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Filing a Suspicious Transaction Report (STR) – Victor Rizzo

10 Dec 2019 12:00 | Deleted user
The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
The FIAU Annual Report for 2018 reported that the number of Suspicious Transaction Reports by subject persons that year stood at 1679. This means that the number of reports more than doubled since 2017, when it was 778. A closer analysis reveals that credit institutions reported 724 (in 2017 they reported 398), while remote gaming reported 700 (in 2017 they reported 218). This means that 85% of total reports are originating from two sectors. Credit institutions remain in pole position of the list of subject persons that file STRs.

Filing a Suspicious Transaction Report can be quite a challenging task for a Money Laundering Reporting Officer (MLRO). Regulation 15 (3) of the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) states that a subject person shall file a report ‘as soon as is reasonably practicable, but not later than five working days from when the knowledge or suspicion first arose’.
The question that arises is: When does the five-day window start?
Let us consider this hypothetical case. A notary publishes a contract of sale of property. Six months later he notices that on the day of the contract, the seller had a court freezing order. Is the five-day period triggered on the date when Notary becomes aware of the freezing order – that is six months after publication of contract - or from the date of publication of the deed? To answer this question, I am making reference to a penalty applied by the FIAU on a subject person on 18th May 2018. The FIAU commented as follows:
‘The Company failed to submit a suspicious transaction report (STR) to the FIAU even though, on the basis of the information it held in its possession together with publicly information, it had reasonable grounds to suspect that the transactions and/or its clients may be linked to proceeds of crime, money laundering or the funding of terrorism’.
A fine was imposed by the FIAU.
The case clearly shows that publicly available information was seemingly ignored by the subject person. Such public information was sufficient to raise suspicion. This means that even when an internal report is not filed, the subject person would still be liable. In other words, the MLRO claiming that he/she was unable to lodge a report because no internal report was received is no defence.
Evidently, the subject person must have robust structures in place to be able to detect any signs of suspicious activity at the very early stages in order for a report to be filed within the regulatory time frame. A welcome initiative in the new FIAU Implementing Procedures is that the designated employee, in the absence of the MLRO, can now file an STR. The designated employee must be approved by the MLRO and can effectively take the role of a substitute MLRO. Consider a situation where a designated employee is not appointed, and an internal report is filed to the MLRO who happens to be on a two week vacation. Can the subject person safely argue that the five day window will only start after the return of the MLRO? This would hardly be the case. The new responsibility of a designated employee is intended to provide the necessary mechanism for subject persons to ensure that reports are filed in a timely manner.
Needless to say, the MLRO and the designated employee should consult each other in their leave planning.

Victor Rizzo is a co-founder and director of Inscope Limited, an AML-CFT software development company.

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