7.01  In October 2015, the UK government produced the first ‘UK National Risk Assessment of Money Laundering and Terrorist Financing’ (NRA).¹ It cites the European Commission’s 2013 impact assessment of the EU anti-money laundering/counter terrorist financing legislative framework, which indicates that ‘global criminal proceeds potentially [amount] to some 3.6% of GDP; around US$2.1 trillion in 2009.^[1]’² This is said to be equivalent to approximately 2.7 per cent of global GDP or US$1.6 trillion in 2009,^[2]3 ‘the social and economic costs of which are estimated to be £24 billion a year.^[3]’⁴

7.02  Such figures cannot be disregarded but, as stated by the House of Lords European Union Committee in July 2009,⁵ estimates need to be treated with caution. That Committee cited an estimate made by HM Treasury in 2007 that the most serious forms of organized crime alone generated ‘an illicit turnover of some £15 billion a (p. 133) year, leading to money laundering through the regulated sector—banks, insurers, accountants, lawyers and the like—of £10 billion a year; and also generated criminal “capital formation”—that is, assets invested in a possible seizable form—of about £5 billion, £3 billion of which was exported overseas.^[2]’⁶

7.03  The eleven million documents that were reportedly held by the Panama-based law firm Mossack Fonseca, which had been passed to German newspaper Suddeutsche Zeitung in early 2016,⁷ provide a telling indication of the problems encountered by government and law enforcement agencies when seeking (properly) to pierce ‘cloaks’ of secrecy around certain financial transactions, legal entities, and trusts.

7.04  Although since 1986 the UK has enacted anti-money laundering rules of increasing reach and intensity, the NRA has candidly acknowledged a number of shortcomings and weaknesses that include the following:

1. (1)  ‘significant intelligence gaps’, in particular in relation to ‘high-end’ money laundering by which the proceeds of major frauds and serious corruption are ‘often held in bank accounts, real estate or other investments, rather than in cash’;

2. (2)  the ‘intelligence picture’ in areas such as high value dealers, gambling, and new payment methods, ‘is mixed’;

3. (3)  the ‘collective understanding’ of law enforcement agencies, supervisors, and the private sector in these areas is limited;

4. (4)  the effectiveness of the supervisory regime in the UK is inconsistent;

5. (5)  ‘there is room for improvement across the board, including in understanding and applying a risk-based approach to supervision and in providing a credible deterrent’; and

6. (6)  data ‘is not yet shared between supervisors freely or frequently enough, which exposes some supervised sectors where there are overlaps in supervision’.⁸

For further useful data, see the ‘Anti-money laundering and counter terrorist finance supervision report 2013–14’.⁹

7.05  The term ‘money laundering’ is a misnomer because all forms of property, not just ‘money’ derived from criminal conduct, are subject to UK anti-‘money’ laundering legislation. Much of that legislation is rooted in international standards, (p. 134) resolutions, and agreements, overviews of which are provided in Chapters 2, 3, 4, and 5 of this work. Given the level of cross-border actions (not least in trade) the UK has little option but to cooperate internationally in addressing money laundering and to legislate accordingly.

7.06  Two techniques have been devised to combat money laundering. The first is an administrative system for reporting financial transactions in which specified persons must make disclosures in prescribed circumstances and in the prescribed manner. This system, sometimes described as a ‘prescriptive approach’, has been in use in several jurisdictions.¹⁰ The second technique—and the one favoured by law makers in the UK—is a suspicion-based system of reporting (sometimes styled a ‘risk-based approach’). The latter technique calls for careful judgment by those who must decide, on a case-by-case basis, the steps that need to be taken with respect to a particular transaction or activity, but it does have the advantage of being more flexible than a prescriptive scheme.

7.07  The principal UK money laundering offences appear in Part 7 of the Proceeds of Crime Act 2002 (POCA 2002). Part 7 applies where the money laundering activity occurred on or after 24 February 2003, notwithstanding that the predicate offence, which generated the ‘criminal property’, was committed before that date. The laundering of ‘terrorist property’¹¹ in connection with acts of ‘terrorism’¹² is the subject of money laundering offences created under the Terrorism Act 2000 (TA 2000) (as amended; see later).¹³ The difference in the wording of the definition of ‘criminal property’ (POCA 2002) and ‘terrorist property’ (TA 2000) is readily explained by the nature of terrorist activities. However, there could be cases where the same conduct constitutes ‘criminal conduct’ for the purposes of POCA 2002¹⁴ and ‘terrorism’ for the purposes of TA 2000; and, indeed, the same property might be both ‘criminal property’ (POCA 2002) and ‘terrorist property’ (TA 2000). Prosecutors will therefore have to decide carefully which Act they wish to use when dealing with allegations of money laundering.

7.08  Acts of money laundering that occurred before the aforementioned commencement dates will continue to be dealt with under the relevant pre-existing legislation. (p. 135) The Serious Organised Crime and Police Act 2005 (SOCPA 2005) made a number of important amendments to Part 7 of POCA 2002, the majority of which came into force on 1 July 2005. Minor amendments have been made to Part 7 of POCA 2002 by the Serious Crime Act 2007 and by the Serious Crime Act 2015. Some of those amendments are designed to relax some of the rules enacted by POCA 2002, albeit to a very limited extent.¹⁵

7.09  Following the decision of the House of Lords¹⁶ in R v Cuthbertson,¹⁷ which exposed the limited circumstances in which an offender’s proceeds of crimes could be forfeited, a Committee recommended (in 1984)¹⁸ the enactment of a general power of the Crown Court to confiscate the proceeds of drug trafficking received by the defendant.

7.10  Parliament therefore enacted the Drug Trafficking Offences Act 1986 (DTOA 1986)¹⁹ which, apart from creating a scheme for recovering the proceeds of crime following an offender’s conviction for a drug trafficking offence, created the UK’s first money laundering offence, namely, section 24 of the DTOA 1986 (‘Assisting another to retain the benefit of drug trafficking’), which came into force on 30 September 1986.²⁰ At that time, the offence extended only to England and Wales. A person who enabled (facilitated) a drug trafficker to retain or to control his or her proceeds of drug trafficking, knowing or suspecting that person to be a drug trafficker, committed the section 24 offence. The burden was placed (reversed)²¹ on the accused to prove (on a balance of probabilities) that he or she did not know or suspect (a) the property to be the proceeds of drug trafficking, or (b) that the arrangement would have the effect of enabling the trafficker to retain or to control the property. It was also a defence for the accused to prove that he or she intended to disclose to a police officer a suspicion or belief (but failed to do so on reasonable grounds) that any funds or investments were derived from (or used) in connection (p. 136) with drug trafficking: section 24(4). The offence was punishable on indictment (Crown Court) with a maximum of fourteen years’ imprisonment (or six months if convicted in a magistrates’ court).

7.11  By Article 3.1 of the 1988 United Nations Convention Against Illicit Traffic In Narcotic Drugs and Psychotropic Substances,²² each state party was required to create criminal offences (when committed intentionally) in respect of (among other things):

1. (a)  the conversion or transfer of property, knowing that such property is derived from (in effect) drug trafficking (ie contrary to any offence established in accordance with the UN Conventions of 1961,²³ 1971,²⁴ and 1988²⁵);

2. (b)  the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from an offence or offences (as stated at (a)) or from an act of participation in such an offence or offences;

3. (c)  the acquisition, possession, or use of property, knowing, at the time of receipt, that such property was derived from an offence or offences (as stated at (a)) or from an act of participation in such offence or offences.

7.12  The 1988 Convention was transposed into UK law by the Criminal Justice (International Cooperation) Act 1990 (CJ(IC)A), which enabled the UK to ratify the 1988 Convention. Article 3.1 was transposed as section 14 of the 1990 Act (in force, from 1 July 1991).²⁶

1. (a)  Section 14(1) CJ(IC)A 1990 made it an offence for a person to conceal or to disguise his or her own proceeds of drug trafficking for the purpose of avoiding prosecution for a drug trafficking offence or the making or enforcement in his case of a confiscation order.

2. (b)  Section 14(2) made it an offence for a person to conceal or to disguise any property for the purpose of assisting any person to avoid prosecution for a drug trafficking offence or the making or enforcement of a confiscation order, knowing or having reasonable grounds to suspect that the property is, or represents, another person’s proceeds of drug trafficking.

3. (c)  By section 14(3), it was an offence for a person to acquire any property knowing or having reasonable grounds to suspect that the property is, or represents, another person’s proceeds of drug trafficking) ‘for no, or for inadequate consideration’.²⁷

(p. 137) Note that ‘reasonable grounds to suspect’ was sufficient for the purposes of section 14(2) and (3) of CJ(IC)A 1990 and thus exceeded the requirements of the 1988 UN Convention.

7.13  Two instruments, namely, the 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, and the First Money Laundering Directive (91/308/EEC), required Member States to introduce anti-money laundering measures in respect of a range of crimes (and not just drug trafficking).

7.14  Thus, Article 6 of the EC Convention required each party to adopt ‘such legislative and other measures as may be necessary to establish as offences under its domestic law, when committed intentionally’:

7.15  By virtue of the First Money Laundering Directive, the UK was required to ensure that money laundering is ‘prohibited’ (Article 2); that financial institutions examine (with special attention) transactions which they regard as particularly likely to be related to money laundering (Article 5) and report facts which ‘might be an indication of money laundering’ (Article 6); and that measures extend in whole or in part to ‘professions’ which are ‘particularly likely to be used for money laundering purposes’ (Article 12). Note that it was not a requirement of that Directive that money laundering should be criminalized—merely prohibited. However, by a statement annexed to the Directive, all Member States agreed to a commitment that money laundering would be made a criminal offence—at least in respect of drug trafficking offences.

7.16  The First Money Laundering Directive was transposed into UK law by the Money Laundering Regulations 1993 (SI 1993/1933).²⁹ The UK also added offences to the DTOA 1986, namely:

1. (a)  ‘acquiring etc. property derived from drug trafficking’ (knowing that any property is, or represents, another person’s proceeds of drug trafficking) (p. 138) (section 23A).³⁰ [Note that there was no overlap with section 14(3) of CJ(IC)A 1990 because this subsection was repealed by the CJA 1993 (Schedule6)];

2. (b)  ‘failure to disclose knowledge or suspicion of money laundering’ (section 26B);³¹ and

3. (c)  ‘tipping off’ (section 26C).³²

Note that section 23A of the DTOA 1986 (in force 15 February 1994) was narrower in scope than section 14(3) of the CJ(IC)A 1990 in that section 23A required proof of actual knowledge.

