Episode 08: Ian Mynot
AML Talk Show Hosted by Stephen Platt
Well, good afternoon folks, and welcome to this KYC360 AML talk show with me, Stephen Platt. Telephones are off, doors are locked, and hopefully there will be no interruptions. I hope that you’re all staying safe and well. It’s the same old, same old for all of us at the moment with a lockdown continuing, but some glimmers of light at the end of a very long tunnel hopefully being seen soon. Let’s hope that all of the sacrifices won’t be jeopardised by an easing of the restrictions too rapidly and too quickly.
Even in the lockdown, crime pays. We all know that. And criminal property continues to get laundered. We need to remain alive to the way that AML risk is evolving during the pandemic, and I hope that these podcasts which are proving to be very popular are being used by you and your organisations to keep awareness levels high amongst your colleagues on the first, second, and the third lines of defense.
I’m very excited to be joined by a man who sits at the very pinnacle of the U.K.’s anti-money laundering effort as the head of the U.K.’s financial intelligence unit, Ian Mynot. Ian, welcome. I know how extraordinarily busy you are at the moment, particularly during this lockdown period, so thank you very much for agreeing to take the time to talk to me today. How are you doing?
Yeah, good thank you. And it’s a real pleasure to be here. I’ve listened to a few of these podcasts, and I think they’re really useful, so appreciative of the chance to take part in one.
Well, that’s very kind of you to say so, Ian. We’re delighted to have you participate. Now could we start off, Ian, by me asking you as it were a semi-personal question? You’re telling us a little bit about your background and how it is you came to be involved in financial crime prevention from a law enforcement perspective, and how you got to the top of the tree in the U.K.?
Sure. So I started my career not in law enforcement actually, but as a policy advisor at HM Treasury.
I did a few jobs there, which I enjoyed hugely and ended up on their financial crime team where I was responsible for domestic anti-money laundering work. In particular at that time we were working on things like the implementation of the third EU directive, so it was really interesting for me, and I enjoyed it a lot. In particular, I enjoyed my interactions with law enforcement that we were going through in order to build the evidence around how the directive should be implemented.
So this was around the time that the Serious Organised Crime Agency was being set up, so when that happened it was a very natural leap for me to go into SOCA and help that organisation work on economic crime and financial crime issues. I spent a bit of that time as an officer in the UK FIU, which I enjoyed hugely and did some other things as well, including running with the NCA came into being, which took over from SOCA. For a period of time I was running their partnerships and threat reduction team on economic crime. So that was looking at things like the NCA support to operational partners in terms of assets and capabilities. We used to look after the Joint Money Laundering Intelligence Taskforce, which I’m sure you and many of your listeners are aware of. And we also led on the law enforcement input into the Criminal Finances Act.
So after that I went to the FIU and had the opportunity to head that up and have been doing that for around two years now. And I have to say it’s really an incredible privilege. The U.K. FIU for me is such an amazing place, and the people are so amazing, so dedicated operating in sometimes quite difficult circumstances, and you know, the results really are coming through now.
It’s going to sound slightly sad, but for someone who worked in the FIU as a junior officer, the chance to come back and lead the unit is almost beyond my wildest dreams.
Well, that’s nice to hear. How do you find, Ian, as somebody who doesn’t have a law enforcement background. You say you were a policy advisor at HMT, how do you find somebody without that law enforcement background, how do you find the experience of heading up a unit that is staffed by a lot of law enforcement professionals?
Well, that all comes down to the team that we have in place there, and I’m lucky to have in place some really experienced people with long careers in law enforcement, long experience of operational decision making who I’ve been able to learn an awful lot from.
But FIU is actually full of all sorts of people when we’re expanding quite a lot at the moment and we’re getting people come in all the time from different backgrounds including the private sector, and they’re all bringing something unique into that environment and all bringing something valuable to the part.
I ask the question deliberately because in my experience with working with different FIUs in different parts of the world, the most effective FIUs are those that are a real mixed bag of skillsets, backgrounds, and so on, people from the private sector, from law enforcement, from policy backgrounds and so on. And the more diverse the thinking is, I often think that the more effective the units are and if you would agree?
Yeah, absolutely. I think that applies in many walks of life. Having that kind of varied input definitely improves things.
And that’s certainly the case in our FIU.
