Money launderingCriminal enforcement
Which government entities enforce your jurisdiction’s money laundering laws?
Money laundering offences are principally investigated by the police, the National Crime Agency (NCA) or HM Revenue & Customs (HMRC), or, if the offence has been committed by an entity in the City of London, the Financial Investigations Unit of the City of London Police. The Crown Prosecution Service usually conducts criminal proceedings. The Serious Fraud Office investigates and prosecutes matters involving serious or complex fraud or corruption. Where the allegations are linked to financial firms, the matter may be investigated or prosecuted by the Financial Conduct Authority (FCA).
The FCA, HMRC, the Gambling Commission and 22 other professional bodies act as supervisory authorities under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the Regulations). Breaches of the Regulations may be pursued civilly or criminally. Supervisory authorities may also take other regulatory action in relation to failures in money laundering systems and controls.Defendants
Can both natural and legal persons be prosecuted for money laundering?
A corporate can be held criminally responsible under UK law under the identification principle. The identification principle requires that to attribute criminal liability to a corporate, its controlling mind and will must be identified. The controlling mind and will is a natural person or persons with sufficient control of the company that their acts are attributable to the company itself.
The identification principle complicates the prosecution of corporates, particularly in relation to large organisations with complex structures. An exception to the principle is the ‘failure to prevent’ strict liability approach, in which a corporate is guilty of an offence if it fails to prevent offending, unless it can demonstrate that it had adequate procedures in place to prevent it. In the UK, failure to prevent offences are currently limited to the offences of failing to prevent bribery and failing to prevent the facilitation of tax evasion. A recurring discussion is whether to extend the ‘failure to prevent’ offences to other economic crimes. The Law Commission is currently undertaking a scoping exercise for a review of the law on corporate criminal liability and whether new ‘failure to prevent’ offences should be introduced.The offence of money laundering
What constitutes money laundering?
The primary money laundering offences are set out at sections 327 to 329 of the Proceeds of Crime Act 2002 (POCA). In each case, it is necessary to show that the person knows or suspects that the property in question represents the proceeds of crime.
The threshold for suspicion in this context is low. Suspicion for these purposes is defined in the decision of the Court of Appeal in R v Da Silva (2006) (EWCA Crim 1654), where the court held that a person ‘must think there is a possibility, which is more than fanciful, that the relevant facts exist’. A vague feeling of unease would not suffice; however, the statute does not require the suspicion to be ‘clear’ or ‘firmly grounded and targeted on specific facts’, or based upon ‘reasonable grounds’.Qualifying assets and transactions
Is there any limitation on the types of assets or transactions that can form the basis of a money laundering offence?
‘Property’ under POCA includes property of any kind wherever it is situated (section 340(9) of POCA).
However, under sections 327(2C), 328(5) and 329(2C), a deposit-taking body does not commit an offence if it commits any of the acts forming the basis of the primary offences so long as the act is done in the course of operating an account that it maintains, and the value of the property concerned is less than £250.Predicate offences
Generally, what constitute predicate offences?
Money laundering offences under POCA are on an ‘all crimes’ basis. This means that the money laundering offences are not restricted to a particular or limited type of predicate offence. Tax offences have always been predicate crimes for the purposes of the money laundering offences under POCA.
For the purposes of the principal money laundering offences, ‘criminal conduct’ means conduct that constitutes an offence in the UK or would constitute an offence in the UK if it had occurred there. It is also immaterial who carried out the conduct, who benefited from it and whether the conduct occurred before or after the coming into force of POCA.
The UK does not have currency exchange laws in place, though law enforcement has considered that methods used to violate other states’ currency exchange laws to remit funds to the UK can involve the commission of ancillary offences under UK law or involve substantive money laundering, or both.
POCA also sets out the UK’s non-conviction-based asset forfeiture regime (which is called ‘civil recovery’). Civil recovery applies to the proceeds of ‘unlawful conduct’, as defined in section 241 of POCA:
- conduct that is unlawful under UK criminal law; or
- where the conduct occurred outside the UK, is unlawful under the criminal law of that territory and that, if it had occurred in the UK, would be unlawful under UK criminal law.
An amendment introduced in January 2018 (section 241(2A)) extended the meaning of ‘unlawful conduct’ to include conduct that:
- occurs outside the UK;
- constitutes or is connected with the commission of a gross human rights abuse or violation; and
- if it had occurred in the UK, would be an indictable offence.
Are there any codified or common law defences to charges of money laundering?