7.17  Similar money laundering provisions in respect of offences other than drug-trafficking were created by the Criminal Justice Act 1993 (CJA), which amended the Criminal Justice Act 1988 (which had enacted a regime for confiscating the proceeds of non-drug trafficking offences). These were the offences of:

1. (a)  assisting another to retain the benefit of criminal conduct: section 93A (CJA 1988);³³

2. (b)  acquisition, possession or use of proceeds of criminal conduct: section 93B (Criminal Justice Act 1988);³⁴

3. (c)  concealing or transferring proceeds of criminal conduct: section 93C, (Criminal Justice Act 1988);³⁵ and

4. (d)  tipping off: section 93D (Criminal Justice Act 1988).³⁶

7.18  Parliament decided to repeal most of the provisions of DTOA 1986 and replaced it with the Drug Trafficking Act 1994. The 1994 Act re-enacted the following money laundering offences:

1. (a)  concealing or transferring the defendant’s own proceeds of drug trafficking: section 49(1);³⁷(p. 139)

2. (b)  concealing or transferring another person’s proceeds of drug trafficking (knowing or having reasonable grounds to suspect that any property is, or represents, another person’s proceeds of drug trafficking): section 49(2);

3. (c)  assisting another person to retain the benefit of drug trafficking (knowing or suspecting that the other person was carrying on or had carried on drug trafficking or had benefited from drug trafficking): section 50;³⁸

4. (d)  acquisition, possession or use of proceeds of drug trafficking (knowing that any property is, or represents, another person’s proceeds of drug trafficking): section 51;³⁹

5. (e)  failure to disclose knowledge or suspicion of money laundering: section 52;⁴⁰

6. (f)  tipping off: section 53.⁴¹

7.19  Given the piecemeal approach just described, Parliament enacted Part 7 of the Proceeds of Crime Act 2002 (POCA 2002), which has codified, and (as amended), extended the pre-existing statutory measures.

7.20  POCA 2002 creates three offences that are correctly described (it is submitted) as ‘money laundering offences’,⁴² namely:

1. (1)  concealing, disguising, converting, transferring, removing a person’s ‘criminal property’: section 327;

2. (2)  entering into or becoming concerned in an arrangement that facilitates the acquisition, retention, use, or control of another person’s ‘criminal property’: section 328;

3. (3)  acquisition, use, and possession of ‘criminal property’: section 329.

7.21  Seven other offences are ancillary to the three principal money laundering offences, namely:

1. (1)  failing to disclose that another person is engaged in ‘money laundering’: section 330;(p. 140)

2. (2)  a ‘nominated officer’ in the ‘regulated sector’ (person nominated to receive disclosures about money laundering) failing to disclose a required disclosure to a person who is authorized under POCA 2002 to receive it as soon as practicable after the information came to him or her): section 331;

3. (3)  a ‘nominated officer’ (not in the ‘regulated sector’) failing to make a required disclosure as soon as practicable after the information came to him or her: section 332;

4. (4)  ‘tipping off’ information that came to a person in the course of business (in the ‘regulated sector’) such that the disclosure is likely to prejudice an investigation that may be conducted: section 333A(1);

5. (5)  ‘tipping off’ by a person in the regulated sector that an investigation into a Part 7 POCA offence is being contemplated or is being carried out: section 333A(3);

6. (6)  a ‘nominated officer’ giving consent for an act to be done (a ‘prohibited act’) contrary to section 327, 328, or 329 of POCA 2002, without complying with one of the conditions set out in section 336 (for example without the consent being given by the Director General of the National Crime Agency (NCA)): section 336;

7. (7)  a person making a disclosure under section 330, 331, 332, or an ‘authorised disclosure’ (see section 338) other than by way of the prescribed form and manner required by an Order of the Secretary of State: section 339(1A), (1B).

7.22  Note that it is also an offence contrary to section 342 of POCA 2002 for a person to prejudice a ‘money laundering investigation’ which is being or is about to be conducted, if either (a) he or she makes a disclosure which is likely to prejudice the investigation, or (b) he or she falsifies, conceals, destroys, or otherwise disposes of, or causes or permits the falsification, concealment, destruction, or disposal of, documents which are relevant to the investigation.

7.23  Money laundering relating to ‘terrorist property’ is the subject of rules enacted under Part III of TA 2000.⁴³ TA 2000 has been amended by the Anti-Terrorism, Crime and Security Act 2001, which inserted in TA 2000 a specific offence of ‘failure to disclose’ (section 21A of TA 2000) knowledge or suspicion (or defendant has reasonable grounds for knowing or suspecting) that another person has committed (or has attempted to commit) an offence under any of sections 15 to 18 of TA 2000. The section 21A offence applies to a business in the ‘regulated sector’.

7.24  TA 2000 has also been amended by the Terrorism Act 2006, and the Counter-Terrorism Act 2008,⁴⁴ as well as by the Terrorism Act 2000 and Proceeds of Crime Act 2002 (Amendment) Regulations 2007,⁴⁵ which implements, in part, Directive (p. 141) 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing. See also the Terrorism Act 2000 (Business in the Regulated Sector and Supervisory Authorities) Order 2007.⁴⁶ Readers ought to be aware of amendments likely to be made to the Terrorism Act 2000 as indicated in the Criminal Finances Bill (2016–2017).

7.25  The disclosure of information to a law enforcement agency (typically, and currently, the NCA) regarding known or suspected money laundering activities is carried out at four levels: (1) voluntary disclosure; (2) compulsory disclosure by those carrying on business in the ‘regulated sector’;⁴⁷ (3) compulsory disclosure by those working outside the regulated sector, but who operate an anti-money laundering scheme with a ‘nominated officer’; and (4) ‘authorised disclosures’⁴⁸ by those who would otherwise commit a money laundering offence contrary to sections 327 to 329 of POCA 2002.

7.26  Between 1991 and 2005, the EC/EU adopted three Money Laundering Directives; this was in 1991,⁴⁹ 2001,⁵⁰ and 2005.⁵¹ The UK has transposed the first three Directives, each being the subject of a revised set of Regulations (as amended), namely, SI 1993/1933,⁵² SI 2003/3075,⁵³ and SI 2007/2157.⁵⁴

7.27  On 20 May 2015, the European Parliament and Council adopted a Fourth Money Laundering Directive,⁵⁵ to be transposed into national law no later than June 2017. The Third Directive, and its Implementation Directive (2006/70/EEC), will be revoked from 26 June 2017. The UK government, proceeding on the basis that the Directive will have to be implemented in this country, has said there will be a three-month consultation period in 2016 before the Fourth Directive is implemented here.⁵⁶

7.28  On 29 September 2014, the UK signed the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism (the Warsaw Convention 2005).⁵⁷ The Warsaw (p. 142) Convention does not revoke the 1990 Convention and both will coexist. The UK ratified the Warsaw Convention on 27 April 2015, and it came into force there on 1 August 2015.⁵⁸

7.29  There is much in the Convention that replicates the provisions of the 1990 Convention, and the UK is of the view that ‘no new legislation is required’ to implement it.⁵⁹ It will consider itself bound ‘by at least the provisions corresponding to the provisions of the 1990 Convention’.⁶⁰ However, it has reserved the right not to apply (in whole) the provisions of Article 47 (international cooperation for postponement of suspicious transactions). It has also made declarations on ratification that include applying paragraph 4 of Article 3 (confiscation measures) in accordance with its domestic legislation, as well as making a declaration that paragraph 2 of Article 24 (execution of confiscation orders) applies subject to the UK’s constitutional principles and basic concepts of its legal system, and that it will only be bound by the findings of the requesting party as stated in a record of conviction or in a given judicial decision of the requesting party.⁶¹

7.30  Two of the three ‘failing to disclose’ offences (ie under sections 330 and 331 of POCA 2002) impose a mandatory obligation on the court to consider whether the accused ‘followed any relevant guidance … (a) issued by a supervisory authority or any other appropriate body, (b) approved by the Treasury, and (c) published in a manner … to bring the guidance to the attention of persons likely to be affected by it’.⁶²

7.31  An ‘appropriate body’ is one which regulates or which is representative of a trade, profession, business, or employment (see, for example, sections 330(13) and 331(9)).

7.32  A large number of bodies have published guidance, but only the guidance issued by the Joint Money Laundering Steering Group (JMLSG) (latest version November 2014) has been approved by the Treasury.⁶³ That guidance states that its scope is to set out ‘what is expected of firms and their staff in relation to the prevention of (p. 143) money laundering and terrorist financing, but allows them some discretion as to how they apply the requirements of the UK AML/CTF⁶⁴ regime in the particular circumstances of the firm, and its products, services, transactions and customers’.⁶⁵

7.33  The reality is (it is submitted) that once an accused asserts that he or she followed the guidance that had been given to him or her, the court cannot disregard that guidance. Similarly, a court is unlikely to disregard evidence that the defendant acted on legal advice but it is not a defence in itself and, unless the defendant waives legal professional privilege, such evidence would usually carry little weight.

7.34  Other offences afford the alleged offender a defence that he or she had a ‘reasonable excuse’ for not making an ‘authorised disclosure’ (sections 327 to 329), or for not making ‘the required disclosure’ (section 332; and see Part III of TA 2000). It is submitted that when that defence is raised, the court may take into account the extent to which the accused followed guidance issued by a professional body or supervisory authority. It must be stressed that guidance is no substitute for understanding and complying with the statutory obligations that exist under Part 7 of POCA 2002 and its related legislation (and note the observations made in the preceding paragraph).

7.35  Businesses that operate within the ‘regulated sector’ are specified in Schedule 9 to POCA 2002 (mirrored in Schedule 3A to TA 2000)⁶⁶ as substituted⁶⁷ (and amended).

7.36  The expression ‘regulated sector’ is slightly confusing because the Schedules specify regulated businesses and ‘excluded activities’ (businesses that are not in the regulated sector). The Money Laundering Regulations 2007 (as amended) do not refer to the ‘regulated sector’ at all: they specify the ‘relevant persons’ to whom the regulations apply and those persons who are excluded from them.⁶⁸ Some businesses (like banks) will always occupy the ‘regulated sector’, but others (for example lawyers in private practice) step in and out of it, depending on the activity undertaken.

