Suspicious activity reports (SARs) are an essential component in global efforts to uncover and prosecute financial crime. In the United Kingdom, SAR-reporting requirements apply across a wide spectrum, including the financial, legal, accountancy, real estate, and gambling sectors. Given the interconnected nature of the global financial system, SARs emanating from each sector are vital in developing a comprehensive overview of financial activity.
Insights gleaned from large volumes of SARs data hold obvious value for firms seeking to develop their understanding of the illicit financial flows associated with serious and organized crime. One useful source of guidance is the National Crime Agency’s SARs in Action magazine. Each publication highlights a specific issue relevant to the exploitation of financial crime intelligence, delivering short, sharp insights for practitioners on the front lines. Reflecting on financial crime in a post-pandemic landscape, we've reviewed SARs in Action publications released over the last three years and assembled our key takeaways below.
Here are the recurrent themes and typologies that you should be mindful of when assessing your organization’s exposure to risk.
Money mule activity
One clear trend that emerged from our analysis is the prevalence of money mule activity, which was raised in more than a quarter of the publications reviewed. Money muling is a key mechanism to cash out the proceeds arising from a variety of predicate offending, ranging from human trafficking to cyber extortion to fraud. Money mules serve as intermediaries in the laundering chain, facilitating the movement of illicit funds through a dispersed network of accounts. This is designed to avoid triggering financial reporting thresholds, obscure the audit trail and, often, move funds across borders and beyond the reach of local authorities. A mule account may be created using a stolen or false identity, or may be a legitimate account held by a (potentially forced or even unwitting) participant in the criminal scheme.
The NCA observed in September 2021 that money mule activity was on the rise, with mule recruiters (or ‘herders’) having demonstrated an increasing awareness of bank detection tools.1 The NCA detailed relevant risk indicators in both May and October last year 2, demonstrating a call from law enforcement for heightened vigilance across the private sector. That call was reiterated by the Financial Conduct Authority (FCA) in its recent review of financial services firms’ systems and controls against money mule activity 3, and can be expected to be reinforced in the UK government’s money mules action plan, due to be published imminently. 4
Exploitation of professional services
Another key threat meriting close attention is the abuse of professional services, which was raised in more than a third of the publications reviewed. Lawyers, accountants, trust and company service providers (TCSPs), and others5 possess specialist knowledge and skills that are readily exploited by criminal actors to launder the proceeds of crime. Awareness amongst professionals as to their potential exposure varies: some may be unwitting participants in a scheme, while others are criminally complicit. Bespoke advice and services provided in connection with corporate structures, investments, and jurisdictions can prove essential to the design and maintenance of complex laundering operations. Beyond their expertise, professionals also offer an added layer of perceived legitimacy to a transaction, deterring unwanted attention from authorities.
Though they represent a minority of any given sector, professional enablers pose a significant risk to the integrity of the UK’s legitimate economy and reputation. Relevant risk indicators outlined by the NCA last year in relation to suspicious TCSPs6 illustrate authorities’ ongoing efforts to disrupt professional enablers, as also emphasized in the UK Government’s second Economic Crime Plan 7, and highlight the need for effective engagement on the part of the private sector.
Misuse of virtual currency
A third recurring theme concerns the misuse of virtual currency, or cryptocurrency, which arose in more than a third of the publications reviewed. While the vast majority of virtual currency transfers are conducted for legitimate purposes, the technology has proven an attractive enabler for criminal activity. The appeal of virtual currency as a payment medium lies in the relatively low cost and high speed of transactions. Value can be moved almost instantaneously between multiple parties and across borders, with ‘mixing’ and ‘tumbling’ services used to ensure anonymity. Given the prevailing need for cash (within both the illicit and legal economies), financial institutions are inevitably exposed to laundering risk upon the conversion of virtual currency to or from its fiat equivalent.
The NCA observed in April last year that cryptocurrency SAR volumes had decreased since September 2021, following moves by a number of banks to restrict direct payments to cryptocurrency exchanges. However, the banking sector still accounts for the largest proportion (60%) of SARs referring to cryptocurrency. In relation to SAR volumes emanating from cryptocurrency exchanges, the NCA noted that reporter risk appetite necessarily influences the decision to submit a SAR.8 In spite of underreporting, criminal acquisition and abuse of virtual currencies is believed to have grown, alongside their widespread adoption by money launderers.9 As the regulatory landscape continues to evolve, combatting the misuse of virtual currency will no doubt continue to feature as a priority area for law enforcement and compliance.
Conclusion
The NCA’s SARs in Action magazine is an important source of intelligence for all practitioners. Adopting an aggregate view of the material offers valuable insights into financial crime trends that continue to capture the attention of authorities, and which demand the attention of regulated entities operating in the UK and even beyond. Next month will mark five years since the magazine’s inception, having opened 2024 with the release of its 24th edition—certainly, an essential resource you should have in your toolbox as you build out your financial crime programs.
Sources:
1. See SARs in Action, Issue 12 (September 2021).
2. See SARs in Action, Issues 20 and 22 (May 2023 and October 2023, respectively).
3. Financial Conduct Authority. (2023, October 19). Proceeds of fraud – Detecting and preventing money mules. https://www.fca.org.uk/publications/multi-firm-reviews/proceeds-fraud-detecting-preventing-money-mules.
4. In its second Economic Crime Plan 2023-2026, the UK government committed to publishing a money mules action plan in 2023. At the time of the FCA’s review referred to above, last updated on 13 November 2023, it noted that the Home Office was due to publish the money mules action plan “in the coming weeks”: see https://assets.publishing.service.gov.uk/media/642561b02fa8480013ec0f97/6.8300_HO_Economic_Crime_Plan_2_v6_Web.pdf.
5. According to the definition developed by the NCA’s National Economic Crime Centre, ‘professional services’ include, but are not limited to, legal professions, accountants and bookkeepers, bank officials, investment advisors and wealth managers, payment service providers, estate agents and letting agents, trust and company service providers, family offices, art and auction houses, and company services including nominee directors/shareholders: see SARs in Action, Issue 21 (August 2023).
6. See SARs in Action, Issue 21 (August 2023).
7. See the UK Government’s second Economic Crime Plan 2023-2026.
8. See SARs in Action, Issue 19 (April 2023).
9. See the UK Government’s second Economic Crime Plan 2023-2026.