Interesting. Now Ian, as you’ll be aware obviously more than anybody of the 2008 FATF report at the U.K., and that report said specifically, and I quote, “The U. K. has made a deliberate policy decision to limit the role of the U. K. FIU in undertaking operational and strategic analysis which calls into question whether suspicious activity report data is being fully exploited in a systematic and holistic way, and providing adequate support to investigators. Additionally, while reports of a high quality are being received, the SAR regime requires a significant overhaul to improve the quality of financial intelligence available to the competent authorities.”
Now I know, Ian, that a lot of work has gone on since the 2018 FATF report. Can you outline for our listeners some of the changes that have been made since then?
Yeah, the FATF mode in 2018 was obviously a very significant moment for us. In general that was a report that was very positive about the U. K. AML CTF regime, but you’re entirely right, it made a number of criticisms of the FIU, including the level of resourcing in the unit, including within that how much we do in respect of analysis and feedback. It made comments around the level of our international response and the fitness for purpose of our IT.
So since that report came out at the end of 2018, we’ve been addressing those in a way that one would hope. So picking up those points in turn, at the time of the MER, we were about 80 people in the FIU, and what’s been absolutely fantastic is the way that the National Crime Agency has responded to that. We’ve put in extra operational resources to boost that number, which takes us up to just over 120 posts at the moment.
In addition, we managed to get funding from the home office SARs foreign program, which is taking place, and some other external funding sources which over time should take us up to around 150 people working in the FIU. So that’s around double where we were at the time of the MER.
And both resources are being used to discharge operational functions. We have a number of those, but we’re also using it to undertake more analysis, more outreach, and more communications which were part of the FATF’s criticism.
So that’s one area. In relation to what they said about our international footprint, again, I think there was some important comments made there. You know, we’re a major international financial centre and we receive a lot of requests to and from other FIUs. We put a lot more of those resources into our international desk so that we can give a better services there.
But actually, in additional to the op-side, we’ve become more engaged on the multi-lateral side in respect to go international work. So in particular, we’ve upped our engagement in the Egmont Group. The Egmont Group, as you’re probably familiar, is the international club of FIUs. So we’re not much more engaged in those meetings. We are taking part in more operational projects where there is a benefit to the U. K. In fact we are leading a project for the very first time. So we are leading a project on the financial flows associated with online child sexual abuse and exploitation, which is something we’ve been seeing more of in the reporting. And we’ve got some fantastic co-chairs on that project in the form of the Australian FIU and the Philippines FIU. So there’s a lot more going on on the international side I’m pleased to say than there was.
And finally in relationship to our IT, that’s FATF we’re right on this, our IT is outdated. And I’m pleased to say that since they reported on us there is now an IT program underway. It’s part of the home office SARs reform program and that is looking to transform and improve all of our systems, and the systems that affect the other regime participants such as the reports and the law enforcement partners.
So the FIU, all of that put together means the FIU is in very much a different place to where we were back in 2018. We are bigger. We’re definitely kind of adding more value, but definitely there is a long way to go on this, and we want to continue to improve over the coming years.
Yeah, that’s really, really interesting. I mean, all of those developments sound very, very positive. To get to a situation in which you’ve almost doubled the size of the FIU in the relatively short period of time since the FATF report, it’s obviously pretty encouraging. And as you say it’s important because whatever way you cut it, the U. K. is the world’s largest financial centre, so having a well-resourced FIU is absolutely critical.
In relation specifically to the observations that FATF made about the role of the FIU in the analysis of SARs, are you able to comment on that, and have any changes been made in that regard?
Yeah, sure. So what they were referring to is our model for SARs analysis and financial intelligence in the U. K. and that is slightly different and remains slightly different to many other countries. So first thing to say on this is that the U. K. FIU is a law enforcement FIU, and that is not actually the predominant model internationally. Many FIUs are regulatory or stand-alone units or administrative in nature. We’re a law enforcement FIU, we’re part of the National Crime Agency, and we think that brings lots of benefits including… It means we have a focus on making sure the material gets to where it needs to and is actionable as quickly as possible.
So the way the U.K. model has been constructed from the legislation onwards is really built for scale, so proceeds of crime sets a low bar in respect to suspicion, and we have a very comprehensive regulated sector and we’re a major financial sector. And the result of that is we receive a very large amount of SARs, so it’s approaching half a million SARs a year.
