Accused of Money Laundering ?

Specialist Fraud Solicitors

Defending Proceeds of Crime Act offences

If you have been accused of Money Laundering taking immediate steps is vital to the success of any Defence.

Allegations of Money Laundering are often complex and can be investigated by many organisations including: the Serious Fraud Office (SFO), HM Revenue and Customs (HMRC), Department of Works and Pensions (DWP), the Office of Fair Trading (OFT), the Department of Trade and Industry (DTI), the Financial Services Authority (FSA), Trading Standards Departments, Serious and Organised Crime Agency (SOCA) well as the Assets Recovery Departments of various Police Forces.

At Rahman Ravelli we have Specialist Teams expert at defending these allegations (see also Serious Fraud Department). We will assemble a team and work out the most advantageous strategy to best protect your interests. If need be we will instruct external experts including Forensic Accountants to progress the Defence.

Dealing with allegations of Money Laundering can be quite involving and it is important to get it right the first time. We at Rahman Ravelli will actively advise you on your options and help you through all the intricacies. Rahman Ravelli are experts in dealing with high profile and complex cases. Indeed we are recognised as such by our appointment to the Specialist Fraud Panel.

The Money Laundering legislation can be a minefield. Understanding the component features is vital to the preparation of any defence.

TYPES OF MONEY LAUNDERING

Money laundering is simply the 'cleaning' or disguising the origins of the proceeds of crime. Money laundering schemes range from the straightforward and simple to the sophisticated, involving chains of several companies and possibly offshore accounts. The CPS guidance for prosecutors suggests that there are basically two types of money-laundering. Firstly "own proceeds" or "self-laundering"; this is where an offender simply acts to launder the proceeds of his own offending. Secondly, there is laundering by a person other than the author of the principle offence. These two types of laundering can be charged as secondary counts where the principal offence is also charged.

Alternatively, money laundering can be charged completely separately without the jury considering the principal offence. This will often happen where someone is convicted, say of a trafficking offence, and the subsequent confiscation enquiry reveals others who are financially linked to the person convicted. Those transactions will form the basis of the money laundering charges and the Crown will rely on the conviction of the principal offender and seek to show links between the two. Sometimes, if the Crown have evidentially difficulties in proving a principal case against a suspect, it will resort to an Al Capone type prosecution (Al 'Scarface' Capone defeated several murder prosecutions but was convicted in 1931 of income tax evasion and received 11 years.); i.e. prosecute the person they say is the principal offender, not for the offence itself but for the alleged laundering of money thereafter.

The latest CPS guidance on money laundering describes the offence as the process by which proceeds are sanitised to disguise their illicit origins; such schemes will usually involve 3 stages:

Placement: - the process of getting criminal money into the financial system;
Layering: - the process of moving money in the financial system through complex webs of transactions, often via offshore companies;
Intergration: - the process by which criminal money ultimately becomes absorbed into the economy, such as through investment in real estate.

Prosecutions for money laundering can involve any or all of these stages.

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STATUTORY REGIMES

Money laundering is a statutory offence. However, which statute applies depends when the alleged offence was said to have been committed. Today there is the Proceeds of Crime Act 2002; sections 327-329. This creates 3 principal money laundering offences, dealt with below. This part of POCA came into force on 24th February 2003; i.e. the Act applies to offences said to have been committed on or after that date.

Pre- POCA
Under pre-POCA law, there were separate laundering offences under two different Acts.

Firstly, laundering the proceeds of money said to eminate from drug trafficking was an offence under the under the Drug Trafficking Act 1994.

Secondly, laundering the proceeds of other crime, that was not drug trafficking, was an offence under the Criminal Justice Act 1988.

There are still prosecutions under both these Acts, especially where the prosecution have the benefit of having someone convicted of say drug trafficking but the offence itself was committed prior to POCA coming into force.

It maybe, in those circumstances, after conviction the police conduct a financial enquiry for possible confiscation proceedings against the newly convicted person and come across other persons not directly involved in the drug dealing, but linked financially to the offender. Depending on the dates of the suspicious financial transactions it is likely that the Crown will, in such a case, proceed under the 1994 Act.

