When is a DAML required?

A DAML (Defence Against Money Laundering) isn’t required every time you submit a SAR (suspicious activity report). It’s required only in specific circumstances and UKFIU guidance is clear about where that line sits.

In short, a DAML is required when continuing with a particular transaction could itself be a criminal offence and you need to rely on a statutory defence before acting.

Understanding that threshold makes it much easier to decide when a DAML is necessary and, just as importantly, when it’s not.

The core test for whether a DAML is required

According to UKFIU guidance, a DAML is required where all of the following conditions are met:

1. You know, believe or suspect that property is criminal property
2. There is a future activity you intend to carry out
3. That activity would fall within the principal money laundering offences
4. You have control over whether the activity goes ahead

If these conditions are present, proceeding without a defence risks committing a money laundering offence under Proceeds of Crime Act 2002 (POCA).

1. Suspicion must already exist

A DAML can only be requested where suspicion has already crystallised. UKFIU guidance is explicit that you cannot seek a DAML in these situations:

• You do not suspect the property is criminal
• To test whether funds are legitimate
• Where property will only become criminal after the activity takes place

The property must already meet the definition of criminal property at the point the DAML is submitted.

2. The activity must be future and specific

One of the most common reasons DAML requests fail is because the activity is not defined clearly enough.

UKFIU will only consider a DAML where the request relates to a future specified activity, also referred to as a prohibited act. That means:

• the activity has not yet happened;
• the activity is described clearly, without jargon;
• the value, timing and destination are set out; and
• the activity is not hypothetical or open-ended.

Requests to “act for the client”, “continue the relationship”, or “decide what to do with the funds” do not meet this test.

3. The activity must fall within POCA offences

For a DAML to be required, the activity must risk committing one or more of the principal money laundering offences.

UKFIU guidance makes clear that DAMLs apply only where the activity would fall within sections 327 to 329 of POCA, such as acquiring, using, possessing, concealing or arranging criminal property.

A DAML does not provide a defence to:

• breaches of the Money Laundering Regulations;
• tipping off offences; or
• fraud, bribery or other criminal offences.

If the risk is regulatory rather than criminal under POCA, a DAML is not the correct mechanism.

4. You must control the activity

A DAML is only relevant where you can actually stop the activity from happening. UKFIU guidance states that:

• the reporter must have control over whether the prohibited act takes place, and
• if the activity is outside the reporter’s control, a defence cannot apply.

This ensures that the reporter can genuinely comply with the notice and moratorium periods if required.

Common situations where a DAML is required

UKFIU guidance includes examples of activities that commonly require a DAML, provided suspicion exists. These include situations such as:

• transferring funds held on behalf of a client;
• completing a property transaction and distributing sale proceeds;
• releasing funds from an account;
• accepting or distributing rental income; or
• paying professional fees out of suspected criminal property.

The common factor is not the type of work but the fact that money or property is being dealt with after suspicion has formed.

When a DAML is not required

UKFIU guidance is equally clear about scenarios where a DAML is not appropriate. A DAML is not required where:

• you are only reporting suspicion for intelligence purposes;
• no prohibited act is pending;
• you are asking what action to take;
• you are seeking to complete due diligence;
• the activity is already covered by a statutory exemption; or
• the activity would not amount to a POCA offence.

Submitting a DAML in these circumstances can lead to delays and may result in the request being closed.

Why timing matters

A DAML must be submitted before the activity takes place. UKFIU cannot grant a defence retrospectively, and if the activity has already happened, the defence regime does not apply. Once submitted, the activity must not proceed during:

• the seven working day notice period, and
• any subsequent moratorium period following refusal.

Proceeding during these periods risks committing an offence.

Final thoughts

A DAML is required when suspicion has crystallised and a specific transaction is waiting to happen that could expose you to criminal liability.

UKFIU guidance is clear that DAMLs are not a safety net for uncertainty or a substitute for risk-based decision-making. They exist for a very particular moment, when stopping, disclosing and waiting is the only legally safe option.

Understanding when a DAML is required helps regulated professionals act decisively, protect themselves and avoid both unnecessary reporting and serious compliance failures.