The Legal Framework

Suspicious activity reporting in the UK rests mainly on two pieces of legislation:

• The Proceeds of Crime Act 2002 (POCA), Part 7. This creates the principal money laundering offences and the reporting obligations for the regulated sector, including the failure to disclose offences in sections 330 to 332 and the tipping off offence in section 333A.
• The Terrorism Act 2000. This creates parallel obligations to report suspicions of terrorist financing, with its own disclosure and tipping off provisions.

The Money Laundering Regulations 2017 then require firms in scope to appoint a nominated officer and to have internal reporting procedures. The FCA’s rules in SYSC 6.3 require most regulated firms to appoint an MLRO, and in practice the MLRO is almost always also the nominated officer. Our guide to the Money Laundering Regulations 2017 covers the wider framework.

Reports go to the UK Financial Intelligence Unit within the National Crime Agency, usually through its online reporting portal. The NCA publishes guidance on submitting reports and on the glossary codes firms should use.

How Reporting Works Inside a Firm

The process has two stages: an internal report from staff to the nominated officer, then an external report from the nominated officer to the NCA where the threshold is met.

• Staff identify a concern. An employee who knows or suspects, or has reasonable grounds to know or suspect, that someone is engaged in money laundering must report it. In the regulated sector, that duty is met by reporting internally to the nominated officer.
• The nominated officer receives the internal report. They acknowledge it, gather information and consider it against everything the firm knows about the customer.
• The nominated officer decides. If they know or suspect, or have reasonable grounds to know or suspect, money laundering, they must report to the NCA as soon as practicable. If not, they record why.
• The firm manages the relationship. Whatever the decision, the firm considers whether to continue the relationship, apply extra monitoring, or seek a defence before carrying out a transaction.
• Everything is recorded. The internal report, the investigation, the decision and the reasons are kept securely, separately from the customer file.

The “reasonable grounds” element matters. In the regulated sector, the test is partly objective: a nominated officer can commit an offence by failing to report something they should have recognised as suspicious, even if they didn’t actually suspect it. That’s one reason the role needs genuine expertise.

The Nominated Officer’s Duties

The nominated officer commits a separate offence under sections 331 and 332 of POCA if they fail to make a required disclosure. The role therefore carries personal criminal exposure as well as the Senior Manager accountability that comes with SMF17. Our guide What Is an MLRO? sets out the full role.

Defence Against Money Laundering (DAML) Requests

Sometimes a firm needs to do something, such as process a payment, release funds or carry out a customer instruction, that could amount to a money laundering offence if the property is criminal. In that case, the nominated officer can make an authorised disclosure to the NCA and ask for a defence against money laundering, often referred to as a DAML, before the firm proceeds.

• The notice period. Once a DAML request is made, the NCA has seven working days to respond. If it refuses consent within that period, or doesn’t respond, different consequences follow.
• Deemed consent. If the NCA doesn’t refuse within the seven working days, the firm is treated as having a defence and can proceed.
• The moratorium. If the NCA refuses within the notice period, a moratorium of 31 calendar days begins, during which the firm should not proceed. Law enforcement uses that time to consider action such as restraining the funds. The moratorium can be extended by court order, up to a statutory maximum.

DAML requests need to be clear about what the firm wants to do, the property involved and why it is suspected. Poorly drafted requests cause delays. Firms also need to manage the customer relationship during the notice and moratorium periods without tipping off, which can be one of the hardest practical aspects of the role. The NCA publishes guidance on DAML requests, and the JMLSG guidance covers the practical steps in detail.

Legislation in recent years, including the Economic Crime and Corporate Transparency Act 2023, has introduced some exemptions designed to reduce low-value and defensive reporting in specific circumstances. Firms should check the current position with their advisers and in the latest JMLSG and NCA guidance rather than assume older practice still applies.

