Disclosure of Suspicious Activity Reports (SARs) in civil litigation
10 August 2021
The guidance states that, subject to balancing public interest factors, a SAR should not be disclosed in civil and criminal proceedings. SARs contain potentially sensitive material and should be considered confidential to ensure the protection of SAR reporters and subjects, minimise the “risk of jeopardising current or future law enforcement investigations” and maintain the SARs regime’s integrity.
It also reminds reporters that a firm or individual may commit an offence of tipping off or prejudicing an investigation1 by: (i) disclosing that a SAR has been made, (ii) disclosing that a money laundering investigation is being contemplated or carried out, or (iii) in certain circumstances, making any disclosure that may prejudice an investigation.
There have long been tensions arising between disclosure obligations in civil litigation and obligations arising under other laws or regulations, either in the UK or abroad. Here, the tension is between English disclosure rules and money laundering laws. How does a firm resolve that conflict?
Bank/customer relationships: how to avoid arguments over disclosures of SARs in civil litigation
The guidance states that reporters should not, if possible, refer to SARs when documenting their internal decision-making processes.
For example, where a firm is deciding whether to exit or terminate a customer relationship, the firm’s documentation should focus upon the case-specific basis for the decision, such as the commercial factors, risk appetite, non-compliance with agreed terms and conditions, or inability to apply customer due diligence measures. This should help a firm explain its decision to a customer before reaching the point of litigation.
It may also remove the need for a firm to have to rely on a SAR in any resulting litigation, as the firm would instead be able to rely on its internal documentation, and may also reduce the likelihood of the SAR being a disclosable document under the Civil Procedure Rules. However, the guidance expressly states that it does not affect any legal obligations of disclosure, including under the Civil Procedure Rules 1998 or under an order of the court.
The guidance recognises that there may be circumstances where a SAR is disclosable in litigation, and sets out steps that should be followed if this is the case. Reporters should first contact the NCA with specified information about the SAR and the claim, so that the NCA can consider any potential risks to the public interest if disclosure is made. The NCA/law enforcement may make representations to the reporter and/or the court as to how to potentially mitigate such risks.
Interestingly the circular only states that the NCA will endeavour to respond to the reporter within a “reasonable timeframe”. Where a reporter receives the views of the NCA, the guidance says that the reporter will be able to take that view (or the fact of the NCA not having a view) into account in making its decision on whether to proceed with the proposed disclosure. However, the circular states that the NCA/law enforcement is not able to provide reporters with assurances regarding s333A (tipping off offence) or s342 (prejudicing investigation offences) of the Proceeds of Crime Act (POCA) and states that SARs exist on the NCA’s database for six years and could become relevant to a current or future investigation at any point during those six years.
This guidance may in part have been provoked after recent cases in which litigants have tried to get access to a SAR. For example, in 2018 in Lonsdale v National Westminster Bank, the court ordered a bank to disclose a SAR during civil litigation by a disgruntled customer whose account had been frozen and who did not believe that the bank had sufficient grounds for suspicion of money laundering. The court was not persuaded that disclosure would cause the bank to “tip off” the customer or prejudice any investigation, but gave the NCA two weeks to object to the disclosure on those grounds.
The Circular tries to help reporters minimise the risk of a SAR becoming a disclosable document in subsequent litigation, by recording the underlying reasons for exiting a customer in contemporaneous documents without referring to the fact of a SAR being filed. However, this is likely to present challenges in practice, both in terms of practically ensuring that this discipline is followed and also because information recorded in the SAR itself may still be relevant to issues in the litigation.
The Circular is helpful, however, in providing guidance to a reporter on how to navigate the difficult situation where it believes that a SAR does need to be disclosed in litigation. While the Circular says that the NCA/law enforcement cannot offer any assurances that disclosure will not amount to the commission of an offence of tipping off or prejudicing an investigation, if the NCA/law enforcement is consulted and does not raise a concern then, in practice, that is likely to materially reduce the risk of prosecution in many cases. Conversely, if the NCA/law enforcement does raise concerns, that will be relevant information that the reporter can factor into its approach to disclosure of the SAR in the litigation, including for the purposes of any necessary court applications.