Typically an FIU would have a sole responsibility around analysing that material, and we don’t think that it’s possible to do that effectively within a single organisation, and we want the SARs to be used as widely as possible. So there is a distributed model in place where rather than holding all that information for ourselves and kicking out packages based on our analysis, as far as possible we make the SARs available across the U.K. law enforcement system. And there’s some exceptions to that with materials particularly sensitive. But in general that’s the approach, and so we have 77 different law enforcement agencies that are able to access material and use it and analyse it themselves in line with their own priorities.
So that’s what FATF were referring to when they mentioned what they perceive to be a limited role for the U.K. FIU in this.
But that said, you know, the point is correct that there’s the potential to be doing more within the FIU around analysis, and so since the report that’s what we’ve been setting about doing, and that’s coming to fruition quite nicely.
I see. That’s a really, really interesting explanation as to why and how the U.K. FIU differs from many other FIU models around the world. Is it the case, Ian, with the sort of almost half a million SARs that you receive, does the FIU undertake some form of initial qualitative analysis of those SARs and does it then as it were direct them to the relevant law enforcement agency? Or does it act as a bit more of a cruder clearinghouse?
So we absolutely do review through our systems all of the material. It’s not just published without any interaction from the FIU. So when a SAR is received in that first seven-day period, the material isn’t immediately made available. Instead we use that time to search the SARs for the issues that require immediate action or otherwise a priority. So in that period we are running our systems in order to pick out things like terrorist finance cases, crimes in action, vulnerable persons cases where someone’s in the process of becoming a victim, and it requires a quick intervention, and other things that affects a life and so on where we haven’t got the luxury of waiting seven days and then hoping someone picks it up.
We are proactively mining the data to identify that material, and when we’ve got it, we do a package and issue that FATF home to the relevant law enforcement agency to take action. So that involves manually reviewing a huge amount of SARs, we estimate around 100,000 a year out of the 4 or 500,000 we get manually reviewed in that seven-day period by the U.K. FIU in addition to this analysis that subsequently takes place by the rest of law enforcement.
Yeah. So you’ve essentially got a system of effectively triaging the SARs that come in so that you can, I guess, essentially risk-rate them, and then you react to them accordingly.
Correct, yeah, that’s right.
I see. I see. Because on those numbers, essentially we’re talking about 10,000 SARs or thereabouts a week. Half a million SARs a year if my maths is correct, that is 10,000 SARs a week, so that’s a couple of thousand SARs between a Monday and a Friday. It’s a huge volume of material, isn’t it?
It is, and this is a challenge. The numbers keep going up. In particular the number of defense against money laundering cases are increasing and that’s what’s driving a lot of the increases. Those are SARs that require the FIU to make an active decision whether or not to go on or refuse the defense.
As you’ll know, that in effect has the impact of allowing the transaction to go ahead or not. So those are significant decisions and they require close attention, and the volume of those has been going up in particular. But you know, our system is built for scale, and we are able to accommodate those volumes, and particularly when new IT comes on board we’re going to get even slicker I would hope.
Yeah. Well, the volumes obviously speak to the criticality of being properly resourced not only from a human resource perspective, but also as you say from an IT and a technology perspective because even with the best will in the world, a workforce that’s double the size is going to struggle with qualitative analysis of that number of SARs without the right IT capability. So it’s great to hear that’s also being addressed.
Now, not withstanding the improvements that have been made since 2018, I’m sure not everything is rosy in the garden. Like every organisation in the world there are always challenges, there are always further improvements and steps that can be taken. What would you say, Ian, are the biggest challenges currently facing the FIU?
I think the points we’ve highlighted really remain relevant here. We’ve been going through, and continue to go through a really quite major period of change with extra resources coming on board and new functionality being added, and we’re really trying to get to a position where we’re adding more and more value to the anti-money laundering regime. And that has involved a huge amount of effort on the part of the team and drawing on other parts of the National Crime Agency as well, so there’s a huge amount of effort in respect to that business change.
We’re putting a lot in place in terms of being able to continue to accommodate that growth in terms of things like people processes and onboarding and things like that. So that has been a challenge, but something that is definitely moving in the right direction and working out for us. And doing that in the context of the volumes that you highlight there and whilst the IT remains in the position it is, is probably the biggest challenge we faced in the FIU.
