Unit 3: Money laundering and proceeds of crime

Which three direct money laundering offences does POCA create?

Concealing etc (s 327), arranging (s 328) and acquisition, use or possession (s 329).

Which POCA offences apply only to the regulated sector?

Failure to disclose (s 330), failure to disclose by nominated officers (s 331) and tipping off (s 333A).

Does prejudicing an investigation (s 342) apply only to the regulated sector?

No. It applies to everyone, including non-regulated individuals.

What is the s 328 arranging offence?

Entering into or becoming concerned in an arrangement which a person knows or suspects facilitates the acquisition, retention, use or control of criminal property by or on behalf of another.

Why is s 328 the most relevant direct offence for solicitors?

Mainstream work can be an arrangement (e.g. transferring a house to a client's relative), and funds need not pass through the solicitor's hands.

What is the maximum sentence for s 328?

14 years' imprisonment.

What is the test for "know or suspect" and which case sets it?

A subjective test with a low bar: a possibility, more than fanciful, that the relevant facts exist (R v Da Silva).

Is a vague feeling of unease enough for suspicion?

No, but suspicion need not be clear or firmly grounded.

What is criminal property under s 340?

A direct or indirect benefit from criminal conduct, including profits from the original crime. The person must know or suspect it is such a benefit.

Does criminal conduct abroad count as criminal property?

Yes, if it would have been criminal in the UK.

Is litigation caught by s 328?

No. Taking steps in litigation, including pre-action steps, and resolving issues in a litigious context are excluded (Bowman v Fels).

Is dividing assets under a court judgment caught by s 328?

No (e.g. divorce), but reinvesting stolen assets would breach s 328. There is no protection if the litigation is a sham.

What is the authorised disclosure defence (s 338) and which offences does it cover?

A defence to ss 327, 328 and 329.

Who must make an authorised disclosure and to whom?

The person who would otherwise commit the offence, about criminal property, to a constable, HMRC officer or nominated officer (usually the nominated officer).

How does the nominated officer report to the NCA?

By suspicious activity report (SAR), preferably online.

Must a nominated officer report every concern?

No, they use their own judgement, but risk s 331 if there were reasonable grounds to suspect.

What is required for an authorised disclosure before the act?

Disclose to the nominated officer as soon as practicable and obtain consent (from the nominated officer or NCA). Disclosure alone is not enough.

What is required for an authorised disclosure during the act (s 338(2A))?

Disclosure made while the act is ongoing, no knowledge or suspicion when the act began, made as soon as practicable after suspicion arises, and on own initiative.

What is required for an authorised disclosure after the act (s 338(3))?

Good reason for not disclosing earlier, disclosure as soon as practicable, and on own initiative.

When can the nominated officer give consent after a SAR?

When the NCA consents, or after seven working days of silence (starting the first working day after the SAR).

What happens if the NCA refuses consent?

Consent can only follow if later granted within 31 days or once the 31 days expire (can be extended).

Does consent mean the transaction is right, ethical or legal?

No. It is only a defence against money laundering, so professional conduct rules still apply.

What is the reasonable excuse defence for non-disclosure?

It is narrowly construed (e.g. information already public). Reasons should be documented.

What is the overseas defence for ss 327 to 329?

The person believed the conduct occurred abroad and was lawful there. The Secretary of State can override.

What is the s 329 offence?

Acquiring, using or possessing criminal property. It is typically used against those who benefited without joining the original crime.

How is s 329 relevant to solicitors?

A solicitor may receive costs from a client charged with a crime.

What are the defences to s 329 and its maximum sentence?

Authorised disclosure, overseas defence and adequate consideration. The maximum sentence is 14 years.

What does adequate consideration cover under s 329?

Professional fees, including disbursements, if reasonable.

When is the adequate consideration defence unavailable?

If the work is significantly less than the money received, or the solicitor knew or suspected the services might help criminal conduct.

What is the s 327 concealing offence?

Concealing, disguising, converting or transferring criminal property, or removing it from England and Wales, Scotland or Northern Ireland.