7.37  It follows that statutory obligations are functional rather than institutional—that is to say obligations are triggered by the activity undertaken (or contemplated) and (p. 144) not by a description of the work ordinarily undertaken by a person or organization. Thus, a solicitor might be operating within the ‘regulated sector’ when advising a particular client about a commercial transaction, but be outside that sector when advising the same client about a criminal charge.⁶⁹

7.38  ‘Money laundering’ has a statutory meaning, namely, acts done (with the requisite mental element) that constitute an offence contrary to section 327 (concealing etc.), 328 (entering into arrangements), or 329 (acquisition or use), or attempting, conspiring, inciting, aiding, abetting, counselling, or procuring, the commission of such an offence (section 340(11)).⁷⁰

7.39  The definition of ‘money laundering’ extends to acts performed abroad, provided that those acts would constitute one of the aforementioned offences if the same acts had been performed in the UK.⁷¹

7.40  The offences of ‘failure to disclose: regulated sector’ (section 330); ‘failure to disclose: nominated officers in the regulated sector’ (section 331); ‘failure to disclose: other nominated officers’ (section 332), ‘tipping off’ (section 333A),⁷² the improper giving of consent for an act to be done (section 336), disclosures not made in the proper form or manner (section 339), and ‘prejudicing an investigation’ (section 342), are popularly styled ‘money-laundering offences’ but they do not constitute ‘money laundering’ for the purposes of chapter 1 to Part 7 of POCA 2002 (see section 340(11)).

7.41  The expression ‘money laundering offence’ is found in several places in POCA 2002 (other than Part 7),⁷³ and its meaning is consistently applied within the definition of ‘money laundering’ in section 340(11) of POCA 2002.⁷⁴ However, (p. 145) the only offences in Part 7 that are ‘money laundering offences’ properly so-called, are those in sections 327 to 329 (both in their substantive and inchoate⁷⁵ forms).

7.42  Section 340(2) of POCA 2002 defines ‘criminal conduct’ as:

7.43  There is no dual-criminality ingredient, so that conduct performed abroad, and which is legal there, but which would be unlawful somewhere in the UK, is sufficient to constitute ‘criminal conduct’. However, statutory provision has been made to exclude a very limited range of acts that are lawful elsewhere but not in the UK.⁷⁶ This provision is explained later in this chapter.

7.44  By section 340(4) of POCA 2002, it is ‘immaterial, (a) who carried out the conduct, (b) who benefited from it, (c) whether the conduct occurred before or after the passing of [POCA]’.

7.45  The concept of ‘criminal property’ is often misunderstood. There is a tendency to think of it as being merely property obtained from crime (‘benefit’ from criminal conduct), but the actual definition includes a mental element that must be proved on the part of the alleged offender. Section 340(3) of POCA 2002 defines property as ‘criminal property’ if ‘(a) it constitutes a person’s benefit from criminal conduct or it represents such a benefit (in whole or in part and whether directly or indirectly),⁷⁷ and (b) the alleged offender knows or suspects that it constitutes or represents such a benefit’.⁷⁸ It is submitted that reference to the ‘alleged offender’ in section 340(3)(b) is plainly a reference to the person who is accused of a Part 7 offence.

(p. 146) 7.46  It is therefore not enough to show that D acquired a bicycle that was stolen. Although the bicycle is a ‘benefit’ in the hands of the thief, it is not ‘criminal property’ in the hands of the recipient (alleged launderer) unless he or she knew or suspected the bicycle to have been stolen (ie knew or suspected that it was a ‘benefit’ obtained by the thief  ).

7.47  The word ‘benefit’ has a technical meaning (discussed at paras 7.60 et seq). It includes not only property obtained as a result of (or in connection with) criminal conduct, but also the obtaining of a ‘pecuniary advantage’. The latter has particular relevance in relation to the commission of revenue offences. It was held in R v K(I)⁷⁹ that where D fails to pay tax on undeclared income or takings on a business (the tax evaded being a pecuniary advantage), the undeclared sum/takings represents ‘in part’ the benefit obtained by D within the meaning of section 340(3)(a). Thus, the ‘criminal property’ as defined by section 340 is the entirety of the undeclared turnover and not merely the tax due because the benefit is represented in part by that sum: see R v William and William (at para 27).⁸⁰

7.48  ‘Criminal property’ applies to property anywhere in the world and includes ‘(a) money, (b) all forms of property, real or personal, heritable or moveable, (c) things in action and other intangible or incorporeal property’ (section 340(9) of POCA 2002).

7.49  Rules that apply in relation to property are set out in section 340(10). The most important rules are (i) that ‘property is obtained by a person if he obtains an interest in it’, and (ii) that references to an interest in relation to property other than land, include references to a right (including a right to possession).

7.50  It was held in R v W and C,⁸¹ that in order to establish guilt under section 327 or 328 of POCA 2002, the prosecution had to prove, among other things, at least the type of criminal conduct that had generated the alleged criminal property: it was not sufficient to show that the circumstances were such that the property could have had no lawful origin. However, in R v W and C, the decision in R v Craig⁸² was not cited. R v W and C was considered in R v Anwoir ⁸³ but not followed in R v Gillies.⁸⁴ The current position is that, for the purposes of the money laundering offences under sections 327 to 329 of POCA 2002, the prosecution is not required to prove the precise crime that generated the proceeds.

(p. 147) 7.51  There are two ways in which it can be proved that property is derived from crime (see R v Anwoir, R v F,⁸⁵ R v Kuchhadia⁸⁶):⁸⁷

1. (a)  by showing that the property was derived from criminal conduct of a specific kind;

2. (b)  by evidence of the circumstances in which the property was handled and which gives rise to the irresistible inference that it could only be derived from crime.

However, an offence that is merely described as ‘tax evasion’ may not be sufficiently precise: consider R v Anwar,⁸⁸ and see NCA v Wong [2016] EWHC 142 (QB).

7.52  It is a prerequisite of the three money laundering offences created by sections 327 to 329 of POCA 2002 that the property should be ‘criminal property’ at the moment that the alleged money laundering offence was committed: see R v GH (UK Supreme Court).⁸⁹

7.53  The above principle was established in R v L, G, Q and M,⁹⁰ (also known as Loizou and others) in the context of section 327(1) of POCA 2002. The decision was applied in Kensington International Ltd v Republic of Congo (formerly Peoples Republic of Congo) (Vitol Services Ltd, Third Party),⁹¹ and R v Akhtar.⁹²

7.54  To illustrate the principle, Clarke LJ said in L, G, Q and M:⁹³

7.55  Although Hughes J (as he then was) would have received ‘criminal property’, namely the cash, he would not have done anything that amounted to concealing it, or disguising it, etc. Section 327(1) does not create an offence of receiving ‘criminal property’ but section 329 does make it an offence to acquire criminal property, or to have possession of it, and the defence of ‘adequate consideration’ in section 329(1)(c) can hardly be said to be satisfied if the cash was obtained in exchange for a stolen car.

7.56  Would Hughes J have committed an offence contrary to section 327 by transferring the car to Clarke LJ? Professor David Ormerod, in his commentary to that case, implies that the answer is ‘yes’:⁹⁴

7.57  A mere intention to use property as an instrument of crime does not render it ‘criminal property’ for the purposes of the money laundering provisions in Part 7 of POCA 2002 (consider R v L, G, Q and M (above)); and see R v Gillies,⁹⁵ R v Geary (Michael).⁹⁶ This is because ‘criminal property’ flows from ‘criminal conduct’, for example, drug trafficking.

7.58  Property does not become ‘criminal property’ in a case where a crime is contemplated but not yet carried out (even partially): see Kensington International v Vitol (see para 7.53) where the question arose whether, by giving a bribe, a person necessarily enters into an arrangement, which he knows facilitates the acquisition of criminal property by the recipient, contrary to section 328 of POCA 2002, on the grounds that the bribe, once received, constitutes (p. 149) the latter’s benefit from criminal conduct. The Court of Appeal held that the answer is in the negative if:

7.59  It is respectfully submitted that the reasoning of the Court is correct. If A uses legitimately acquired income to buy a car from B (a car that A knows B has stolen), then the receipt of the money by B represents a benefit in B’s hands (and thus it is ‘criminal property’ in B’s hands). However, at the moment that A agreed to buy the car from B, the money was not criminal property in A’s hands.

7.60  The word ‘benefit’ is broadly defined by POCA 2002⁹⁷ and includes not only the property that the offender obtained as a result of or in connection with the offence, but also any ‘pecuniary advantage’ that he or she obtained from it (for example the value of tax or duty evaded, or the value of a debt deferred).⁹⁸ It is immaterial who carried out the criminal conduct, or who benefited from it, or whether the criminal conduct occurred before or after POCA 2002 came into force.

7.61  The concept of ‘benefit’ applies to (a) the money laundering provisions, and (b) cases where a court is considering making a confiscation order (in personam) against a person convicted of a criminal offence and who has ‘benefited’ from his or her criminal conduct.⁹⁹ The definition of ‘benefit’ therefore has a consistent meaning under POCA 2002.

7.62  The concept of ‘benefit’ is extremely complex, and it continues to be the subject of developing case law. Accordingly, only an outline of the relevant principles relating to the meaning of ‘benefit’ can be given here:

1. (a)  Benefit does not mean ‘profit’. The court looks to what had been ‘obtained’: it does not carry out an accountancy exercise to determine personal enrichment (p. 150) based on the profit made by the offender after deducting expenses: see Smith,¹⁰⁰ Banks,¹⁰¹ Comiskey,¹⁰² McDonald,¹⁰³ R v Aujla,¹⁰⁴ R v Chahal,¹⁰⁵ and R v Harvey (Supreme Court, UK).¹⁰⁶

2. (b)  Benefit must be obtained by the offender but it need not be retained by him/her. The focus of the court’s inquiry is on what the defendant himself has obtained: see the trilogy of decisions of the House of Lords in R v May,¹⁰⁷ R v Jennings,¹⁰⁸ and R v Green.¹⁰⁹ Those cases have provided an invaluable bedrock upon which a coherent set of principles is developing, notably, the cases of Allpress,¹¹⁰ Mitchell,¹¹¹ Seager,¹¹² Briggs-Price,¹¹³ Sivaraman,¹¹⁴ White and others,¹¹⁵ More,¹¹⁶ Warwick,¹¹⁷ R v Ahmad and Fields,¹¹⁸ and R v Harvey.¹¹⁹ In R v May, the House of Lords stated six conclusions of which the sixth is perhaps the most significant (judgment, paragraphs 48(1)–(6)):

   • 1. (1)  The legislation is intended to deprive defendants of the benefit they have gained from relevant criminal conduct, whether or not they have retained such benefit, within the limits of their available means. It does not provide for confiscation in the sense understood by schoolchildren and others, but nor does it operate by way of fine.¹²⁰ The benefit gained is the total value of the property or advantage obtained, not the defendant’s net profit after deduction of expenses or any amounts payable to co-conspirators.