But at the same time, it’s a huge amount of potential here and value being driven out, the kind of packages that we’re issuing and other analytical products continues to increase, as does the value of assets that we’re managing to deny from getting into criminal hands.
Yeah. Now on the question of volume which we heard is significant, to what extent, Ian, do you think the defensive reporting that you referred to is leading to a problem of quantity over quality when it comes to SARs? And to what extent does that hinder, if at all, the effective use of FIU resources in your view?
So with such a large volume of reports, inevitably there’s going to be a range of different quality. And the main thing I want to emphasise actually is that there is lots and lots of fantastic material in there, and we get some really high quality reporting from across the sectors really. But inevitably, we’re such a broad reporting sector with such a large volume of reports, there are quality issues in play. What we do about that is really kind of down to the communications and outreach effort we have, which is increasing as I’ve mentioned. So we are trying to do more outreach and more comms.
We’ve got new products out there, so there’s a U.K. FIU magazine that now comes out four times a year, which is available on our website. And we’re doing more digital events such as this as well, so by doing this we hope we can reach out to a broader proportion of the reporting sector than otherwise we would be able to and really drive up the value of that reporting and complimenting that with specific engagement where there are major issues that require direct intervention.
And at the extreme end where we do see reporting that clearly indicates the lack of understanding of the legislation or poor standards or controls, we have relationships with the regulatory bodies and we refer those matters to those agencies in order to get those things picked up.
Do you do that, Ian, on a case-by-case basis, or do you undertake more of a macro trend analysis to identify weaknesses in SAR reporting from certain sectors and then refer onto those agencies? How does it work?
We do a bit of both. I think it’s probably more weighted to the case-specific examples at the moment, but again, this is another area we’re looking to get into with the increased footprint we’ll have around engagement, more thematic reporting to inform the regulatory activity and supervisory priorities.
Yeah. Yeah, it’s very interesting. Now you referred earlier to some of the international work that you’re doing, and in particular to a project that you’re leading with Egmont on online child exploitation. And that obviously sounds incredibly valuable in and of its own right, but it speaks, doesn’t it, to the value that can be added by SARs made by industry, not only in the fight against financial crime, but also in the fight against predicate criminality. Could you talk to us about that in a bit more detail? Because it’s hugely important for everybody to recognise that when they’re reporting SARs, they’re reporting those SARs in circumstances where they have suspicions not just of money laundering, but of criminal conduct and that is a very, very, very broad church of activity, everything from drug trafficking all the way through to tax evasion.
And so SARs are vital in the fight against those predicate crimes. And I say that because sometimes in my career I’ve found that people working within organisations can find it sometimes quite difficult to relate to financial crimes. You talk about money laundering and people can sometimes make the mistake of saying, “Oh yeah, it’s a victimless crime,” or, “It’s a crime that you don’t see.” “It’s an invisible crime.” But they can more easily relate to predicate crime types like drug trafficking or human trafficking, whatever the case may be. And SARs are obviously a hugely important part of the fight against those crimes.
Yeah, I think that’s a really important point, Stephen. And I think the contribution that SARs can make around money laundering and economic crime is reasonably well-understood, but they need to be seen much more broadly than that. I think you have predicate crimes out there that generate huge amounts of proceeds and lead onto significant money laundering and the role that SARs can play there, is fairly obvious.
But I think the other area where SARs is becoming increasingly important is around victim-based crime. We’re seeing this all the time now. I mean, you mentioned the online child sexual abuse and exploitation. That’s a kind of relatively new phenomenon and we’re seeing more and more reporting related to this really quite horrific activity whereby the abuse will take place in one country, typically in the developing world, and then streamed live to other countries, the U.K., other developed countries, and people watch that on a pay-per-view basis. So really horrific stuff.
But the fact that there’s a financial transaction involved gives an opportunity. We’re getting more and more SARs in relation to that, in particular from money service businesses and online payment service providers. It’s proven to be a really useful source of intelligence on this, and we’re actively engaging with those sectors to do some information sharing to further refine that reporting.
But it doesn’t just stop there. Human trafficking is another one. We’re dealing with a case today actually where we’ve had a report in. It relates to a young woman from Eastern Europe who has been tricked into travelling to the U.K. by her boyfriend, or more accurately her controller, and the purpose for that travel was to enslave her and exploit her sexually.