Tipping Off

Section 333A of POCA makes it an offence for a person in the regulated sector to disclose that a SAR has been made, or that an investigation is being contemplated or carried out, where the disclosure is likely to prejudice an investigation. There is a similar offence under the Terrorism Act. There are limited exceptions, for example for disclosures within the same undertaking or group, and to supervisors.

In practice, tipping off risk arises in everyday situations:

Good firms train front-line staff on what they can and can’t say, keep SAR records restricted, and give staff approved wording for difficult conversations. The MLRO is usually the person who signs off communications with customers who are subject to a report.

What Makes a Good SAR

The value of a SAR to law enforcement depends on its quality. The NCA has repeatedly said that many reports lack the detail it needs. A good report:

• Explains the suspicion clearly. What the firm saw, why it is unusual for this customer, and why it suggests criminal property.
• Identifies the parties. Full details of the subject and any associated persons, accounts, addresses and identifiers the firm holds.
• Describes the activity. Dates, amounts, accounts, counterparties and the flow of funds, in a logical order.
• Uses the right codes. The NCA’s glossary codes help it route reports to the right teams.
• Avoids jargon. Internal abbreviations and product names mean nothing to an investigator.
• Is timely. Reports should be made as soon as practicable after the suspicion forms.

Record-Keeping and Governance

Firms should keep records of every internal report, the nominated officer’s enquiries, the decision and the reasons, and any SAR or DAML request made. These records are kept separately from the customer file to reduce tipping off risk and are retained for the periods required by the Money Laundering Regulations. Management information on internal reports, SARs, decision times and themes should go to senior management and the board, usually through the annual MLRO report and regular updates.

Patterns in internal reports also feed the firm’s risk assessment. A cluster of reports about a product, channel or customer type is a signal that controls elsewhere may need strengthening. Our guides to the business-wide risk assessment and transaction monitoring cover how those links work.

Cover and Succession for the Nominated Officer

Internal reports don’t wait for the nominated officer to be in the office. Firms need a clear arrangement for absences, especially where the MLRO is fractional or part-time. Most firms appoint a deputy who is authorised to receive internal reports and, where the firm’s procedures allow, make decisions in the nominated officer’s absence, with those decisions reviewed on the MLRO’s return. Our guide to whether you need a deputy MLRO covers how to set this up.

When the MLRO leaves, the firm must make sure reports keep being handled. Our guide to what to do when your MLRO resigns sets out the first steps, and interim MLRO cover can bridge the gap while a permanent successor is approved.

What This Means When You Hire

Because the nominated officer role carries personal criminal exposure and calls for fine judgement, it is one of the clearest tests of an MLRO candidate’s experience. When we recruit MLROs, we look for evidence of real reporting decisions, both to report and not to report, with clear reasoning; experience of DAML requests and the customer management that goes with them; and an understanding of tipping off in practice. Our page on MLRO recruitment (SMF17) explains how we run those searches, and our guide to MLRO interview questions includes questions that test SAR judgement. For smaller firms where one person holds both compliance oversight and the MLRO role, see our page on combined compliance officer and MLRO recruitment.

Frequently Asked Questions

Is the nominated officer the same as the MLRO?

In most firms, yes. The MLRO is the FCA role (SMF17 under the SMCR) and the nominated officer is the role under POCA and the Money Laundering Regulations. Firms usually give both to the same person.

Can staff report directly to the NCA?

Staff in the regulated sector normally meet their obligation by reporting internally to the nominated officer, who decides whether to report externally.

Do we have to tell the customer if we make a SAR?

No. Telling the customer, or anyone else, in a way likely to prejudice an investigation could be a tipping off offence.

Can we close an account after making a SAR?

Often, yes, but timing and communication need care to avoid tipping off, and law enforcement may sometimes ask a firm to keep an account open. Take advice and follow the NCA’s guidance.

Who covers internal reports when the MLRO is away?

A deputy or alternate authorised under the firm’s procedures. Their decisions should be recorded and reviewed by the MLRO.