     2. (2)  The court should proceed by asking [three questions]: (i) Has the defendant (D) benefited from relevant criminal conduct? (ii) If so, what is the value of the benefit D has so obtained? (iii) What sum is recoverable from D? Where issues of criminal life style arise the questions must be modified. These are separate (p. 151) questions calling for separate answers, and the questions and answers must not be elided.

     3. (3)  [evidence] …

     4. (4)  [statutory interpretation] …

     5. (5)  In determining, under the 2002 Act, whether D has obtained property or a pecuniary advantage and, if so, the value of any property or advantage so obtained, the court should (subject to any relevant statutory definition) apply ordinary common law principles to the facts as found …

     6. (6)  D ordinarily obtains property if in law he owns it, whether alone or jointly, which will ordinarily connote a power of disposition or control, as where a person directs a payment or conveyance of property to someone else. He ordinarily obtains a pecuniary advantage if (among other things) he evades a liability to which he is personally subject. Mere couriers or custodians or other very minor contributors to an offence, rewarded by a specific fee and having no interest in the property or the proceeds of sale, are unlikely to be found to have obtained that property. It may be otherwise with money launderers.

     The foregoing has considerable practical significance, for example in respect of the following:

     • 1. (1)  cash couriers and custodians of drug moneys: R v Allpress;¹²¹

       2. (2)  money laundered through a bank account: again, consider Allpress;

       3. (3)  couriers and bailees: see R v Anderson (a case of ‘people-trafficking’),¹²² Clark and Severn,¹²³ and R v Smith and others¹²⁴ (stolen illicit controlled drugs), a case decided in the context of the Theft Act 1968.

3. (c)  Note that the fact that the defendant initially obtained criminal property, which he then divided up between others, does not prevent him being assessed as having obtained the whole amount: see Patel, R v Carter,¹²⁵ Glatt,¹²⁶ Gibbons,¹²⁷ and, crucially, R v Ahmad and Fields.¹²⁸

4. (d)  The expression ‘he obtains property’ does not mean that the property must pass through the defendant’s hands. However, as explained in R v White and Dennard,¹²⁹ it is not sufficient merely to show that the defendant’s acts ‘contributed, to a non-trivial (that is, not de minimis) extent, to the getting of the (p. 152) property’: the focus is on the value of the benefit obtained by the defendant, ie ‘obtained by him’: and see ARA v Olupitan,¹³⁰ Nadarajah,¹³¹ and Warwick [NI].¹³²

7.63  Some offences in Part 7 of POCA 2002 require proof of ‘suspicion’¹³³ (for example under section 328). Other provisions in that Part use the expression ‘reasonable grounds for … suspecting’ (for example under section 330). It is important to note that the mens rea applicable to the offence of conspiring to launder criminal proceeds (sections327 to 329), charged under section 1 of the Criminal Law Act 1977, is not to be equated with the mens rea applicable for the substantive offence, and it is required that the property must in fact be the proceeds of crime: see R v Saik¹³⁴ and R v Thomas.¹³⁵ The effect of section 1(2) of the 1977 Act is that knowledge or intention is required (not suspicion). Similarly, in relation to attempts to commit a money laundering offence charged under section 1 of the Criminal Attempts Act 1981, see R v Pace.¹³⁶

7.64  In R v Da Silva¹³⁷ the Court of Appeal gave guidance as to the meaning of the word ‘suspicion’ in the context of CJA 1988. The Court remarked that using words such as ‘inkling’ or ‘fleeting thought’ is liable to mislead:

(p. 153) 7.65  It is submitted that comparisons with ‘wilful blindness’, or the ‘blind-eye’ cases, are best avoided because they have more to say about proving knowledge than suspicion.

7.66  The case of R v Da Silva has been applied in other cases: for example R v Afolabi,¹³⁸ K v National Westminster Bank, HMRC,¹³⁹ and Shah v HSBC ¹⁴⁰ (and see also Parvizi v Barclays Bank PLC).¹⁴¹

7.67  The decision of the Court of Appeal (Civil Division) in K v National Westminster Bank, HMRC, SOCA makes it clear that the word ‘suspicion’ means the same in English civil law as it does in English criminal law, that the existence of suspicion is a subjective fact, and that there is no legal requirement that there be reasonable grounds for the suspicion.¹⁴² In the context of banking practices, the Court pointed out that the relevant bank employee either suspects money laundering or he/she does not. If a bank employee does entertain suspicion, then he or she must personally, or through the bank’s nominated officer, inform the authorities of it.¹⁴³

7.68  In respect of disclosures made under Part 7 of POCA 2002, the Court of Appeal (Civil Division) in K v National Westminster Bank, HMRC rejected a submission that a party should be entitled to investigate the grounds on which a suspicion was formed:

7.69  The expression ‘reasonable grounds for knowing or suspecting’ appears in POCA 2002 in sections 330 (failure to disclose: regulated sector), 331 (failure to disclose: nominated officers in the regulated sector), and 337 (protected disclosure).

7.70  In Saik¹⁴⁵ (a decision of the House of Lords, in the context of section 93C(2) of CJA 1988), it was said that a person who is proved to have had reasonable grounds to suspect that the property had a criminal origin, did in fact suspect that this was so (p. 154) when he proceeded to deal with it: ‘[in] other words, the first requirement contains both a subjective part—that the person suspects—and an objective part—that there are reasonable grounds for the suspicion.’¹⁴⁶

7.71  Lord Hope added that the ‘objective test is introduced in the interests of fairness, to ensure that the suspicion has a reasonable basis for it’.¹⁴⁷

7.72  It is tempting to take the view that the Saik case is authority for the proposition that wherever the words ‘reasonable grounds to suspect’ appear in POCA 2002, it is incumbent on the prosecution to prove both a subjective and an objective element. Unhappily, one cannot be confident that this is so. The mens rea required to be proved for the purposes of section 93C(2) of CJA 1988 and section 49(2) of DTA 1994 was not confined to the accused’s state of mind as to the provenance of the property. The prosecution must also prove that the accused acted for the purpose of assisting another person to avoid prosecution, or the making or enforcement of a confiscation order. As Lord Brown pointed out, an accused ‘could not have that illicit purpose unless subjectively he also either actually knew or at the very least suspected the property to be hot’.¹⁴⁸ This gives support to the views of Professor David Ormerod QC in his commentary on the Saik case¹⁴⁹ that their Lordships’ conclusion ‘is heavily influenced by the fact that it would be illogical for the section to have an objective element of mens rea as to the provenance of the property and yet simultaneously require proof of a purpose to assist a person to avoid prosecution’. But section 327 of POCA 2002 is differently constructed: the ingredients as to purpose that appeared in sections 93C and 49(2) do not feature in section 327. Accordingly, for the purposes of sections 330, 331, and 337, it is arguable that whether the defendant had ‘reasonable grounds to suspect’ or not, is a fact to be objectively determined. However, there is a strong case for saying that as a matter of policy a person ought not to be criminally culpable for his or her failure to suspect even if, objectively viewed, there were grounds for suspecting the illicit origins of the property.

7.73  Some offences require proof of one of only two states of mind—‘knows or suspects’ or ‘knowing or having reasonable grounds to suspect’—and in those circumstances it would not be an unwarranted construction to hold that having ‘reasonable grounds to suspect’ has both a subjective and an objective requirement. But, for the purpose of other offences (for example under sections 330 and 331 of POCA 2002), it is sufficient for the prosecution to prove one of three alternative states of mind, namely, ‘knows’, ‘suspects’, or ‘has reasonable grounds for knowing or suspecting’. As Professor Ormerod QC has remarked, if one applies (p. 155) their Lordships’ analysis in R v Saik that proof that the defendant had ‘reasonable grounds to suspect’ will necessarily involve proof that the defendant had actual suspicion, then it follows that the expession ‘reasonable grounds to suspect’ would seem to be a redundant alternative because no prosecutor is likely to take the more onerous route.¹⁵⁰ One answer is that the expression ‘reasonable grounds for … suspecting’ is not redundant.

7.74  In the context of sections 330(2)(b) and 331(2)(b) of POCA 2002, and section 21A of TA 2000, the JMLSG appears to focus only on the objective element of the expression ‘reasonable grounds for … suspecting’.¹⁵¹ Arguably (for the reasons just given) this view may be too narrow. The JMLSG guidance provides:¹⁵²

7.75  By setting the threshold¹⁵³ for mens rea as low as suspicion, or ‘reasonable grounds for suspecting’, the UK has exceeded its treaty obligations. As we have seen, the 1988 UN Convention Against Illicit Traffic In Narcotic Drugs and Psychotropic Substances and the four EU Money Laundering Directives only require states to create money laundering offences that are punishable ‘when committed intentionally’ (p. 156) (emphasis added).¹⁵⁴ In the Montila case, the House of Lords noted the absence of ‘reasonable suspicion’ as a basis for criminal liability in respect of the three main international instruments that were applicable at that time (at para 38).¹⁵⁵ However, there is no principle of law that Parliament is only empowered to enact criminal offences that reach no further than a treaty requires. And in practical terms, in the finance sector there will rarely be knowledge of the relevant factual situation. In any case, the suspicion threshold is now well established in this area of the law.