The benefit for the Defendant is that the prosecution then have to prove specifically that the Defendant 'knew' or 'had reasonable grounds to suspect', that the proceeds in question were, in whole or in part, directly or indirectly, representative of the proceeds of drugs trafficking. It may be much more difficult for the Crown to prove to a jury beyond reasonable doubt that the Defendant had the knowledge or suspicion that the money came specifically from drug dealing - the jury may just believe that the Defendant must have known the money was somehow tainted but not necessarily know specifically that it came from the sale of drugs.

CONSPIRACIES

The Crown may also face difficulties in conspiracy cases.

A person is guilty of conspiracy where he agrees with at least one other to commit an offence; the offence is made out at the time of the actual agreement so, generally speaking, there has to be a mental element of actual knowledge in conspiracy cases - as opposed to suspicion. Case law now establishes that in cases where the Crown wish to show that specific property was to be laundered; e.g. specific sums of currency, then the Defendant should only be convicted of a conspiracy to contravene section 49(2) of the Drug Trafficking Act 1994 or section 93C(2) of the Criminal Justice Act 1988, if he knew at the time of the agreement that he was dealing with the proceeds of drug trafficking/ criminal conduct; R. v. Montila and others [2004] 1 W.L.R. 3141, H.L. and R. v. Liaquat Ali, Akhtar Hussein and Mohsan Khan; R. v. Shahid Batti (2005) 149 S.J. 770, C.A. (following R. v. Harmer [2005] 2 Cr. App. R 23, 2)..See also now R v Saik [2006] 2 W.L.R. 993, HL. Where how ever the case was that the conspirators where dealing with property which had not been identified when the agreement was made, an intention that the property would be the proceeds of criminal conduct was required.

It is likely now that the practical effect in conspiracy to commit the new POCA offences will be the same; i.e. that the prosecution will have to show an intention that the property to be laundered would be 'criminal property' (see definition below) where the property itself had not yet been identified at the time of the agreement; i.e. an abstract or general agreement to convert or transfer theoretical property which might turn out to be the proceeds of crime. Where, on the other hand, the property to be laundered was actually identified at the time of the agreement then the Crown have to prove knowledge (not just belief or intention) on the Defendant's part that the property was 'criminal property'. This complication only arises in conspiracy allegations.

The issues surrounding the law on conspiracy to commit a laundering offence are far from easy. However, POCA generally has made life easier for the Crown as they do not have to identify the type of crime alleged - just that the laundered money is the proceeds of some type of crime.

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MONEY LAUNDERING CHARGES UNDER POCA AND CRIMINAL PROPERTY

There are three main offences created by POCA which carry penalties of up to 14 years imprisonment.

Section 327 - concealing, disguising, converting or transferring criminal property (see definition below), or removing it from the jurisdiction. This is one offence which can be committed in the five different ways listed. It is perhaps the easiest way for the Crown to proceed on 'self-laundering' charges.

Section 328; is entering into, or becoming concerned in an arrangement to facilitate the acquisition, retention, use or control by, or on behalf of another person, of criminal property knowing or suspecting that the property is criminal property. That offence can cover a wide range of evils but it can be seen how it would be used in cases where the launderer is not said to be the principal offender in the criminal conduct.

Section 329 is the offence of acquiring, using or having possession of criminal property. Again, this can cover a whole range of situations but will often be used to prosecute an 'end user'; i.e. the person who buys a car, a house etc from a criminal.

There are exceptions to all 3 charges where the person concerned makes an "authorised disclosure" to the relevant authorities but this is really to protect banks and other businesses from committing what would otherwise be an offence when dealing with a criminal's money. The Act is clear that certain businesses are under a duty to inform the police of any customer they believe is laundering criminal cash through their business. Many professionals have fallen foul of the Act in one way or another.

What is 'Criminal Property'?

It can be seen then that the lynchpin of the 3 offences is the notion of 'criminal property'. The prosecution have to prove that the property, whether it is cash, a house, a car or whatever it is, is 'criminal property'. This is defined at s340(3) as property which represents a benefit from criminal conduct, either directly or indirectly, in whole or in part, so long as the launderer 'knows or suspects' that the property represents such a benefit. The Crown has to show that the launderer committed the relevant act (i.e. transfer, concealing etc) knowing or suspecting that the property derived from criminal conduct.