Why are solicitors at risk under s 327 and what are its defences?

Transactions often convert (money into property) or transfer (money or ownership). Defences are authorised disclosure and the overseas defence.

What are the elements of the s 330 failure to disclose offence?

Knowing or suspecting (or having reasonable grounds to know or suspect) that a person is engaged in money laundering, information coming in the course of regulated sector business, information that may help identify the launderer or locate laundered property, and no disclosure as soon as practicable.

Must money laundering actually have occurred for s 330?

No.

Is the s 330 test subjective or objective?

Objective. A solicitor can offend even if they genuinely did not suspect, and turning a blind eye is no defence.

What is the regulated sector for s 330?

POCA Sch 9: most firms for at least some of their work.

What must a disclosure under s 330 include?

It goes to the nominated officer or NCA, giving reasons for suspicion and, where possible, the launderer's identity and the property's whereabouts.

What is the maximum sentence for s 330?

5 years.

What are the defences to s 330?

Reasonable excuse, the training defence, legal professional privilege and the overseas defence.

What is the training defence to s 330?

The employee did not know or suspect, only had reasonable grounds, and lacked proper training.

What are advice privilege and litigation privilege?

Advice privilege: confidential solicitor-client communications for legal advice. Litigation privilege: confidential communications for the sole or dominant purpose of litigation (existing or reasonably in prospect).

When is legal professional privilege lost?

Where the communication furthers a criminal purpose.

What is the overseas defence to s 330?

The person believed the laundering is outside the UK and lawful there (the Secretary of State can override but has not).

What is the s 331 offence and its defence?

The nominated officer knows, suspects or has reasonable grounds to know or suspect laundering through their role and fails to disclose to the NCA as soon as practicable. Defence: reasonable excuse.

What is tipping off under s 333A?

Alerting a suspect (or associate) that an investigation has started or is anticipated. No intent to alert or prejudice need be shown, and the information must come in the course of regulated sector business.

What is the s 333A(1) offence?

Disclosing a disclosure: telling anyone a relevant disclosure (to the nominated officer or NCA) has been made, likely to prejudice an investigation.

What is the s 333A(3) offence?

Disclosing an investigation: telling anyone an investigation is underway or contemplated, likely to prejudice it.

What are the defences to tipping off?

Did not know or suspect the disclosure would prejudice an investigation (s 333D(3) and (4), scope unclear), or an adviser dissuading their client from laundering (s 333D(2), treat with caution).

What is the penalty for tipping off?

An unlimited fine and/or 2 years.

What is the s 342 offence of prejudicing an investigation?

Knowing or suspecting an investigation has begun or is about to, then making a material disclosure likely to prejudice it or interfering with relevant material.

How does s 342 differ from tipping off?

It is similar, but extends to non-regulated individuals.

What does para 6.3 of the SRA Code say on confidentiality?

Keep client affairs confidential unless disclosure is required or permitted by law or the client consents.

Does a s 338 disclosure breach confidentiality?

No.

What is the SRA's role on money laundering?

A supervisory role, with AML treated as one of its most important functions. Likely outcome of breaches is disciplinary proceedings and significant sanctions.

Which SRA Principles are breached by money laundering?

Direct involvement breaches Principle 4 (honesty). Other offences likely breach Principle 1 (rule of law and administration of justice).

Why must solicitors watch for warning signs?

Most solicitors fall between the complicit few and the totally duped, so they must spot red flags, ask questions, keep the client relationship under review and report to the nominated officer or NCA.

What are client warning signs?

Secretive, obstructive or evasive, avoids personal contact, refuses information, criminal associations.

What are funding warning signs?

Large cash payment, unexplained third-party payments, non-institutional loans, multiple or foreign accounts.

What are transaction warning signs?

Loss making, repetitive instructions, unexplained urgency, no commercial purpose, litigation settled too easily or quickly.

What are unusual instructions warning signs?

Outside the firm's expertise, non-local client with no explanation, high fees, client unconcerned.

What are geographical warning signs?

Unexplained movement of money between jurisdictions and suspect jurisdictions.