7.76  The definition of ‘criminal property’, seen in the light of the elements of each of the three money laundering offences (sections 327 to 329 of POCA 2002), shows those three offences to be of considerable reach. Thus, it was said in R v Allpress:¹⁵⁶

7.77  The courts have done what they can to strongly advise prosecutors to charge appropriately. Thus, for example, in R v GH¹⁵⁷ the UK Supreme Court said:¹⁵⁸

7.78  The Crown Prosecution Service has published guidance along similar lines:¹⁵⁹

A careful judgement will need to be made as to whether it is in the public interest to proceed with the money laundering offence in the event of a plea to the underlying criminality by a defendant who is also indicted for laundering his own proceeds. The prosecutor should take into account whether the laundering activity involves such a significant attempt to conceal ill-gotten gains that a court may consider a consecutive sentence.

7.79  It should be noted that a body of sentencing jurisprudence is developing in relation to money laundering offences (see, for example, R v Talwar,¹⁶⁰ R v Stocks¹⁶¹). Little purpose is served in analysing or setting out a selection of sentencing decisions. This is because each case is fact-specific. In any event, the correct approach is to note the Sentencing Council’s Definitive Guideline Fraud, Bribery and Money Laundering Offences.¹⁶²

7.80  By section 327(1) of POCA 2002, a person commits an offence if he (a) conceals, (b) disguises, (c) converts, (d) transfers, or (e) removes from England, Wales, Scotland, or Northern Ireland, ‘criminal property’. The expression ‘criminal property’ contains a mental ingredient (see ‘Words, Phrases, and Concepts’ at paras 7.38 et seq).

(p. 158) 7.81  Section 327 creates a single offence which may be committed in more than one way (for example converting, transferring, etc). It is an offence that is framed in a way that ensures that the UK meets its international obligations under treaty (indeed the UK has exceeded its obligations).

7.82  The verbs (converts, transfers, etc) employed in section 327(1) are to be given their ordinary meaning. Thus, the word ‘converts’ does not have its legal meaning (in the law of tort): consider R v Ogden.¹⁶³ It would seem that criminal property can be ‘converted’ where a defendant, living and working abroad, had permitted money to be paid into and then withdrawn from his foreign bank account: R v Rogers¹⁶⁴ and R v Fazal.¹⁶⁵

7.83  It is submitted that the words ‘removes property from England and Wales, or from Scotland or from Northern Ireland’ (section 327(1)(e)), include cases where property is moved from (for example) England to Scotland, or removed outside the UK.

7.84  The wording of section 327 of POCA 2002, coupled with the definitions of ‘criminal conduct’ and ‘criminal property’, makes it clear that it is incumbent on the prosecution to prove that the alleged money laundering activity concerns the proceeds of a crime committed, but the prosecution is not obliged to prove the precise crime that generated the proceeds. It is submitted that this also holds true for the purposes of sections 328 and 329 (see definition of ‘criminal property’ at paras 7.45 et seq). The position under pre-POCA money laundering legislation is different, which is understandable given the predicate offences that are specified in DTA 1994 (drug trafficking) and Part 6 of CJA 1988 (crimes other than drug trafficking). In the Montila case,¹⁶⁶ the House of Lords (reversing the decision of the Court of Appeal)¹⁶⁷ held that for an offence to be committed under section 49(2) of DTA 1994 or section 93C(2) of CJA 1988, it was necessary for the prosecution to prove that the property in question was, or represented, the proceeds of drug trafficking or the proceeds of a crime (as the case may be). It was not sufficient to prove that D had reasonable grounds to suspect that the property was the proceeds of drug trafficking/crime, even if it was not. The mischief Parliament was seeking to address was the concealment (etc) of actual proceeds (judgment, para 38). Their Lordships noted the absence of ‘reasonable suspicion’ as a basis for criminal liability in the three main international instruments.¹⁶⁸

7.85  The prosecution must prove that the alleged offender ‘knows or suspects’ that the property constitutes a person’s benefit from ‘criminal conduct’ (see section 340(3)(b) of POCA 2002): see Ali and Hussain.¹⁶⁹

7.86  One can envisage many situations in which a person transfers or converts property blissfully unaware of its illicit origins. Those two actions will often be carried out transparently, and may be neutral in terms of indicating whether the person who handled the property had the requisite mens rea. But when a person conceals or disguises criminal property, such actions are likely to be telling of the actor’s level of knowledge regarding the origins of the property.

7.87  For the purposes of section 14(1) and (2) of the Criminal Justice (International Co-operation) Act 1990, as well as section 49(2) of DTA 1994, and section 93C of CJA 1988,¹⁷⁰ it must be proved that the accused acted for one of the purposes stated in the relevant provision (for example to avoid prosecution, or the making or enforcement of a confiscation order). No such requirement exists in respect of the offence under section 327 of POCA 2002. This aspect of the earlier legislation tended to be overlooked; but not in the cases of Causey (18 October 1999, CA) or in Powell¹⁷¹ (where it was held that the purpose did not have to be the dominant one, but there could be personal purposes as well): see the Singh case.¹⁷² Note that for the purposes of section 49(2) of DTA 1994 and section 93C(2) of CJA 1988, it was immaterial that the prosecution was being pursued outside the UK (Mulvey):¹⁷³ ‘There is no reason to think that limiting the offence to the avoidance of a prosecution in this country was the intention of Parliament, nor would it make any kind of sense’.¹⁷⁴

7.88  No offence is committed if (a) the alleged offender makes an ‘authorised disclosure’ under section 338 of POCA 2002 (which must be made before he performs one of the acts mentioned in section 327(1)) and he has ‘appropriate consent’ so to act;¹⁷⁵ or (b) he intended to make such a disclosure but had a reasonable excuse for not doing so; or (c) he acted in pursuance of a function relating to the enforcement of any provision under POCA 2002 or of any other enactment relating to criminal conduct or benefit from criminal conduct: see section 327(2)). An ‘authorised disclosure’ is one made by the defendant to a ‘constable, a customs officer or a nominated officer’ (p. 160) that property is ‘criminal property’ and that one of three conditions in section 338 (section 338(2), (2A), or (3)) is satisfied: see section 338.

7.89  No offence is committed if the defendant ‘knows, or believes on reasonable grounds’ that the relevant criminal conduct occurred outside of the UK, and it was not then unlawful in the place where the conduct took place, and it is ‘not of a description prescribed by an order made by the Secretary of State’: see section 327(2A). The Proceeds of Crime Act 2002 (Money Laundering: Exceptions to Overseas Conduct Defence) Order (SI 2006/1070) has the effect of stating that all criminal conduct is ‘prescribed’ if it would constitute an offence punishable by imprisonment for a maximum term of twelve months or more, in any part of the UK if it occurred there, other than (a) an offence under the Gaming Act 1968, (b) an offence under the Lotteries and Amusements Act 1976, or (c) an offence under section 23 or 25 of the Financial Services and Markets Act 2000 (see later for further details of this defence).

7.90  A person convicted of an offence under section 327, is liable (a) on summary conviction (in a magistrates’ court), to imprisonment for a term not exceeding six months or to a fine (not exceeding the statutory maximum), or to both, or (b) on conviction on indictment (before a Crown Court), to imprisonment for a term not exceeding fourteen years, or to a fine, or to both: 334(1) POCA 2002. Note the Sentencing Council’s Definitive Guideline Fraud, Bribery and Money Laundering Offences.

7.91  The offence is a ‘criminal lifestyle’ offence (listed in Schedule 2 (England and Wales), Schedule 3 (Scotland) and Schedule 4 (Northern Ireland)) for the purposes of the statutory confiscation regimes. It will be open to the sentencing court to determine that a defendant has benefited from his or her ‘general criminal conduct’. The court must assume (among other assumptions) that all property held by the defendant during specified periods, was obtained by him or her as a result of or in connection with that conduct. The assumptions can be displaced if they are shown to be incorrect or where there would be serious risk of injustice to make the assumption.

7.92  Section 328 provides (in part):

7.93  The section 328 offence has its origins in section 24 of the Drug Trafficking Offences Act 1986, and (later) section 50 of DTA 1994. It is not an offence that is required by the international treaties and conventions referred to earlier.

7.94  Provisions that broadly correspond to section 24 of the DTOA 1986, and which related to forms of criminal conduct other than drug trafficking, appeared in section 93A of CJA 1988,¹⁷⁶ and section 38 of the Criminal Law (Consolidation) (Scotland) Act 1995: see Colle¹⁷⁷ and Butt.¹⁷⁸

7.95  Significant differences exist between the section 328 offence and the earlier offences, and therefore pre-POCA cases need to be applied with care (if applied at all):

1. (1)  The phrase ‘becomes concerned in’ replaces ‘is otherwise concerned in’. There is probably little practical difference brought about by this change.

2. (2)  The mens rea under section 50 of DTA 1994 or section 93A of CJA 1988 is quite narrow, namely, that D knew or suspected that A carried on drug trafficking/crime and, with that mens rea, he became concerned in an arrangement which in fact facilitated, for example, the retention of criminal proceeds by A.

3. (3)  Under section 328 of POCA 2002 there is a double mens rea requirement:

   1. (a)  that the defendant knows or suspects that the arrangement will have one of the results specified in section 328(1), ie ‘acquisition, retention, use, or control’ of criminal property; and

   2. (b)  that the alleged offender ‘knows or suspects’ that the property constitutes or represents somebody’s benefit from criminal conduct (section 340(3)(b)).

4. (4)  Section 328 requires the prosecution to prove mens rea. The section does not replicate section 50(4)(a) and (b) of DTA 1994, which placed a burden on the defendant to prove lack of knowledge or suspicion in respect of the matters specified.¹⁷⁹

7.96  The ‘another person’ need not be (it is submitted) the person who originally obtained property as a result of, or in connection with, criminal conduct carried on by him.

7.97  In R v GH,¹⁸⁰ the Supreme Court held¹⁸¹ that, for the purposes of section 328, the arrangement into which D enters is one that facilitates the acquisition, retention, use, or control by another person in respect of property that was ‘criminal property’ at a time when the arrangement operates on it (see the judgment of Lord Toulson JSC at para 40).¹⁸² Thus, an arrangement may be in existence and remain dormant until the moment that criminal property engages the arrangement. The decision accords with the reasoning of the Courts in Kensington International Ltd v Republic of Congo¹⁸³ and R v Geary.¹⁸⁴

7.98  To illustrate the foregoing principle, suppose D opens a bank account so that P can deposit stolen money into that account. The section 328 offence is complete as soon as stolen moneys are deposited into D’s account (the arrangement becomes operative at that point).

