Suspicious Activity Reports - still a defence, but possibly a weakness

A person (more usually, a company) may defend itself against committing a money laundering offence by submitting a Suspicious Activity Report (SAR) to the National Crime Agency and receiving permission to proceed with a proposed act. 

Filing SARs has developed into a common practice and over 400,000 are now submitted each year. This is partly due to a growing culture of compliance, but also because companies - especially banks - often err on the side of caution and submit SARs as a precautionary measure.

However, the recent case of Lonsdale v National Westminster Bank plc [2018] EWHC 1843(QB) has shown that the contents of SARs may be disclosable and that the submission of a SAR (and its contents) could potentially expose the submitting party to liability.

In Lonsdale, the claimant made claims of defamation and breach of contract (among other things) against the bank for submitting SARs that related to him. The bank failed to have these claims struck out at a summary judgment hearing. Interestingly, it also failed in its argument that disclosing the SARs may cause it to commit the offence of "tipping off". The claimant successfully applied to have the SARs disclosed and inspected.

This is not likely to result in a sea-change in the approach to SARs or open the floodgates of litigation. However, it could be a check on firms submitting SARs without proper consideration. Firms that are considering submitting a SAR should take steps to ensure that they meet the requirements for doing so and that the wording of the SAR is carefully chosen in order to reduce the risk of issues arising if they are required to disclose them, many months later, in adverse circumstances.