Dealing with the client relationship after filing a Suspicious Activity Report, or SAR have some points to consider. Deciding to file an SAR is only one part of the story. The other part is far more complicated and critical. What will you do with a client, a transaction, or an account after you file an SAR?
This question is challenging to answer, but we will highlight the common best practices worldwide. Make sure to know and follow local laws and regulations and your internal policies for the appropriate guidance.
What strategy to use in dealing with the client relationship?
The easiest way to handle clients is to exit them after an SAR is filed, which is common in some jurisdictions, such as Germany but would be tipping off in other jurisdictions. In some jurisdictions, you must either have consent from the Financial Intelligence Unit, or FIU or only proceed following the expiration of a default period, for example, after 30 days. The same applies to transactions. In some jurisdictions, you must hold the transaction until further notice from the FIU, whereas other jurisdictions require you to proceed to avoid tipping off.
Some jurisdictions also require you to freeze an account to prevent further transactions until the FIU consents. This option can also be used by institutions voluntarily. To freeze an account and all transactions, you must get the approval of the Money Laundering Reporting Officer, or MLRO or senior staff.
We learned earlier that the trigger for an SAR is suspicion, and suspicion does not require evidence of a criminal act. In many cases, you file an SAR, but you still want to keep the client and monitor them closely, especially when clients have big loans. In some cases, you cannot exit a client because the client has long-term products and services which cannot be exited.
In all cases, you must closely monitor the client’s activities and file follow-up SARs as necessary. In addition, before an SAR is filed, you need to make sure the Costumer Due Diligence/Know Your Costumer, or CDD/KYC information is correct or with updated information. This does not mean you need to identify a client repeatedly, but you must check that the CDD/KYC information is correct or corrected without tipping off the client.
The AML/CFT Act of 2009
In addition, the Anti-Money Laundering and Counter-Terrorism Financing Act of 2009, or AML/CFT Act of 2009 requires lawyers to file SARs. Lawyers who have filed a SAR will have to decide whether they can or must continue to represent their client.
The fact that a lawyer has reason to suspect that their client is involved in money laundering or financing terrorism does not absolve them of their obligation to complete the retainer. It will depend on the specific circumstances, such as the nature of the suspicion, the stage of the transaction, the risk of ‘tipping off,’ and the lawyer’s professional obligations in the case.
Of course, a lawyer may seek to be released from an engagement by a client. Alternatively, the lawyer could reach an agreement with the client to cease acting on the matter. However, before seeking to be released from the retainer, a lawyer must consider the AML/CFT Act’s anti-“tipping off” provisions.
A SAR is a tool that financial institutions can use to monitor, report, and control nearly any type of suspicious activity. SARs can be used for a variety of purposes, but they are most commonly used to report potential money laundering and other illegal financial operations. Having knowledge in dealing with the client relationship after filing a SAR is very important to maintain proper SAR rules and regulations.