7.99  In R v GH, D was alleged to be guilty of laundering by ‘arranging’ under section 338, when he made his bank account available to a fraudster selling bogus motor insurance, as the place to direct the victims of his frauds to pay in the ‘premiums’ he had extracted from them. However, the money became ‘criminal property’ only when the victims paid it into D’s account: ‘[W]hat rendered the property which the defendant received from the victims “criminal property” was not the arrangement made between [the fraudster] and the defendant, but the fact that it was obtained from the victims by deception.’¹⁸⁵ Thus, for the purposes of section 328, the ‘predicate offence’ is one that is separate from D’s alleged act of money laundering, by which the subject matter became ‘criminal property’.¹⁸⁶

(p. 163) 7.100  Exchanging currency is capable of constituting ‘facilitating or retention’ of another person’s ‘criminal property’ for the purposes of section 328 (see McMaster¹⁸⁷ and Tarsemwal Lal Sabhawal).¹⁸⁸

7.101  The section 328 offence is a source of considerable concern to those who handle or advise third parties in connection with money and other types of property. Prior to Bowman v Fels,¹⁸⁹ it seems that some judges were concerned that a decision/judgment made by them might be caught by section 328. The key words in section 328 of POCA 2002 are ‘becomes concerned in’ an ‘arrangement’, and ‘facilitates’—see Bowman v Fels,¹⁹⁰ where the Court of Appeal took a robust and welcomed approach to some of the more exaggerated views of what might amount to a breach. The central question in Bowman v Fels was whether section 328 applies to the ordinary conduct of legal proceedings ‘or any aspect of such conduct—including, in particular, any step taken to pursue proceedings and the obtaining of a judgment’ (para 52). The Court answered the question as follows:

(p. 164) 7.102  In Kensington International v Vitol¹⁹² the question arose of whether, by giving a bribe,¹⁹³ a person necessarily enters into an arrangement which he knows facilitates the acquisition of criminal property by the recipient, contrary to section 328 of POCA 2002, on the grounds that the bribe, once received, constitutes the latter’s benefit from criminal conduct. The Court of Appeal held that the answer is in the negative if ‘the only arrangement into which he enters is one by which the property in question first acquires its criminal character. A person who gives a bribe may know that it will constitute criminal property in the hands of the recipient, but that does not make him guilty of entering into an arrangement which facilitates the acquisition of what is already criminal property’.

7.103  Section 328 requires proof of two discrete mental elements:

7.104  There is (as Parliament intended) a place for conspiracy to commit the section 328 offence (see section 349(11) of POCA 2002), and thus it is submitted that the courts have been correct not to construe section 328 as an offence that is complete once an arrangement has been entered into in anticipation of criminal proceeds coming into existence.

7.105  In K v National Westminster Bank, HMRC, SOCA,¹⁹⁴ the Court of Appeal (Civil Division) said:

7.106  It is submitted that this statement is wholly accurate if—and only if—the money was in fact criminal property prior to the moment of facilitation. Following R v Preddy,¹⁹⁵ the banker has not transferred the money at all (but he has transferred (p. 165) its value). The banker has created a new item of property, which represents that money, and this is sufficient.

7.107  In the absence of judicial guidance of the type given in K v National Westminster Bank, financial institutions (notably those carrying out banking business) found that their statutory obligations under POCA 2002 and their contractual obligations to their customers, put them on the horns of a dilemma. One commentator has remarked that the Court of Appeal’s decision in K suggests that ‘an institution will be able to rely on a defence of illegality or frustration during the 7 working day notice and 31 day moratorium periods, irrespective of whether the contract with the customer contains such a term, and that the court would in any event refuse as a matter of discretion to grant a mandatory injunction compelling an institution to commit an offence’.¹⁹⁶ It is submitted that a customer is unlikely to have a claim for breach of mandate against a bank if it turns out that the property is not in fact criminal property in circumstances where the bank acted reasonably, albeit on suspicion.

7.108  In the opinion of the Court of Appeal, POCA 2002 strikes a ‘workable balance’ of conflicting interests:

7.109  In P v P,¹⁹⁷ the Court endorsed the ‘position statement’ issued by the (now defunct) National Criminal Intelligence Service (NCIS) that should a legal adviser, who is advising a client in relation to a matter that might involve a suspicious financial arrangement, have a suspicion ‘that there is a step to be taken in the case that would involve the legal advisor or their client becoming involved in an arrangement’ contrary to the money laundering provisions enacted in POCA 2002, then steps should be taken to make an ‘authorised disclosure’ and to obtain ‘appropriate consent’ before proceeding. P v P is, however, now to be read in the light of Bowman v Fels. Although sham litigation that is initiated for the purpose of money laundering would be caught by sections 327 to 329, the ordinary conduct of litigation would not fall within section 328 of POCA 2002.

7.110  Relevant here are the defences mentioned previously in relation to the section 327 offence. It is submitted that the Colle case¹⁹⁸ remains good law for the purposes of section 328, namely, that it is for the prosecution to prove the state of knowledge required by section 328 in accordance with the normal standard of proof (and consider R v Butt).¹⁹⁹ If the defendant wishes to rely on the special defence created by section 328(2), it is for him to prove, on the balance of probabilities, the matters set out in that subsection (and consider R v Hunt).²⁰⁰

7.111  A person convicted of an offence under section 327 is liable (a) on summary conviction to imprisonment for a term not exceeding six months, or to a fine (not exceeding the statutory maximum), or to both, or (b) on conviction on indictment (before a Crown Court), to imprisonment for a term not exceeding fourteen years, or to a fine, or to both: section 334(1) POCA 2002. Note the Sentencing Council’s Definitive Guideline Fraud, Bribery and Money Laundering Offences, noted earlier.

7.112  The offence is a ‘criminal lifestyle’ offence (listed in Schedule 2 (England and Wales), Schedule 3 (Scotland), and Schedule 4 (Northern Ireland)) for the purposes of the statutory confiscation regimes. It will be open to the sentencing court to determine that a defendant has benefited from his or her ‘general criminal conduct’. The court must assume (among other assumptions) that all property held by the defendant during specified periods, was obtained by him or her as a result of or in connection with that conduct. The assumption can be displaced if it is shown to be incorrect or there would be serious risk of injustice to make the assumption.

7.113  Section 329(1) of POCA 2002 makes it an offence for a person to acquire, use, or possess, ‘criminal property’. Criminal property is defined by section 340(3).

7.114  The section 329 offence has its origins in section 14(3) of the Criminal Justice (International Co-operation) Act 1990 (CJ(IC)A 1990), later enacted as section 23A of the Drug Trafficking Offences Act 1986,²⁰¹ re-enacted as section (p. 167) 51 of DTA 1994, and mirrored in section 93B of CJA 1988.²⁰² Note that section 14(3) of CJ(IC)A 1990 was limited to the acquisition of property. Section 51 of DTA 1994 and section 93B of CJA 1988 extended the activities to ‘use’ and ‘possession’. This is consistent with the requirement of the four EC/EU anti-money laundering directives.

7.115  The prosecution must prove that the property handled is ‘criminal property’ (section 340(3) of POCA 2002), namely that it is a person’s benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly). The words ‘acquires’ and ‘uses’ have their ordinary, non-technical, meanings. It is submitted that the fact of ‘possession’ is satisfied if it is proved that the accused had custody or control of the property in question.

7.116  The offence requires proof that the property is obtained from ‘criminal conduct’ (see section 340(3)): see paras 7.45 to 7.56. Note that section 51 of DTA 1994 and section 93B of CJA 1988 required nothing less than ‘knowledge’ of the illicit origin of the property, whereas the mental ingredient that had to be proved under section 14(3) of CJ(IC)A 1990 was ‘knowing or having reasonable grounds to suspect’.

7.117  No offence is committed if:

1. (1)  the accused makes an ‘authorised disclosure’ under section 338; or

2. (2)  the accused intended to make such a disclosure but he or she had a reasonable excuse for not doing so; or

3. (3)  the accused gave adequate consideration at the time he or she acquired, used, or took possession of the property; or

4. (4)  the accused performed a function that he or she has relating to the enforcement of POCA or other relevant enactment; or

5. (5)  the conduct related to ‘relevant criminal conduct’ that occurs in a jurisdiction overseas and which is lawful there (section 329(2A), (2B)); or

6. (6)  the act was done by a ‘deposit taking body’ (section 329(2C)).

7.118  It is a defence that the accused acquired, used, or had possession of property for ‘adequate consideration’ (section 329(2)(c) of POCA 2002). Thus, no offence is committed where a person sells food (at the correct price, or at least for ‘adequate consideration’) to a person he or she knew to be a drug trafficker.

(p. 168) 7.119  The expression ‘consideration’ is to be given its normal legal meaning in the law of contract: see R v Kausar,²⁰³ applied in R v Nawaz²⁰⁴ (and consider R v Usoro,²⁰⁵ albeit in the context of Part 2 of POCA 2002).

7.120  By section 329(3)(a) and (b), consideration is inadequate if it is ‘significantly less than the value of the property’. No consideration is deemed to be given if the person provides goods or services knowing or suspecting that they ‘may help another to carry out criminal conduct’ (section 329(3)(c)).

7.121  The question of whether consideration is ‘adequate’ is one of fact for the jury. It is submitted that it is for the judge to decide what constitutes consideration. The limits of the defence are stark. It is no defence for the defendant (‘D’) to borrow property held by a third party, being property which D, suspected (correctly) to be criminal property: in this situation D gave no consideration at all. It is arguable that moneys received by D ‘on account’, ie for work to be done, constitute a payment made without consideration. There might be circumstances in which it would be appropriate for fact-finders to receive expert evidence on the question of whether consideration was adequate or not, for example whether fees charged by a person were within reasonable/acceptable limits for the work that had been carried out.