In R v IK [2007] EWCA Crim 491, 8/3/07 the question for the Court was whether the proceeds of cheating the revenue could be 'criminal property'. In a nutshell a legitimate trader had earned legitimate money undertaking a legitimate business (a shop). The allegation was that not all the income was declared - thus cheating the revenue. The Crown prosecuted money laundering offence but the trial Judge ruled that there was no 'criminal property' - the money did not come from crime. Following a prosecution appeal, the Court of Appeal found that the undeclared income could in part 'represent' the proceeds of crime, as that undeclared amount would be representative of the 'benefit'. Thus applying the statute properly that undeclared income could at that point be criminal property.

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How do the prosecution prove the existence of 'criminal property'?

So to prove any of the above three offences the Crown have to prove that the property was derived from criminal conduct. How do they do that?

Of course it all depends on the facts of the case; if, in a trial, the money laundering is a secondary Count to the principal crime alleged in Count 1, then the focus for all sides is to concentrate on Count 1. If though the alleged money launderer is not included in Count 1, or the original criminal activity was committed by someone else convicted in an earlier case; or even where there is no convicted principal, the case for the Crown on money laundering becomes more problematic. The Crown will first of all want to prove a link between the principal criminal, the drug trafficker for example, and the launderer. Under the three offences the Crown have to show that not only that actual property derived from crime, but it must also be proven that the suspect 'knew or suspected' that the property represented benefit from crime.

When the prosecution is unable to show the commission of the underlying criminal offence then that task becomes more difficult and the Crown will then usually have to rely on circumstantial evidence to try and prove that the money was criminal property. The same often applies were a particular crime can be proven to have been committed by someone else; then the only issue for the jury, in the money laundering trial will be what was in the alleged launderer's mind - did he/she 'know or suspect'?

Preparing your Defence

In R v Da Silva [2006] EWCA Crim 1654, 11/7/06 the Court of Appeal considered a trial Judge's direction to the jury on the word 'suspicion'. Generally there should be no jury direction on what it means but in law 'suspecting' means that "there is a possibility, which is more than fanciful that the relevant facts exist. A vague feeling of unease would not suffice." Of course the circumstantial evidence which the prosecution may bring to Court can be quite damming and first sight, e.g. large sums of cash, contaminated notes, lies in interview and a lack of commercial sense in some transactions linked possibly with connections to anyone accused or convicted of a principal offence.

However, though the power of circumstantial evidence should never be underestimated, the fact is that the defence may, either through cross-examination or through the Defendant's evidence, show that there are other 'co-existing circumstances' which explain the issues and can go to weaken the prosecution's inference. The Judge may be persuaded that the case is a suitable one for direction to the jury on circumstantial evidence. This simply means that the Judge will remind the jury that, as a matter of law, that it should distinguish between arriving at conclusions based on reliable circumstantial evidence, and mere speculation. Juries are often told that speculating in a case amounts to no more than guessing, or making up theories without good evidence to support them and that is an un-supportable basis for a conviction.

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Rebutting Inferences

Rebutting inferences therefore can be a very significant part of the job of defending and must get early attention. It may lead to the instruction of an expert, for example a forensic accountant. It may be that an accountant or auditor with a particular knowledge of some business area can help a Defendant show, for example, that it is not unusual for significant cash flow to come from a bar, or a mini-cab business - all cash only businesses, or that certain losses appeared to fall outside the indictable period or the Defendant's work shift. The expert may be able to help rebuttal by comparing with other like businesses in the area and/or show the existence of a reasonable audit trail. Of course there may be a lack of a proper audit trail etc; experts will not always be able to help but in the right circumstances such evidence can make the Crown's case look like speculation.

It is especially important in money laundering cases to keep an eye on the basic ingredients of the offence and if it is a 'suspicion' case seek to get rebutting evidence, and in complex cases ensure that full disclosure has been given of all the accounts and audit trails etc and an expert for the defence considered.

Related Subjects
Confiscation Orders
The New Money Laundering Offences and Longfirm Frauds
Money Laundering
Freezing Your Assets
Asset Forfeiture
Asset Recovery
Serious Crime
Financial Offences

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Arrested for Money Laundering? | Charged with Money Laundering ?
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