Financial Crime World

Suspicious Activity Reports: A Key Tool in Fighting Financial Crimes

In today’s digital age, combating financial crimes such as money laundering and terrorism financing is more crucial than ever. One of the primary tools used to fight these crimes is Suspicious Activity Reports (SARs). In this article, we will delve into the importance of SARs, who needs to report suspicious activity, and when to report it.

The Role of Suspicious Activity Reports

Suspicious Activity Reports play a vital role in combating financial crimes by providing the Financial Intelligence Unit (FIU) with valuable information. A SAR can indicate suspected criminal activity through a transaction, service, or series of transactions and services. Reporting entities are required to submit SARs when they have reasonable grounds to suspect that a transaction, proposed transaction, service, or proposed service may be relevant to the investigation or prosecution of any person for a money laundering offence.

Who Needs to Report Suspicious Activity?

Reporting entities under the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act, Police, partner agencies, international counterpart agencies, and open-source databases submit reports to the FIU. These reporting entities are required to report any suspicious activity where:

  • A person conducts or seeks to conduct an activity or transaction through a reporting entity
  • A reporting entity provides or proposes to provide a service to a person
  • A person requests a reporting entity to provide a service or makes an inquiry about a service

Obligation to Report Suspicious Activity

The requirement to report SARs applies to transactions, proposed transactions, services, or proposed services, and inquiries. There are no monetary thresholds for SARs.

Circumstances That Trigger SARs

Reporting entities must make a SAR where they have reasonable grounds to suspect that a transaction, proposed transaction, service, or proposed service may be relevant to:

  • The investigation or prosecution of any person for a money laundering offence
  • The enforcement of the Misuse of Drugs Act 1975
  • The enforcement of the Terrorism Suppression Act 2002
  • The enforcement of the Proceeds of Crime Act 1991 or the Criminal Proceeds (Recovery) Act 2009
  • The investigation or prosecution of an offence punishable under New Zealand law

Reasonable Grounds to Suspect

Suspicious Activity Reporting is based on an objective test. A reporting entity must submit a SAR if it has reasonable grounds to suspect that a transaction, proposed transaction, service, or proposed service may be relevant to one of the above circumstances.

Predicate Offences to Money Laundering

A wide range of profit-motivated offences can give rise to money laundering or terrorism financing. Tax offending, fraud, and drug offending are common examples, as well as national security, weapons proliferation, organized crime groups, immigration and labour fraud, trade and invoice fraud, environmental and conservation crimes, sanctions avoidance, corruption, cybercrime, insider trading, securities fraud, identity theft, pharmaceuticals fraud, and others.

When to Report?

Once reasonable grounds for suspicion exist, a reporting entity must submit a SAR to the FIU as soon as practicable, but no later than three working days. In practice, reporting entities will need to conduct enquiries to gather information to establish reasonable grounds for suspicion.

Conclusion

In conclusion, Suspicious Activity Reports are a crucial tool in fighting financial crimes such as money laundering and terrorism financing. Reporting entities have an obligation to report any suspicious activity where they have reasonable grounds to suspect that it may be relevant to the investigation or prosecution of any person for a money laundering offence. By understanding who needs to report suspicious activity, when to report, and what activities should be reported, we can better combat financial crimes and protect the integrity of the financial system.

What You Should Know

  • Reporting entities must submit SARs if they have reasonable grounds to suspect that a transaction, proposed transaction, service, or proposed service may be relevant to money laundering offences.
  • The requirement to report SARs applies to transactions, proposed transactions, services, or proposed services, and inquiries.
  • There are no monetary thresholds for SARs.
  • Reporting entities must submit SARs as soon as practicable, but no later than three working days.