By Dan Byrne for AMLi
DEFENSIVE REPORTING is a trend that is causing issues in some financial sectors and reform is needed, according to the head of the UK’s financial intelligence unity.
Ian Mynot, who has headed up the British National Crime Agency (NCA) for over seven years, said that the practice – essentially the filing of reports which turn out to be unnecessary, and done to avoid liability – is highlighting the need for a change in the system.
“A tendency of defensive reporting from some parts of some sectors is one of several issues which we are considering SARs reform,” Mynot told the Financial Times Thursday.
“We are dealing with huge volumes and large increases, year on year. The DAML cases are the ones that are the most resource-intensive, and often quite complicated to deal with, and those have risen to just over 62,000 this year, which is a big increase.”
DAML requests are a sub-category of SARs which provide an ahead-of-time option for individuals or financial institutions to raise the red flag about a transaction.
They are filed when a reporter believes that a transaction they are about to process may involve some kind of criminal activity.
It essentially then becomes the responsibility of the NCA to assess. If the NCA approves, the transaction may go ahead with no risk of liability to the original reporter, even if it does turn out to involve foul play.
While the NCA has praised the potential of DAML requests, Mynot believes there is more work to be done to ensure they are not overused.
“We will continue to provide targeted outreach and guidance across the various reporting sectors to promulgate best practice and improve the quality of reporting,” he stressed, as the latest figures for SARs in the UK were released by the NCA this week.
The report shows a significant rise in SARs – and DAML requests – over the last 12-month period.
62,000 DAML requests were filed in 2019, but only 2,055 (3.3%) actually resulted in a transaction being halted. The rest were given the go-ahead after analysis.
Meanwhile, SAR numbers more than doubled between 2018 and 2019, the NCA said. This has been attributed to growing customer pools, and the increased use of automation in day-to-day transaction monitoring.
Defensive reporting has previously been flagged by authorities and regulators as an issue that can throw their work off balance.
Efforts to tighten AML rules and encourage reporting has led to a trend of flagging any suspicious-looking transaction, allowing institutions to ‘wash their hands’ of the activity.
This has the effect of flooding offices with information – sometimes sub-standard information – which is not relevant and slows down work.
Earlier this month, Christian Lynne Wandt of the Swedish Government’s financial regulator said that the trend is frustrating Nordic authorities.
“We need the right information to reach the right person at the right time,” he said. “But I appreciate that’s a hard thing to do.”
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