Money LaunderingNovember 2005

The Proceeds of Crime Act 2002 (POCA) is one of the largest pieces of criminal legislation on the statute books and, just like the Criminal Justice Act 2003, it is now becoming a regular feature in the lives of criminal lawyers. It is clear that the police are now comfortable with the new offences created under Part 7 of POCA. Bodies such as the Regional Asset Recovery Teams and HMRC, the new amalgamation of customs and the Inland Revenue, appear to be much more pro-active at considering money laundering offences as part of a wider investigation, into e.g. drugs or people trafficking. Money laundering is being taken very seriously both by the prosecution authorities and the Courts; we expect to be defending in more and more of these types of cases.

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 on this issue envisages that there are basically 2 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 2 types of laundering can be charged on a stand alone indictment or may be secondary counts where the principal offence is also charged. At the moment the trend seems to be for money laundering to be dealt with separately.

Laundering Charges pre-POCA

Prior to the enactment of Part 7 of POCA on 24th February 2003 there were two separate money laundering regimes. Firstly, there was s93C of the Criminal Justice Act 1988 which referred to the laundering of the proceeds of any criminal conduct other than drug trafficking. Secondly, there was s49(2) of the Drug Trafficking Act 1994 which dealt specifically with the proceeds of drug trafficking. The money-laundering offences created by these Acts still apply to laundering offences committed before 24th February 2003. The split regime created difficulties where the police couldn't be sure where the money came from, drugs or other crime. One method of dealing with this problem was to allege both counts in the indictment and leave it to the jury but this route was far from satisfactory for either side.

Laundering Charges post-POCA and 'Criminal Property'

The distinction between drugs money and money from other types of crime has now been abolished. The three main offences created by POCA are s327 - concealing, disguising, converting or transferring criminal property, 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 business, 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; we are currently engaged in a case where the Defendants include an estate agent and a solicitor. We expect prosecutions of this sought to increase.

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. Under the old law if the principal money launderer was accused of any type of transfer the Crown had to prove that the act was for the express purpose of avoiding prosecution or a Confiscation Order. Now the Crown just 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.

It is scarily easy to commit an offence under the Act - any involvement in property which has been obtained even partly through crime exposes you to risk. For example a wife that spends £5000 in cash given to her by her husband when he is unemployed. If the cash is from the proceeds of crime and the unknowing wife suspects it is at least 'dodgy' then she can expect to find herself in the dock with her husband if the police come knocking. Or if you agree to let someone use your bank account to deposit some cash there is a risk that if that person is arrested, you too will find yourself in the dock. In short the people around a profiteering criminal are clearly at risk as well as the criminal himself and also people who the criminal might not even know who are involved further down the line. For example a drug dealer buys a brand new expensive car and gives it to his son. The son gets bored with the car after a year and sells it through a notice in the newsagents window - he sells it very cheaply because he wants a quick sale and its all profit anyway. In that scenario the end purchaser as well as the son could find themselves in the dock and possibly the newsagent too under s328. There would be no reason necessarily to wait for the father to be convicted for drug dealing and all three would be facing custodial sentences. The maximum sentence in each case is 14 years imprisonment.

It is important in any money-laundering allegation to consider the basics; what type of laundering is alleged, is there a principal offender, can the prosecution prove the property is 'criminal property' and, in the more complex cases it is important to identify whether or not there a need for a forensic accountant. If so he or she must be engaged early and your solicitors must ensure that the prosecution have served copies of all relevant accounts etc. As always early and thorough preparation is the key - as we said above the authorities are now becoming increasingly confident in using Part 7 of POCA and we can all expect to come across more and more people who have fallen into POCA's net.

Authors

Zafar Ali is a specialist criminal defence Barrister at 23 Essex Street Chambers in London dealing with very serious crime.

Aziz Rahman is a Solicitor- Advocate and Partner at the leading Criminal Defence firm Rahman Ravelli Solicitors, specialising in Human Rights, Financial Crime and Large Scale Conspiracies/Serious crime. Rahman Ravelli are members of the Specialist Fraud Panel.

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