the whole regime by reducing the volume and quality of SARs.»

Volume is reduced because ‘reasonable grounds' is a higher standard than ‘suspicion', so fewer circumstances would meet this level. Quality would be adversely affected because introducing an evidential standard to an intelligence function inherently weakens the intelligence function... this proposal might effectively ‘turn off the tap' to financial intelligence used by nearly 5,000 investigators across the UK, before doing this we should explore the consequences more fully.

5.103 The MPS also disagreed with the proposal to amend the threshold for reporting to reasonable grounds to suspect. In their response, the MPS also queried the likely consequences of such a change:

This narrows the circumstances under which disclosures are required to be made and has the potential to significantly weaken the whole regime. A reduction in the volume of SARs submitted will impact on the ability of law enforcement to mitigate and investigate crime. The MPS are unaware of any analysis on the effect of such a proposal. Any analysis should consider the effect from law enforcement's viewpoint and the consequences on the behaviour of reporters in preventing money laundering.

5.104 The MPS also observed that, in their experience, «intelligence provided by SARs is frequently not available from any other source.».

5.105 Other consultees believed that reports were already being lodged on the basis of objective supporting grounds. Norton Rose Fulbright based their objection largely on the assumption that there would be very few reports which did not base a suspicion on a reasonable basis:

. there would be little value in raising this to «reasonable grounds for suspicion» on the basis there are likely to be very few occasions where a reporter subjectively suspects money laundering but has no reasonable basis for his suspicion. It is unlikely that any such instances would be reported following discussion with a firm's MLRO.

5.106 Many who disagreed doubted the enhanced value that such an approach would bring. On this issue, it is worth examining the small-scale data analysis we undertook in conjunction with the UKFIU which undermines the assumption that such a change would not generate better quality SARs.

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