The victim managed to get a hold of her controller’s phone from the premises that she was locked up in, and actually make a phone call to the police in her home country. Those authorities got hold of the metropolitan police and that happened pretty quickly. The MET were able to search the name through Arena, which is our SARs database and got a hit. The SAR that came up didn’t actually directly relate to the individual but rather he was referenced as account partner in a transaction, but that kind of gave the opportunity to get into that bank, who were able to ride a current address. And as a result the police were able to get around there and safeguard the victim. As it turned out, she was likely to be moved that very evening. So that’s been something that we’ve been having updates on quite recently.
But another example if I may, which is very current relates to a SAR from a bank where they were reporting on a person they suspected to be involved in money mueling. So we picked that up as a priority issue and fast tracked that out to a police force. And it turned out that the force already had an existing investigation involving this and they were looking at the potential of this person being under the control of a Serious Organised Crime group. The individual is a fairly young teenage boy.
So whilst they were already looking at this, the SAR provided new information and a new line of inquiry, so that’s now being looked at and progressed between the police force and the reporter. So just a few examples there, relatively current, but it just goes to show actually the range of ways that SARs can be used, and you’re entirely right, it’s not just about money laundering and economic crime.
Very, very interesting, and it leads me on to another thought, which is that as you know there has been criticism leveled at the FIU that the benefits in the form of assets and seizures derived as it were from the actions at the FIU are disproportionate to its overall cost. Now that sort of criticism may paradoxically increase because of the resource expansion that we talked about earlier. As the cost of the FIU increases, the pressure is clearly on you to demonstrate value for money in a return on investment now, but are you able to comment on that criticism as well?
Sure. I think the important thing to recognise is that asset seizure is really only one of the outcomes here, albeit a very important one. But even in respect of that, it’s pleasing that the numbers are going up quite significantly. So in the most recent reporting year, ’19/’20, we contributed to 132 million being denied specifically as a result of our defense against money laundering work, and that was up 150% on the previous year. So I still want more and I’m absolutely convinced that’s the tip of the iceberg in terms of what’s possible.
But SARs are used in so many different ways, it’s not just about asset seizure. And as you might see from the examples I just gave, some of those things are not particularly easy to count. You know, when something has just taken the investigation onto the next stage, really important at the time, but not something that can be counter in financial terms. And sometimes the SARs are used to start investigations or with the vulnerable persons case I was just talking about, they more often contribute to an existing investigation, and they come together with other intelligent sources as a jigsaw which takes the investigation onwards.
So asset seizure very important, and the numbers are definitely going up there, but SARs need to be seen as making a much broader contribution than that.
Yeah, I think that’s fair, and I think any objective, balanced observer must be able to recognise that because as you say, Ian, there are a number of ways to judge the effectiveness of SARs and therefore the role of the FIU. You’ve got the impact on financial crime or financial crimes, you’ve got the impact on an interruption of predicate crimes and you’ve spoken about a number of those, and then you’ve got the asset seizure piece.
So it’s very, very important, all of those consequences, all of those positive consequences, not all of which can be judged in financial terms are borne in mind. I think the other point you make that’s really interesting, and I know this has been borne out of my own experience of working with FIUs, the sum of the parts of SARs are much, much greater generally than the individual SARs themselves because, you use the term ‘jigsaw’ but often time a SAR can be made in isolation. It doesn’t add much value, but when you combine it with one or more other SARs or vital pieces of intelligence, a picture begins to emerge upon which you can then take effective action. I mean, that’s certainly been my experience, is I’m sure that’s your experience too.
Absolutely. It’s all about bringing together all the different intelligence sources and again, this is another benefit of being a law enforcement FIU, houses we are in the NCA. NCA investigators are able to bring together SARs with lots of different intelligence sources.
But it speaks also, Ian, doesn’t it to the criticality of that international corporation because the trans-national nature of so much crime now means that just looking at SARs that are made in the U.K. in isolation without having access to intelligence gained from reports made by entities in other jurisdictions would be limited, so that international cooperative effort is absolutely crucial, isn’t it?
