20 May 2022: Suspicious Activity Reports (SARs) reform programme accounting officer memorandum
Updated 2 April 2024
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It is normal practice for Accounting Officers to scrutinise significant policy proposals or plans to start or vary major projects, and then assess whether they measure up to the standards set out in Managing Public Money.
From April 2017, the Government has committed to make a summary of the key points from these assessments available to Parliament when an Accounting Officer has conducted an assessment of a project or programme within the Government’s Major Projects Portfolio (GMPP).
This Accounting Officer Assessment considers the SARs Reform Programme on joining the GMPP.
Background and context
Suspicious Activity Reports (SARs) are the foundation of the UK’s response to money laundering and terrorist financing. The regime requires the regulated sector (e.g. banks, lawyers, accountants, estate agents) to submit a SAR if they know, suspect, or have reasonable grounds for knowing or suspecting, money laundering or terrorist financing. In addition, where anyone, including those in the regulated sector, thinks they may be dealing with criminal or terrorist property and at risk of committing a money laundering or terrorist financing offence, they can submit a request for consent. Such requests are known as a DAML (Defence Against Money Laundering) or DATF (Defence Against Terrorist Financing) SARs.
SARs are submitted to the UK Financial Intelligence Unit (UKFIU), which disseminates them to UK law enforcement agencies and international FIUs. As such, the SARs regime helps to protect the integrity of the regulated sector from exposure to criminality and provides law enforcement with critical intelligence to disrupt crime and terrorism.
However, despite the current SARs regime being one of the toughest in the world, the intelligence data from SARs needs to be more effectively and efficiently reported, analysed and used, so that we can go faster and further in identifying dirty money and increasing money laundering prosecutions and disruptions, securing the reputation of the UK as a global leader in tackling economic crime. The main problems affecting the regime are:
- Inconsistent levels of compliance reporting in some parts of the regulated sector resulting in inefficiencies.
- Insufficient human resource capacity within the UKFIU which limits their ability to analyse financial intelligence or engage with partners to improve the quality of SARs.
- Under-utilisation of SARs by law enforcement.
- Legacy IT systems which cause inefficiency and ineffectiveness throughout the regime.
We must address these problems to protect vulnerable victims and bear down on money laundering and terrorist financing.
The SARs Reform Programme, in collaboration with public and private sector stakeholders, has identified changes to be implemented to address the problems with the current SARs regime. It aims to deliver the strategic outcomes of effectively and efficiently protecting the integrity of the regulated sector, and disrupting money laundering, terrorist financing and high harm offences including modern slavery, drugs trafficking and child sexual exploitation.
There is public and private sector commitment to SARs Reform, demonstrated through the inclusion of SARs specific actions in the Economic Crime Plan which was jointly published by HM Government (HMG) and UK Finance in July 2019.
The Strategic Outline Business Case (SOBC) for the programme was reviewed by the Home Office Portfolio Investment Committee (PIC) in April 2019 and the Outline Business Case (OBC) was reviewed by the PIC in August 2020. The Full Business Case has subsequently been reviewed and approved by the Home Office (Finance and Investment Committee) in April 2021.
Due to the cost of the programme being in excess of £100m over 5 years and the programme’s inclusion in the GMPP, an Accounting Officer Assessment is required.
Assessment against the Accounting Officer standards
Regularity
The programme itself does not require new or amended legislation to progress.
The 2020 Budget proposed the introduction of an Economic Crime Levy on the anti-money laundering regulated sector as a long-term sustainable funding solution for the SARs regime. Consultations took place over the summer of 2020 and the levy is expected to come into force by 2023/24. Up to 2023/24, funding for the SARs programme will be provided by funding secured through the Spending Review.
Therefore, I consider the programme to conform to the Regularity Accounting Officer standard.
Propriety
It is anticipated that the programme will not breach parliamentary control procedures or expectations. Parliament’s intention for the SARs Reform Programme authorised expenditure continues to be met properly. The programme’s funds are being managed with impartiality, honesty, and with the avoidance of personal gain, waste and extravagance.
Given the importance of defending the UK against economic crime, preventing harm to society and individuals, protecting the integrity of the UK economy, and supporting legitimate growth and prosperity, together with the implications for the public and private sectors, including financial institutions, Law Enforcement Agencies and the UK economy, inaction is not an option. Therefore, I consider the programme to conform to the Propriety Accounting Officer standard.
Value for Money
Value for money assessments are carried out at each project level to satisfy approval requirements in line with Home Office governance arrangements, with a significant volume of activity being contracted through competition. Overall, I consider the programme is a sound use of public funds that will deliver a significant level of benefits for the public and private sectors and the UK economy, and to conform to the Value for Money Accounting Officer standard.
Feasibility
The programme is assessed as deliverable. The programme team is adequately resourced and has established structured delivery controls, including a detailed delivery plan which is regularly monitored (with changes managed through formal change control processes), proactive risk management supported by a regularly updated Risk Log and a robust governance structure. The programme is following good practice and adhering to all internal review and approval processes. Therefore, I consider the programme to conform to the Feasibility Accounting Officer standard.
Conclusion
The SARs Reform Programme conforms to the four Accounting Officer standards of regularity, propriety, value for money and feasibility.
The overall requirement to tackle the level of money-laundering is at such a severe and urgent level as to warrant the progress of the programme.
As the Accounting Officer for the Home Office, I have considered and approved this assessment of SARs Reform Programme.
This Accounting Officer Assessment will be published on the Government’s website (GOV.UK). Copies will be deposited in the Library of the House of Commons and sent to the Comptroller and Auditor General and Treasury Officer of Accounts.