‘Money laundering’ is the term used to describe the process by which the ownership and control of the proceeds of criminal conduct is varied or disguised to make it appear to have come from a legitimate source.
This rather widely drawn definition, together with the complexity of modern finance, means there are few investigations in the corporate environment which do not raise a money laundering issue.
The fact that money laundering is investigated both as a standalone offence and alongside other criminal offences, where there is an allegation of financial gain from a criminal offence there will usually be an associated money laundering investigation.
Even where individuals or companies are entirely innocent of an offence, it is surprisingly easy for a prosecutor to make out a case for money laundering. Awareness of the vulnerability this creates is important in advising any business facing police or regulatory investigation.
The key piece of legislation governing money laundering is the Proceeds of Crime Act 2002 (‘POCA’). POCA has been criticised as being both complex and draconian.
The Act’s substantive money laundering offences focus on criminal property, which is defined as property which is known by the alleged offender to be the result of criminal conduct. Any individual or corporate that deals in criminal property may be liable under POCA for one of the three primary money laundering offences. These offences are:
A potential defence against any of the three POCA money laundering offences listed above is to make a Suspicious Activity Report (SAR).
Suspicious Activity Reports are confidential disclosures made by an individual or organisation to the National Crime Agency detailing potential money laundering activity (or terrorist funding). Since being introduced into law in 1996, SARs have proved very popular. During the financial year 2018/2019, the NCA processed a total of 478,437 SARs.
The decision on whether to make a SAR is not always simple, especially when information on which a suspicion is based is subject to legal professional privilege. Care should be taken not to contravene the ‘tipping off’ provision (whereby a potential suspect becomes aware of suspicions) or to prejudice an investigation.
In addition to POCA, firms conducting business in the regulated sector (typically financial and credit institutions, accountants, tax advisers and other professionals) have to comply with additional obligations under the Money Laundering Regulations. Under the Regulations, these firms are obliged to implement certain checks, controls and procedures to prevent money laundering within their business. Failure to comply can be a criminal offence.
In certain circumstances those in the regulated sector also have an additional duty to report suspicious of others being involved in money laundering, with failure to do so carrying a criminal sanction.
Money laundering investigations often involve allegations that assets have been transferred across borders or hidden in another jurisdiction. As such, investigators are well used to working with their counter parts in other countries and in assisting in each other’s investigations. The UK’s extensive mutual legal arrangements with other countries are often deployed both to pursue enquiries overseas and to assist with requests made to the UK in money laundering investigations.
Nearly all of the SFO’s investigations involve an international dimension. Its Proceeds of Crime and International Assistance Division liaises with foreign authorities and handles incoming requests for assistance.
The UK’s law enforcement agencies have extensive powers to restrain assets suspected of being the result of criminal behaviour. Criminal restraint orders, civil restraint orders, Account Freezing Orders (AFOs) and Unexplained Wealth Orders (UWOs) are all are available under POCA. These orders can be draconian, wide reaching and disruptive to individuals and businesses alike.
Restraint orders such as the above are usually sought when a law enforcement agency anticipates seeking forfeiture at the conclusion of its investigation. It is possible to challenge these orders by applying for discharge or variation. When and whether to do so is an important strategic decision.
Hickman & Rose has extensive experience advising in money laundering cases. Members of our team are regularly instructed by lawyers, law firms and other professionals facing potential money laundering issues or grappling with the SARs regime and disclosure issues. Our clients include some of the leading professional services firms in the UK as well as high profile individuals, senior executives and businesses in banking and the wider financial sector.
We are experienced in advising clients subject to requests from law enforcement in the US, Europe and elsewhere in the world for mutual legal assistance in money laundering investigations. We are used to working with lawyers in other jurisdictions to identify the best strategic approach in these cases.
One partner in our financial crime team has been a member of the Law Society Money Laundering Task Force since 2012 and three are members of the Law Society Money Laundering Panel giving advice to solicitors on money laundering issues.