7.122  In Hogan,²⁰⁶ H was convicted on summary trial of two offences charged under section 329(1) of POCA 2002. The Divisional Court agreed with a district judge that ‘adequate … [consideration] required the court to consider the whole circumstances and manner in which the consideration may have been paid’. The Court said, ‘it is for the Crown to show that there was not adequate consideration, and to do so in relation to both halves of that question, namely the fact of the consideration advanced and the adequacy of the consideration, if proved’. It would often be the case that the same evidence will bear on both questions. The Divisional Court held that, even if the amount paid by D would ordinarily be regarded as a fair price (given the condition of the goods), that does not inevitably make the consideration ‘adequate’. The question of whether consideration is adequate is an objective one, and it is discrete from the question of knowledge, belief, or suspicion by the defendant about whether the property constitutes a benefit from criminal conduct. The Court remarked: ‘[It] is an inevitable consequence of the way this Act is drawn that a person who acquires property which he knows to be stolen, but acquires it for full consideration, will not be guilty under this part of the Act.’ It is not clear why an ‘adequate consideration’ defence does not exist in specified circumstances for the purposes of sections 327 and 328. It was pointed out in R v Afolabi,²⁰⁷(p. 169) that ‘although there would be a defence to acquiring such property under section 329(2), it would seem to us, though we have had no direct argument on the point, that any subsequent transfer would fall under section 328 or indeed under section 327, which makes it an offence to transfer criminal property’.²⁰⁸

7.123  A person convicted of an offence under section 327 is liable (a) on summary conviction to imprisonment for a term not exceeding six months, or to a fine (not exceeding the statutory maximum), or to both, or (b) on conviction on indictment (before a Crown Court), to imprisonment for a term not exceeding fourteen years, or to a fine, or to both: section 334(1) POCA 2002. Note the Sentencing Council’s Definitive Guideline, Fraud, Bribery and Money Laundering Offences.

7.124  The offence is not a ‘criminal lifestyle’ offence (that is to say, the offence is not listed in Schedule 2 (England and Wales), Schedule 3 (Scotland), and Schedule 4 (Northern Ireland)) for the purposes of the statutory confiscation regimes.

7.125  It is a defence to a charge under sections 327 to 329 of POCA 2002 that a person:

1. (1)  made an authorized disclosure under section 338 and (if the disclosure is made before he does the prohibited act) he has the ‘appropriate consent,’ or

2. (2)  intended to make such a disclosure but had a reasonable excuse for not doing so, or

3. (3)  acted for the purpose of carrying out a function relating to the enforcement of any statutory provision relating to criminal conduct or benefit from criminal conduct.²⁰⁹

7.126  The expression ‘authorised disclosure’ is defined by section 338 of POCA 2002 to mean a disclosure by the defendant to a constable, a customs officer, or a nominated officer²¹⁰ that property is ‘criminal property’ and one of the three conditions specified in section 338(2), (2A), or (3) is satisfied.

7.127  Section 337 protects disclosures—that is to say, a disclosure is not to be taken to breach any restriction on the disclosure of information ‘however imposed’.

7.128  Following amendments made by the Serious Organised Crime and Police Act 2005 (SOCPA) to section 338²¹¹ (which came into force on 1 July (p. 170) 2005),²¹² the disclosure must meet one of three conditions set out in section 338(2), 338(2A), or 338(3) of POCA 2002. The three conditions reflect three time periods, namely, (1) before the ‘prohibited act’ was done, (2) whilst a transaction was being carried out, and (3) after the prohibited act was done.²¹³

7.129  By virtue of section 338(3) (the third condition) the defendant must have a good excuse for failing to make an authorized disclosure before the act was done, and his subsequent disclosure must be made on his initiative.

7.130  If the defendant, whilst doing the prohibited act, did not then know or suspect that the property constituted or represented a person’s benefit from criminal conduct, no offence will be committed if he makes a disclosure on his own initiative and as soon as practicable after he came to suspect or to know that the property constitutes or represents a person’s benefit from criminal conduct.

7.131  A person has ‘appropriate consent’²¹⁴ if:

1. (1)  consent is given by one of the persons specified in section 335 (ie a nominated officer, constable, or customs officer) to whom disclosure was made; or

2. (2)  seven working days have elapsed (starting with the first working day after he makes the disclosure) after which he does not receive notice from a constable, or an officer of HM Revenue and Customs, that consent to the doing of the act is refused;²¹⁵ or

3. (3)  a period of thirty-one days has elapsed, starting with the day on which notice is received by the person that consent to the doing of the act is refused (the ‘moratorium period’) and no further instruction from the relevant law enforcement agency has been received.²¹⁶ The ‘moratorium period’ exists to give the relevant law enforcement agency the opportunity to investigate the material disclosed and, if necessary, to act on the information (for example by obtaining a restraint order).

7.132  The tensions that exist between the interests of the individual and the state are graphically illustrated by the UMBS v SOCA, HMRC,²¹⁷ where the Court of Appeal pointed out that ‘there is force in the complaints, that, for example’:²¹⁸

7.133  The tensions peak when the customer presses a financial institution to fulfil its contractual obligations or to offer an explanation for its inaction. The financial institution then faces the dilemma of whether to reveal to the customer the fact that an authorized disclosure has been made, or not. The High Court might be able to offer comfort or guidance but the preferred route is for the parties to try to resolve problems by agreement.

7.134  Three cases are of particular interest, namely, Bank of Scotland v A,²¹⁹ Amalgamated Trading v London Police Financial Investigation Unit,²²⁰ and N v S ²²¹ (but it should be remembered that the first two cases were concerned with difficulties raised by the earlier provisions of section 93A to D of CJA 1988 in respect of which the time limit consent provisions of POCA 2002 were not incorporated).

7.135  In the Bank of Scotland case the bank applied, without notice, to the High Court for directions as to what it should do. It did not ask for any form of substantive relief. In an attempt to assist the bank, Lightman J granted an injunction against the bank and therefore froze the account of A Ltd. As the Court of Appeal (Civil Division) noted, the order of the judge did not solve the problem because the bank could not tell the customer why the account was frozen. It held that C v S²²² provided no justification for the order made by the learned judge; that the appropriate defendant was (in this instance) the Serious Fraud Office; that the law enforcement agency and the financial institution should strive to resolve the dispute but if they could not reach agreement, the court would have to resolve it. The matter could be heard in private, and the customer would therefore not be a party to the proceedings. It might be appropriate for a court to make an interim declaration the life of which would probably be short. If the customer initiated civil proceedings, summary judgment would not be given if there is ‘reason why the case or issue should be disposed of at a trial’. The financial institution must carefully draft its evidence opposing an application for summary judgment. The Court warned that an interim declaration ‘will not automatically provide protection’ for a financial investigation against actions by customers or third parties. Nonetheless, such a declaration is likely to be highly persuasive in the institution’s favour. However, it is unclear whether the Bank of Scotland case has provided a solution that has been adopted in practice. These difficult problems await further clarification from the courts.

(p. 172) 7.136  An interim declaration is inappropriate in a case where the issue is whether there were sufficient grounds for suspicion that money may be the proceeds of crime or as to whether property is ‘criminal property’ (Amalgamated Metal Trading Ltd case).²²³

7.137  However, an interim declaration was granted on the facts in N v S.²²⁴ In that case, the claimant (N) commenced proceedings for a mandatory injunction and interim declaratory relief arising out of the freezing and then the purported termination without notice by the defendant (S) of its banking relationship with N. N had an arguable case on the question of whether the defendant was entitled to terminate its banking relationship without notice. N’s best estimate was that it would be able to continue for a matter of days before business had to cease altogether. The Court granted an injunction requiring a bank to comply with N’s banking instructions, and made an interim declaration protecting the bank (namely, that in performing certain banking transactions, the defendant would not commit any criminal offence, whether under POCA 2002 or otherwise, and that the defendant was not obliged to make any disclosure as would or might be required by the criminal law or any other law). There was no evidence that the funds concerned were criminal property or suspected of being so.

7.138  In cases that do not involve a concern about ‘tipping off’, a financial institution will have to take a commercial decision regarding whether to contest proceedings were they to be brought by a customer.²²⁵

7.139  A ‘nominated officer’ is a person nominated to receive disclosures under section 338 of POCA 2002.²²⁶

7.140  A nominated officer commits an offence contrary to section 336(5) if he gives consent for a prohibited act to be done in circumstances where consent is not sanctioned pursuant to section 336(2), (3), or (4), and he knows or suspects that the act is prohibited.

7.141  A nominated officer may give consent only if he has made an ‘authorised disclosure’ to a person authorized by the Director General of the NCA²²⁷ and:(p. 173)

1. (1)  such person gives consent (section 336(2)(b)), or

2. (2)  notice refusing consent is not received seven days after disclosure was made (section 336(3)(b) and (7)), or

3. (3)  the moratorium period has expired (section 336(4)(c) and (8)).

7.142  A nominated officer who fails to make a required disclosure commits an offence under either section 331 (regulated sector) or section 332 (other nominated officers), subject to the conditions and defences stated in the relevant section.

7.143  Amendments made by section 106(2) of SOCPA 2005 to section 330 of POCA 2002 protect nominated officers when a professional legal adviser seeks guidance about the making of a disclosure under section 330, without intending that guidance to constitute a disclosure for the purposes of section 330.²²⁸ Such communications are treated as not amounting to disclosures.

7.144  Given the difficulties that exist in probing the grounds on which suspicion is said to have arisen (see K Ltd v NWB),²²⁹ and that there appears to be no legal requirement that there should be reasonable grounds for the suspicion (K Ltd v NWB), and the potential criminal consequences of getting it wrong, it is tempting for a nominated officer to take the safe route and ‘if in doubt: disclose’. But there might be cases where an unwarranted disclosure (once proved to be so) could result in the affected party securing a remedy against a financial institution, or which undermines the reputation of, or confidence in, that institution. Training and guidance for nominated officers and employees of a financial institution is therefore a paramount consideration, and it is submitted that disclosure should be restricted to cases of real suspicion.

7.145  As a result of amendments made by section 105(2) of the Serious Organised Crime and Police Act 2005 (SOCPA 2005), to sections 330(9)(b), 337(5)(b), and 338(5)(b) of POCA 2002, an employee is not bound to follow the employer’s procedures when making a disclosure to a ‘nominated officer’.²³⁰ For example, a member of staff might seek the advice of the Money Laundering Reporting Officer (MLRO) as to whether a transaction indicates improper conduct or not. The member of staff might not submit a completed form to the MLRO, but nonetheless the MLRO will have to decide whether the matter should be taken further or not.

7.146  The Secretary of State has power to prescribe the manner in which disclosures under section 330, 331, 332, or 338 must be made, but section 339(1A) creates an offence if a disclosure is made otherwise than in the form prescribed under section 339(1).