Yes. It’s absolutely fundamental, and that’s really what’s behind our increased engagement in The Egmont Group. The fact that we can achieve much more together as FIUs than we can on our own, particularly as the crime has become more complicated and more transnational.
Yeah. And one of the other thoughts that occurs to me that flows from that is the importance of insuring that financial institutions in particular that operate across border utilise consistent policies, procedures in particular in relation to SAR reporting internationally. I mean, I can remember 20 years ago being aware that there were fairly large institutions that were looking for regulatory arbitrage opportunities as between the different anti-money laundering laws in different countries in order to exploit those loopholes. There was nothing illegal about that at the time. Lots of institutions look for arbitrage opportunities either from a tax or regulatory or legal perspective.
But today, obviously that is not permitted from an AML perspective, and there needs to be a uniformity of approach to anti-money laundering standards and SAR reporting, in order to ensure that we do maximise the value from that international corporation as between financial intelligence units. So yeah, that’s clearly important. I’m sure you’d agree with that.
Definitely. I think on all levels of the global AML CTF regime, cohesiveness is absolutely fundamental.
Yeah, yeah. Now obviously I’m stating the blindingly obvious here, because you’re talking to me from lockdown, and I’m talking to you from lockdown, and our listeners are listening to us in lockdown, but we’re in the middle of this global pandemic. I was very interested to note that Europol put out a very interesting note today on the way in which transnational crime is evolving during the pandemic. What are the U.K. FIU doing around COVID? Have you, for example, seen a big uptick in SARs related to procurement of medical products or other such activities? What are you seeing in relation to COVID?
We are seeing an impact of COVID, as is the rest of society and the economy. So the number of SARs that refer to COVID is relatively small but increasing. I think looking at the two main areas, I suppose fraud and money laundering, some of the stuff that we’re seeing is broadly consistent with what you’re outlining there. I think the main type of fraud that’s being seen, not just in FIU, but in law enforcement beyond relates to online shopping scams associated with the sale of PPE equipment, where the equipment doesn’t arrive or isn’t up to standard.
We’ve also seen reporting in relation to investment fraud, so for example investments in COVID-19 vaccines or other opportunities that are pitched as time-critical. So forces are definitely adapting. I think it’s probably quite important to note from what the NCA sees COVID-related fraud is still a relatively small part of the overall broad picture, but obviously there’s a clear public interest here, so we have within FIU been refocusing some of our priorities and activity to focus on COVID-related crime.
On the money laundering side, I think the sort of thing we have tended to see through reporting includes large deposits for money movements that are given the justification of being related to COVID-related sales of PPE equipment and that sort of thing, so that’s been given as the justification for those types of large deposits.
And you know, we also see some use of crypto in relation to things like the online shopping frauds that I mentioned earlier. But on the laundering side there are opportunities really here for law enforcement and other parts of the money laundering regime. So the opportunities for money laundering are reduced and certain activity, like for example, large cash deposits now really stand out like a sore thumb, so yes, the laundering and fraud markets are adapting, but there’s some opportunity there for us as well.
Yeah, I made the point a couple of weeks ago that clearly with less legitimate economic activity there would be perhaps less scope for the disguise or secretion of illicit funds together with clean money, so it’s an interesting point because financial criminals are also being faced with a unique set of circumstances and they have to adapt in order to continue to launder their ill-gotten gain. So it’s interesting.
Now hopefully, Ian, we’ve dispelled any doubts that any listener might have about the value of SARs from the discussion that we’ve had so far during this interview. We’ve all got, I’m sure everybody would agree with this, a vested interest in quality SARs. So it’s an obvious question, but it’s an important one, what in your opinion makes a good SAR?
So there’s a few aspects to this. I think firstly it’s really important that all the fields are completed as far as possible, and obviously some information might not be available, but if you have the information please do include it. An obvious example around this is date of birth. So date of birth is such an important piece of information for law enforcement. Without that, it’s often quite challenging to confirm the person is the same person that law enforcement are interested it. It also limits the ability to undertake key searches of law enforcement databases. So completing that, and all of the other fields as far as possible is a very important thing.
In terms of the other detail on the report, being clear and concise is really important as well. Having reports that follow a logical structure, preferably with a clear summary included is really beneficial to investigators. Similarly where possible avoiding acronyms and jargon is useful, so in the FIU we have a lot of offices that are very experienced and have a lot of knowledge around different sectors, but it’s impossible for us to have detailed knowledge of every aspect of the financial system and every type of transaction or business relationship. So avoiding acronyms and jargon really does help, as does an explanation of any particularly technical aspects within the SAR.
