Money laundering and financial fraud pose a significant threat to the UK’s financial system, and businesses require a robust anti-money laundering process to combat financial crimes. As part of this system, businesses are required to submit Suspicious Activity Reports (SAR), which flag potential criminal activity to government agencies.

You might have heard of this process before, but what triggers a Suspicious Activity Report in the UK? In this blog, we’ll take you through the steps leading up to generating this report and the standout behaviour that warrants investigation.

Ensure you have the right software for your SAR process with our PEP screening solutions at SmartSearch.

What is a Suspicious Activity Report (SAR)?

Before learning what triggers a suspicious activity report, you need to understand what a SAR is. A suspicious activity report is a report submitted to the National Crime Agency to inform the organisation that an individual or business is suspected of money laundering or financial crime.  

These reports are used by law enforcement to conduct further investigations into organised and financial crime. A SAR can be filed without definitive proof and instead is created based on suspicious activity, so further investigations can be organised.

What triggers a suspicious activity report?

Not every transaction is a reason to believe money laundering is occurring. There are a few triggers that alert AML officers to potential crime:

Unusual transactions

Complex or unusual transactions that are particularly complicated or have no clear purpose are a cause for suspicion. This can include companies making large or frequent transactions to accounts overseas with no clear business reasons upon investigation.  

This also includes transactions that appear to obscure the source of funds with several layered payments from different banks and accounts. 

Large cash payments

Many criminals attempt to use cash for money laundering as they believe that it is harder to trace. This isn’t always the case, however, and using larger sums of cash to make expensive payments can still trigger suspicious activity reports.

Some examples include individuals attempting to buy a property with large amounts of physical cash, or customers deliberately depositing money just below the threshold of suspicion. 

The Proceeds of Crime Act 2002 outlines that transactions of £10,000 and above should be reported to the NCA, even if they are not inherently suspicious. Criminals may try to avoid this detection by depositing amounts like £9,000 or £9,999, which can, in turn, trigger a SAR, especially if these transactions are frequent.

Transactions that don’t match customer profiles

This means that a transaction raises suspicion when compared to a client’s known background. For example, if a student is suddenly making significant transfers despite no recorded or visible source of income from employment. The same logic also applies to those who are unemployed or who do not regularly use a bank account and then begin transferring and receiving large sums of money. 

For businesses, this can be large transactions that are unrelated to their trade or not clearly business expenses. 

Suspicious behaviour 

Sometimes, the way a person acts during a transaction can be enough to trigger a SAR. If a client or user is reluctant to provide‌ ID documents for verification or if they are hesitant to provide information on the source of their funds, this can be suspicious enough to generate a report. 

Suspicious behaviour occurs in person when making a transaction, or it can occur online during an application process.

Use of high-risk jurisdictions

Transactions linked to high-risk countries with weak AML laws are often triggers for SAR, especially if funds are being transferred to countries well known as offshore tax havens. This behaviour typically suggests deliberate means to avoid tax on income and earnings and conduct money laundering. 

Business relationships between individuals overseas in sanctioned states also trigger red flags that need to be investigated.

Concerns about property or real estate transactions

Estate agents and solicitors are financial institutions that are required to conduct their own AML checks on clients, and as such, they are often required to submit SARs in relation to property transactions. 

We previously mentioned buyers trying to pay in cash as a cause for concern; there are also other reasons for suspicion. 

Shell companies with no clear indication of income operations also trigger suspicion when trying to buy or sell properties.

Potential terrorist financing

Alongside money laundering threats, other serious financial crimes are suggested through Suspicious Activity Reports, including terrorist financing. 

Signs of funding terrorism can include transferring small but regular amounts to individuals or groups in areas deemed high risk for terrorism or terrorist organisations. Any donations from business or personal accounts to organisations that appear linked to extremist activities are also flagged.

Who needs to submit Suspicious Activity Reports?

As we’ve mentioned before, banks and building societies are not the only organisations that have a responsibility to submit SARs. There are several businesses and organisations in the regulated sector that are required to conduct checks and flag any suspicious activity, including: 

• Accounting firms and independent accountants
• Solicitors and law firms
• Auditors
• Gambling companies and casinos
• Estate and letting agents
• Luxury goods dealers

What happens once a SAR is submitted?

Once a SAR has been sent, it is received by the UK Financial Intelligence Unit, which will analyse the reports. If there is enough evidence, some reports are passed to law enforcement or other fraud divisions for further investigation. 

In some instances, transactions can be stopped or blocked by the NCA if they are deemed suspicious or a risk to financial security. 

It’s important to remember that organisations must never disclose a SAR report to the customer, as this can jeopardise the investigation and is also seen as a criminal offence.

Detect suspicious activity with quality AML processes

In order to create a SAR, you need to have the right AML and KYC systems to be able to detect suspicious behaviour. Once you’ve gathered this information, it’s then your duty to forward it to the correct authorities to ensure the safety of your business and other financial institutions.

With our all-inclusive AML software at SmartSearch, you’ll be able to pull data on customers to create detailed and informed SAR reports. 

Do your part and help prevent financial crime, and book a Smartsearch demo today.