You have all heard of the expression ‘money laundering’ and often the association to this can be gangsters having to ‘wash’ or ‘clean’ the fruits of the criminality so that it can recirculate and have the appearance as clean money.
Money laundering is defined in the Proceeds of Crime Act 2002 (‘POCA’) as “the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin, so that they can be retained permanently or recycled into further criminal enterprises”.
Money laundering can be broken down into two categories:
Those who commit offences and then launder the proceeds of those criminal offences;
Those whose only criminal involvement is to launder the proceeds of crime committed by others.
Interestingly, there is no actual ‘money laundering’ offence but there are ways that one can commit money laundering as set out in Part 7 of POCA including:
Section 327:
Concealing criminal property;
Disguising criminal property;
Converting criminal property;
Transferring criminal property;
Removing criminal property from the jurisdiction.
Section 328:
Entering into an arrangement concerning criminal property by facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person.
Section 329:
Acquires criminal property;
Uses criminal property;
Has possession of criminal property.
Terminology
First things first. What do all of these words mean? And what does the prosecutor need to prove (also known as the ‘elements of the offence’).
Criminal property: a person’s benefit from criminal conduct/behaviour;
Property includes money, all forms of property or real estate, things in action and other intangible property;
State of mind: the offender knows or suspects that the property represents the benefit from criminal conduct;
Concealing or Disguising includes concealing or disguising its nature, source, location, disposition, movement or ownership or any rights with respect to it;
Converting: the 'converter' has dealt with the property in a manner inconsistent with the rights of the true owner of the property;
Transferring: moving from one place to another;
Removing: withdrawing or removing from its original location;
Acquires: obtain criminal property for inadequate consideration i.e. acquiring an item for significantly less than its market value;
Uses: makes use of the criminal property for inadequate consideration;
Has possession: knowingly in possession of the criminal property.
When an individual is charged, the charge will either be a money laundering count on its own or on an indictment with the underlying offence that gives rise to the criminal property – such as a fraud or drugs offence.
In cases where the money laundering offence is charged alone, the prosecution either need to prove the type of offending that resulted in the criminal property or by relying on evidence that the circumstances in which the property was handled were such as to give rise to an ‘…irresistible inference that it could only have been derived from crime’ [R v Anwoir [2008] EWCA Crim 1354]. As a minimum, the prosecution need to produce sufficient circumstantial evidence or other evidence from which an “irresistible inference” can be drawn to demonstrate that the property has a criminal origin.
Examples of Money Laundering
Money laundering can involve various activities, including tax evasion, theft, fraud, bribery, corruption, cash obtained from selling drugs and more. It is essentially the process of making the proceeds of crime appear lawful.
Defences
If you have been accused of a money laundering offence, it is important to consider whether any specific defences may apply. Some examples of common defence are as follows:
Lack of Knowledge or Suspicion: If a person can prove that they did not know or suspect, and had no reasonable grounds for knowing or suspecting, that the property was criminal property, this is a complete defence. This defence is all about your state of mind.
Authorised Disclosure (section 338): If a person suspects money laundering and makes an authorised disclosure to the National Crime Agency (NCA) by filing a SAR (Suspicious Activity Report), and obtains consent (or a ‘defence’) from the NCA before proceeding with a transaction, this can serve as a defence to money laundering charges.
Compliance with Due Diligence: If a business can demonstrate that it has complied with all due diligence requirements, including customer due diligence, ongoing monitoring, and record-keeping, it may have a defence against money laundering charges.
Adequate Consideration: If the property was obtained for adequate consideration (without knowing or suspecting it to be the proceeds of crime), this may also serve as a defence.
It’s important to note that these defences are complex and require careful legal consideration. If someone is implicated in a money laundering investigation, they should seek legal advice to understand the full scope of their legal options and defences that might be available to them. Defences can be complicated and each case needs to be considered on its own facts.
Sentence
Money laundering offences are known as ‘either way’ offences, which means they can be dealt with either in the magistrates’ court or the crown court. The venue will be decided at the outset of the court proceedings and will generally be determined by the value and other relevant factors.
If a money laundering offence remains in the magistrates’ court, the court is limited by their maximum sentencing powers, which are up to 6 months imprisonment and/or a fine not exceeding the statutory maximum.
The penalties for committing money laundering offences that are dealt with in the crown court can be even more severe, reflecting the seriousness of the offence, culpability and harm as well as any aggravating or mitigating features that may apply.
Offences under the Proceeds of Crime Act 2002 (POCA) prescribe maximum sentences of:
Up to 14 years imprisonment
Unlimited fines
The Sentencing Council have issued guidance on sentence for these offences, which can be found here. Care should be taken when reading these guidelines to ensure the appropriate levels of culpability and harm are applied along with movement up or down to take into account the particularly facts of the case and the individual concerned.
Following a conviction – either by pleading guilty or by finding of guilty after trial – in addition to sentence being passed, confiscation proceedings can follow to seize assets believed to be derived from, or intended for use in, unlawful conduct. These are complex proceedings for which further advice and guidance should be sought.
Additionally, the Economic Crime and Corporate Transparency Act 2023 has introduced new provisions to strengthen the UK’s fight against economic crime, including money laundering. It allows for greater information sharing between businesses to prevent, detect, and investigate economic crime. A business in breach of anti-money laundering regulations can be subject to enforcement action by the Information Commissioner’s Office, with the maximum penalty being £17.5 million or 4% of the total annual worldwide turnover in the preceding financial year, whichever is higher1.
What are the key anti-money laundering regulations in the UK?
The key anti-money laundering (AML) regulations in the UK are designed to prevent and detect the use of the financial system for money laundering or terrorist financing. Here are the primary regulations:
Proceeds of Crime Act 2002 (POCA): This is the foundational legislation that defines money laundering offenses and provides for confiscation, civil recovery, and enforcement powers.
Terrorism Act 2000: It includes provisions for freezing assets and other measures to prevent funding of terrorist activities.
Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017: These regulations set out the detailed AML obligations for businesses, including customer due diligence, record-keeping, and reporting suspicious activities.
Money Laundering Regulations 2019: An update to the existing regulations, reinforcing the legal framework for AML measures.
Economic Crime and Corporate Transparency Act 2023: This act introduces new measures to strengthen the UK’s fight against economic crime, including provisions for information sharing between businesses to prevent, detect, and investigate economic crime.
The UK’s AML framework is robust and continuously evolving to address new challenges and trends in economic crime. Compliance with these regulations is mandatory for businesses, especially those in the financial sector, to ensure the integrity of the UK’s economic system. Additionally, most people working in a regulated sector must receive regular AML training.
Legal disclaimer: Articles are intended as an introduction to the topic and do not constitute legal advice. The information contained herein is accurate at the date of publication but please note that the law is ever changing and evolving. If you require advice in relation to any matter raised in this article please contact a member of the team.