7.147  None of the money laundering offences (sections 327 to 329 of POCA 2002) are Group A offences for the purposes of CJA 1993 (which gives a criminal court in England and Wales jurisdiction to try offences specified within that Group).

7.148  It was held by the Court of Appeal in R v Rogers²³¹ that sections 327(2A)(a), 340(2)(b), and, in particular, section 340(11)(d), gave a strong indication that a defendant’s money laundering activity abroad is potentially within the jurisdiction of the courts of England and Wales in respect of offences contrary to section 327 of POCA 2002. Accordingly, the court had jurisdiction in respect of a charge of converting criminal property, contrary to section 327(1)(c) of the 2002 Act in circumstances where R lived and worked abroad and had permitted money to be paid into (and withdrawn) from his foreign bank account. Alternatively, even if the 2002 Act did not provide jurisdiction in the instant case, the offence of money laundering was an example par excellence of an offence which has no respect for national boundaries. When the significant part of the criminality underlying the case took place in England, including the continued deprivation of the victims of their moneys, there was no reasonable basis for withholding jurisdiction. It was not an offence in which the Spanish authorities would have had an interest.²³²

7.149  Although in Rogers the Court focused on the offence created by section 327, it is submitted that there could be circumstances in which the reasoning of the Court is applicable in respect of an offence charged under section 328 or 329.

7.150  A person who conducts business in the ‘regulated sector’²³³ commits an offence contrary to section 330(1) if he fails to make a ‘required disclosure’ (section 330(5))²³⁴ and four conditions are satisfied.

(p. 175) 7.151  A disclosure is a ‘required disclosure’ when it involves:²³⁵

1. (1)  the identity (if the person making the disclosure knows it) of the person he knows or suspects to be engaged in money laundering;

2. (2)  the whereabouts of the laundered property, so far as he knows it; and

3. (3)  the information on which his knowledge or suspicion is based, or which gives reasonable grounds for such knowledge or suspicion.

7.152  The four conditions are as follows:

1. (1)  the person making the disclosure knows, suspects, or has reasonable grounds for knowing or suspecting that another person is engaged in money laundering;

2. (2)  the information, on which the person’s level of knowledge is based, came to him in the course of business in the regulated sector;

3. (3)  the person:

   1. (a)  can identify someone who is known or suspected to be engaged in money laundering, or

   2. (b)  can identify the whereabouts of any laundered property,²³⁶ or

   3. (c)  believes, or it is reasonable to expect him to believe, that the information or other matter mentioned in section 330(3) will or may assist in identifying that other person or the whereabouts of any of the laundered property;

4. (4)  he does not make the required disclosure to one of the persons specified in section 330(4)²³⁷ as soon as is practicable after the information or other matter mentioned in section 330(3) comes to him.

7.153  Section 330 of POCA 2002 (and section 21A of TA 2000) criminalizes those who conduct business in the ‘regulated sector’²³⁸ but who fail to make a ‘required disclosure’ of their knowledge or suspicion that another person is engaged in (p. 176) money laundering.²³⁹ Section 330 has been significantly amended, in particular, by SOCPA 2005.

7.154  As originally drafted, section 330 made it an offence to fail to disclose a suspicion of money laundering even if (objectively viewed) there was no hope of identifying the launderer or the whereabouts of any of the laundered property. The amendments made to section 330 by SOCPA 2005 have the effect of imposing a less onerous burden on persons in the regulated sector. A ‘required disclosure’ is one that identifies the person suspected to be engaged in money laundering, and/or identifies the whereabouts of the ‘laundered property’,²⁴⁰ and/or ‘information or other matter’ on which that knowledge or suspicion is based (or which gives reasonable grounds for such knowledge or suspicion).

7.155  Section 330(3A)(b) makes it clear that an offence under the section will be committed if it is reasonable to expect the alleged offender to believe that the information or other matter will or may assist in identifying the suspected launderer or the whereabouts of any of the laundered property.

7.156  In R v Castellanos-Penaloza and others (Southwark Crown Court, 2006), the question arose of whether it is necessary for the prosecution to prove a predicate money laundering activity. The point was resolved without a ruling from the trial judge. The defence relied on a statement made by the Attorney-General in the House of Lords that ‘the concern that the negligence offence is unfair overlooks the fact that the offence in clause 330 of failing to report to the authorities is permitted only if the prosecution proves that money laundering was planned or undertaken’.²⁴¹ Had the matter been argued before the trial judge, the prosecution would have contended that no predicate money laundering activity need be proved, and that this reflected the true intention of the legislature having regard to (a) other statements made in Parliament, and (b) the purpose of other domestic and EU legislative instruments. The decision of the House of Lords in Montila²⁴² is relevant in this context because it is authority for the proposition that for the purposes of an offence charged under section 49(2) of DTA 1994 or section 93C of CJA 1988 it is necessary for the prosecution to prove that the property was, in the case of the former, the proceeds of drug trafficking or, in the case of the latter, the proceeds of crime.

7.157  The definitions of ‘criminal conduct’ and ‘criminal property’ appear in section 340 of POCA 2002 for the purposes of sections 327 to 329. Accordingly, it might be argued that the principle decided in the Montila case applies to the ‘failure to (p. 177) disclose’ offences too. The objection to such argument is that the latter set of offences is not concerned with the fact that D handled property in circumstances where he knew of or suspected its illicit origins, but with D’s failure to disclose his knowledge or suspicions, or the information upon which his level of knowledge was based. It is submitted that the object of section 330 is to enable the appropriate law enforcement agencies to investigate whether a predicate offence has been committed or not. That process is dependent on information—including suspicions—being passed to the relevant agency. That said, it is submitted that there are likely to be many cases where a prosecution for failure to disclose would not be in the public interest, for example an unreported suspicion that is demonstrably unfounded, or where criminal conduct cannot be proved. But there might be other cases where the failure to report was blatant, and where the activities of the third party were in fact highly suspicious, albeit that subsequent investigation revealed no wrongdoing.

7.158  All defences under section 330 are subject to section 330(8) that requires a court to consider whether the alleged offender followed any ‘relevant guidance’ approved by the Treasury.

7.159  By virtue of section 330(6)(a) and (b), no offence is committed if a person has reasonable excuse for not making the required disclosure, or he is a professional legal adviser ‘or other relevant professional adviser’ whose knowledge of the material that would otherwise be disclosed, came to him in ‘privileged circumstances’ (as defined by section 330(10) and (11) of POCA 2002).

7.160  A person who is employed by (or who is in partnership with) a professional legal adviser or ‘a relevant professional adviser’ and who provides the adviser with assistance or support does not commit an offence contrary to section 330 if two conditions are satisfied: (1) the information (or a matter mentioned in section 330(3)) comes to that person ‘in connection with the provision of such assistance or support’; and (2) the information (or other matter) came to the adviser in privileged circumstances (section 330(7B)).²⁴³

7.161  No offence is committed if a person does not know or suspect that another person is engaged in money laundering, and he has not been provided by his employer with such training as is specified by the Secretary of State (by order) for the purposes of section 330 POCA: (section 330(7)).

7.162  No offence is committed under section 330 if a person ‘knows, or believes²⁴⁴ on reasonable grounds’, that the money laundering is occurring in a particular country or territory outside the UK, and the money laundering is not unlawful under (p. 178) the criminal law applying in that country or territory, and is not of a description prescribed in an order made by the Secretary of State (section 330(7A) as amended by section 102(5) of SOCPA 2005).

7.163  For an offence under section 330 of POCA 2002, the maximum penalty for conviction on indictment is five years’ imprisonment, a fine, or both; and on summary conviction, a maximum term of six months’ imprisonment, a fine up to the statutory maximum, or both (section 334(2) of POCA 2002).

7.164  Section 331 of POCA 2002 applies to persons nominated to receive disclosures under section 330 of the Act. Such an officer commits an offence if he fails to disclose his or her knowledge or suspicions that another person is engaged in money laundering. The elements of the offence, and the defences to it, broadly mirror those set out in section 330.

7.165  For an offence under section 331 of POCA 2002, the maximum penalty for conviction on indictment is five years’ imprisonment, a fine, or both; and on summary conviction, a maximum term of six months’ imprisonment, a fine up to the statutory maximum, or both (section 334(2) of POCA 2002).

7.166  Section 332 of POCA 2002 largely mirrors section 331 of the Act, but no provision is made that a court must consider whether the accused followed relevant guidance approved by the Treasury that has been issued by a supervisory authority or any other appropriate body.

7.167  For an offence under section 332 of POCA 2002, the maximum penalty for conviction on indictment is five years’ imprisonment, a fine, or both; and on summary conviction, a maximum term of six months’ imprisonment, a fine up to the statutory maximum, or both (section 334(2) of POCA 2002).

7.168  A person commits an offence contrary to section 333A of POCA 2002 if he reveals (tips off) that he or another person has disclosed to a police officer, officer of revenue and customs, a nominated officer, or an officer of the NCA relevant information that came to him in the course of a business in the regulated sector. The (p. 179) tip-off must be one likely to prejudice an investigation that might be conducted: section 333A(1).

7.169  A person also commits an offence if he tips off another person that an investigation into allegations of a money laundering offence is being contemplated or is being carried out, and the disclosure (tip-off) is likely to prejudice that investigation (being a disclosure that came to the person in the course of a business in the regulated sector): section 333A(3).

7.170  No offence is committed by an employee, officer, or partner of an undertaking, if the disclosure is made to another such person in that same undertaking: section 333B.²⁴⁵

7.171  No offence is committed by a person if the disclosure is by a ‘credit institution’ or a ‘financial institution’ to another such institution situated in an EEA state or in a country that has equivalent money laundering requirements: section 333B(2).

7.172  No offence is committed if the disclosure is made by a ‘credit institution’, ‘financial institution’, ‘professional legal adviser’, or other ‘relevant professional adviser’ to another like person, and the disclosure (which relates to a client) was made only for the purpose of preventing an offence under Part 7 of POCA (typically, a money laundering offence): section 333C.

7.173  No offence is committed if the disclosure is to a ‘supervisory authority’, or for the purpose of the detection, investigation, or prosecution of an criminal offence (in the UK or elsewhere) or the enforcement of any order of a court under POCA 2002: section 333D.