AML thematic review of Suspicious Activity Reports

The Law Society of Scotland's anti-money laundering (AML) team will launch its next thematic review on 13 May, examining suspicious activity reports (SARs).

The SAR thematic review follows on from the AML team's major thematic review of Policies, Controls and Procedures, conducted across 2022/23.

What is a thematic review?

To fulfil our responsibilities as the AML supervisor for Scottish solicitors, we deploy a number of tools and resources. For example, AML inspections, selected file audits, MLRO discussions and the requirement to submit the AML Certificate. Another tool is sample-based thematic reviews, which are a compulsory exercise that help us to identify and assess specific current and emerging AML risks within the regulated population.

Thematic reviews allow us to:

• Work collaboratively with our supervised population to obtain further oversight regarding overall understanding of the SARs regime across the sector, along with the quality of SARs being submitted.
• Gain a greater insight into how the profession complies with obligations under Proceeds of Crime Act (PoCA), the Money Laundering Regulations (MLRs), the Terrorism Act (TACT ) and Legal Sector Affinity Guidance (LSAG).
• Use the data gathered to provide further information and support to members to improve SARs understanding and quality across the profession.

The importance of SARs

All practices are obligated to comply with PoCA, irrespective of the services they offer, extending beyond those covered by the MLRs. PoCA imposes supplementary obligations specifically on entities falling under the MLRs.

The effective reporting of SARs by regulated entities is of paramount importance and is central to the effectiveness of the AML system. We have chosen this topic as the National Crime Agency (NCA) has highlighted particular findings regarding the standard of quality and quantity of reports from the sector. As an effective AML supervisor, we have ongoing productive relations with the NCA as the UK’s Financial Intelligence Unit.

What does this mean for our members?

We are keen to obtain further visibility regarding the quantity and quality of SARs across the sector. In order to do so, we will launch a questionnaire-based thematic review on Monday, 13 May, across 50 selected practices.

The questionnaire will be undertaken using Microsoft Forms, an encrypted form which complies with the Society’s data privacy standards.

This will allow us to complete detailed analysis on answers, gaining insight into the sectors knowledge and understanding of the SARs regime. This will, in turn, help us provide supplementary guidance and support to aid practices in this critical area of regulatory compliance.

Who, what, when, why and how?

The review will take part in four stages:

• Stage 1 – The request to complete the questionnaire will be sent by our AML team on 13 May 2024, giving a submission date of four weeks from the date of the email.
• Stage 2 – Our AML team will analyse the results and collate findings.
• Stage 3 - Our team will issue case studies to some participants based on answers received.
• Stage 4 – Our AML Team will then contact a further cohort of practices to test quality of SARs.
• Stage 5 - A report will be generated highlighting our overall anonymised findings, along with key areas for improvement. It will also provide practical help and support for firms to aid compliance, as set against PoCA, MLRs, TACT and LSAG. This anonymous report will be sent directly to those who have participated, as well as being published on our website.

We look forward to working with you as your supervisor. Your cooperation and participation is required to minimise the AML risks to you, your business, your clients and to the legal profession as a whole.

Members can contact Jenni Rodgers or Dale Trahms in our AML team with any queries at aml@lawscot.org.uk.