The next raft of provisions from the Criminal Finances Act 2017 (CFA) have come into effect today, 31 October 2017. The focus is on money-laundering and terrorist financing. The basket of measures which come in to force cover:
- extensions to the "moratorium period" during which business must suspend dealings pending investigation of a suspicious activity report (SAR);
- information-sharing and joint SARs; and;
- new powers for the National Crime Agency (NCA) to make "further information orders".
The extended moratorium period
Individuals and businesses have a defence to money-laundering and terrorist financing charges in respect of suspicious transactions or other activity where, in response to a SAR, the NCA has given its consent to the transaction or activity in question. The NCA ordinarily has seven working days to respond to a request for consent. If consent is refused, the transaction or activity must not be continued during a "moratorium period" while the NCA investigates. The moratorium period was previously capped at 31 days, but the new provisions enable its extension, in 31-day instalments, up to a total of 217 days from the initial refusal by the NCA.
The safeguard is that such extensions require court approval. A senior officer of the NCA would make an application to court, which must demonstrate that: (a) an investigation is being conducted into the SAR; (b) that investigation is being conducted "diligently and expeditiously"; (c) further time is needed for it; and (d) an extension is "reasonable in all the circumstances". It is unclear, however, how far the reasonableness assessment will take account of any impact on those affected.
Information-sharing and joint SARs
The new provisions enable financial and credit institutions in the regulated sector to share SAR-related information with each other, and then to submit a joint SAR, also known as a super SAR. In essence, information may be shared by businesses in the regulated sector if its disclosure may assist in determining "any matter" in connection with a money-laundering or terrorist financing suspicion. Those who share information enjoy protection against claims for breach of confidentiality and data protection violations.
However, businesses may well be dissuaded from engaging in this scheme – which is entirely voluntary – by its cumbersome procedures. A disclosure may only be made following a request issued either by the NCA or by one of the intended recipients. In both cases, a notification must be made to the NCA prior to the disclosure – either by the business requesting the disclosure, or by the business of which disclosure has been requested by the NCA. Crucially, in the case of a disclosure request made by another business rather than the NCA, the notification made by that party must contain all the information that the business would be required to disclose if it had been submitting a SAR.
Following a disclosure, the corporates in question may file a joint SAR, provided that they do so within a set period. This will be either the period specified by the NCA when it made the disclosure request or 84 days in the case of a disclosure request by another business. If the corporates decide not to file a joint report, the NCA must be informed of that fact before the submission deadline. If a joint report is filed, it is treated as discharging the SAR-filing obligations of all the corporates party to it, as far as regards the suspicion in connection with which it is made.
Further information orders
Under the new power to make further information orders, the NCA may require regulated businesses to provide information that would assist in investigating, or deciding whether to investigate, a money-laundering or terrorist financing suspicion arising from a SAR. This would apply whether that SAR was submitted by the same or another business. A broadly similar provision is made for information orders relating to SAR-type disclosures made to foreign authorities under overseas laws on money-laundering and terrorist financing. This involves cases where the foreign authority issues a request for information to the NCA.
Businesses have some protection on the basis that it must be "reasonable in all the circumstances" for the information in question to be provided. In addition, businesses will not need to provide privileged information, or fear that they may breach any obligations restricting disclosure. Nor can a statement made in response to a request be used in criminal proceedings against the person who made it (subject to exceptions for perjury and inconsistent statements). Failure to comply with an order within the time limit specified by the order may be punished with a fine up to £5,000.
Ultimately, the new provisions do not require entities to implement any major changes, in particular since the information-sharing scheme is voluntary. However, they should prepare to face potentially long delays in their transactions, and accordingly establish policies to manage customers' expectations without tipping them off to ongoing investigations.