Pretty basic thing is to break up the paragraphs, so having it of a single block paragraph makes it quite difficult to read and consumes time. I suppose the really key part of a SAR is the reason for suspicion, and in the U.K. that’s a free text box. Typically the bulk of analysis focuses on this box, so it’s a very important part of the SAR.
You know, what is really fundamental here is to outline why it is that you’re suspicious, and I know that sounds kind of pretty basic, but we do on occasion get SARs where that is not clear. So why are you suspicious? And then the basic information about who it is you’re suspicious about. Where is the criminal property? When did the act that you are describing take place? So those are the sorts of questions that it’s useful to set out in the reason for suspicion box.
And then finally, I’ll just highlight we have a number of glossary codes where if a SAR relates to a particular theme or crime type, applying that code helps us more easily identify that and make sure it gets to the right places as quickly as possible. So those are the sorts of things that make a good SAR. We’ve got a lot of guidance out there on the NCA website which I encourage people to look at.
That’s really, really interesting guidance, which is helpful to industry at the same time clearly is I’m sure being helpful to you at the FIU, Ian. I mean, what strikes me is that this is something that I’m sure financial institutions in particular can relate to because of their own experience of having to deal, for example, with excessive false positives arising from their own screening activities of their customer base. Because as listeners will know, the less information you feed into a screening tool the more noise you’re going to get, the more false positives you’re going to get, the more resource it’s going to eat up before you actually get down to the signal instead of the noise. And that is obviously a challenge that the FIU faces as well. So the more information that can be provided, the more accurate that information is, the quicker the SARs can be processed and the more valuable they will be. So this is, I’m sure, an issue that they can relate to from their own operational experiences from screening customers as I say.
I have to say, Ian, that I didn’t expect that one of the bits of guidance would be simply to encourage people to use better, as it were, grammar by breaking up paragraphs.
Well it’s a simple thing, but it does make a difference. Another one would be capital letters. Capital letters make things a bit harder for our system, so preferably those aren’t used as well.
So just to clarify on that, when I say capital letters, at the start of sentences is fine. The use of capital letters throughout is a bit trickier.
Yeah, understood. Now you referred to the fundamental importance of outlining why it is the reporting institution is suspicious. That can often be quite tricky, can’t it? Sometimes people just can’t put their finger on it, but they know that something just doesn’t smell right, but it’s very difficult for them to put that into some sort of formulation in a form of words.
In those circumstances, even though you can’t outline precisely why it is you’re suspicious, or what it is you’re suspicious of in terms of a particular form of predicate crime type, you would nevertheless still encourage organisations to report, I presume, Ian.
Well, if the reporter is suspicious, then yes I would encourage them to report as per the legislation and suspicion is quite a low threshold. I suppose in terms of developing that suspicion if someone can’t quite put their finger on it, that would suggest to me that the activity is potentially not in line with what they would normally expect or otherwise hits red flags. And setting out that kind of detail is certainly helpful as well.
Yeah. So don’t confuse the ‘what it is you’re suspicious about’ with the ‘why it is you’re suspicious.’ That’s, I think, the point that I’m driving at. You might not really understand what the nature of the predicate criminality might be, but you understand why it is you’re suspicious because for example the activity is outside of the normal pattern or whatever the case may be, and it’s crucial that you outline those reasons within the SAR.
Yeah, okay. Well look, Ian, I could carry on talking to you for hours because there’s so much more I would like to explore with you from the really unique vantage point with which you look at this issue as the head of the U.K.’s FIU, but sadly we’re up against our time limit I’m afraid. So I want to thank you very, very much on behalf of all of our listeners and KYC360 members, not only in the U.K. but around the world for taking the time to share your experiences with us and your thoughts and your guidance. So, Ian, thank you very, very much for your time.
Thanks, Stephen. It’s been a pleasure.
Thank you. Now if you like what you’ve heard today, please spread the message about KYC360 and the AML talk show. This recording will be available as a podcast on KYC360 and on many other platforms from tomorrow. For now, stay safe, stay alert. Thank you for listening and goodbye.