Defences to the primary offences are set out in sections 327 to 329 of POCA.
It is a defence to the primary money laundering offences if an authorised disclosure is made to the NCA and appropriate consent has been given (before the act is done). It is also a defence if a person intended to make a disclosure but had a reasonable excuse for not doing so. These disclosures are made via a suspicious activity report (SAR) seeking the appropriate consent. They are sometimes called consent SARs or a defence against money laundering SAR (DAML SAR).
A DAML SAR gives the NCA an opportunity to consent (or refuse consent) to the relevant transaction. If no response is given by the NCA within seven working days starting from the first working day after the DAML SAR is filed, consent is deemed to have been given. If, however, within that seven working day period, consent is refused, a moratorium period of 31 days follows (starting from the day on which consent is refused). At the end of the moratorium period, consent is deemed to have been given (section 335 of POCA). The moratorium period can be extended by the Crown Court a number of times up to a maximum of 186 additional days, on top of the initial 31 days (section 336A of POCA).
It is also a defence to an offence under section 329 of POCA to acquire, use or possess the property for adequate consideration. However, there is no consideration where the person knows or suspects that the provision of the goods or services may help another person to carry out criminal conduct. The adequate consideration defence does not apply to the money laundering offences under sections 327 and 328 of POCA.Resolutions and sanctions
What is the range of outcomes in criminal money laundering cases?
The primary offences are punishable with a maximum penalty of 14 years’ imprisonment and an unlimited fine. Whether to prosecute an individual for a money laundering offence is subject to the two-stage test applied to all criminal offences: (1) whether there is sufficient evidence to provide a realistic prospect of conviction; and (2) whether a prosecution is in the public interest.
For a corporate defendant, the penalty is an unlimited fine. Unlike an individual defendant, a corporate defendant can enter into a deferred prosecution agreement (DPA). A DPA requires an admission of some wrongdoing but avoids a criminal conviction. A DPA usually contains conditions requiring the payment of a fine, disgorgement of any benefit from the wrongdoing and the payment of the prosecution costs. It can also require continued cooperation with an ongoing investigation and a period of monitoring of policies and procedures. A DPA is for a fixed period, agreed between the parties and must be approved by a judge. At the successful conclusion of a DPA, the criminal proceedings against the corporate defendant are concluded.
The UK has a non-conviction-based asset forfeiture regime (the civil recovery regime). Civil recovery investigations and proceedings can be settled.Forfeiture
Describe any related asset freezing, forfeiture, disgorgement and victim compensation laws.
A number of procedures are available to deprive offenders of the proceeds of crime.Confiscation orders
A confiscation order is an order depriving a convicted person of the benefit gained from their criminal conduct. The order is not directed at any specific property but is made for the recovery of a sum said to represent the value of the benefit from criminal conduct. When making a confiscation order, a period of imprisonment in default must be set in the event of a failure to satisfy the order.Compensation orders
A compensation order is an order made by the court requiring the payment of a sum of money to a victim for loss or damage suffered as a result of the criminal conduct.Civil recovery orders
Part 5 of POCA provides for the making of a civil recovery order (CRO) by the High Court for the recovery of property, which is or represents property obtained through unlawful conduct. The question of whether property has been obtained through unlawful conduct is decided on the balance of probabilities. A CRO does not require a criminal conviction or any criminal proceedings; it targets property not the person holding it. An enforcement authority may obtain a CRO against any person it thinks holds recoverable property.Disgorgement
Under the DPA regime, a corporate that enters into a DPA may be required to pay a disgorgement figure representing the profits from any wrongdoing.Limitation periods on money laundering prosecutions
What are the limitation periods governing money laundering prosecutions?
As is the norm in UK criminal law, except in respect of summary only offences, there is no limitation period for the prosecution of offences, including money laundering offences. The money laundering offence must be committed after the commencement of POCA; however, the date of the predicate offending is immaterial.Extraterritorial reach of money laundering law
Do the money laundering laws applicable in your jurisdiction have extraterritorial reach?
The courts have held that the primary offences have some extraterritorial application. A person who is not in the UK can be prosecuted for a money laundering offence in the UK even where their conduct took place entirely outside the UK, in circumstances where a substantial element of the overall criminality took place in the UK and its harmful consequences were felt in the UK (see R v Rogers (2014) EWCA Crim 1680, paragraph 55). The reporting obligations attach to money laundering wherever it occurs (assuming the reporter is within the UK).
Law stated dateCorrect on
Give the date on which the above information is accurate
21 May 2020.