1. What laws in your jurisdiction prohibit money laundering?
In the UK, the main laws prohibiting substantive money laundering are contained within Part 7 of the Proceeds of Crime Act 2002 (POCA). There are also separate money laundering offences related to terrorist property and terrorist financing contained within the Terrorism Act 2000. These laws apply across the UK, although England & Wales, Scotland and Northern Ireland are three separate criminal justice systems and independently enforce criminal laws and prosecute offences.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs) also set out the obligations that regulated firms have in relation to anti-money laundering (AML) and counter-terrorist financing (CTF) and provide the basis for the AML procedures that regulated firms need to have.Answer contributed by Daniel Hudson
2. What must the government prove to establish a criminal violation of the money laundering laws?
Money laundering under POCA
A prosecution can be brought against any person who commits one of three principal money laundering offences under POCA (sections 327–329). These are:
‘The concealing offence’ – it is an offence to conceal, disguise, convert or transfer or remove criminal property from the jurisdiction.
‘The arrangements offence’ – it is an offence to enter into or become concerned in an arrangement that a person knows or suspects would facilitate (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person.
‘The possession offence’ – it is an offence to acquire, use or have possession of criminal property. A person who acquires, uses or has possession of the property for adequate consideration (which does not include the provision of goods or services that the person knows or suspects may help another to carry out criminal conduct) does not commit an offence.
For these purposes ‘money laundering’ also includes attempts or conspiracies to commit any of the above offences. All offences are punishable by up to 14 years' imprisonment and/or an unlimited fine.
In relation to each of these offences any prosecution must prove (beyond reasonable doubt) the requisite activity in relation to ‘criminal property’ – which is defined as any property that constitutes or represents a person's benefit from criminal conduct (in whole or in part and whether directly or indirectly) (section 340(3) POCA).
‘Criminal conduct’ is any conduct that constitutes a criminal offence in any part of the United Kingdom or would do if it occurred within the jurisdiction, and therefore extends to overseas conduct (section 340(2) POCA). However, where the underlying/predicate criminal conduct takes place overseas, a money laundering offence will not be committed if the overseas conduct is lawful in the place where it occurs and is minor in nature (ie, it would be punishable with no more than 12 months' imprisonment under UK law, had it occurred there (except for prescribed offences – currently certain offences under the Gaming Act 1968, the Lotteries and Amusements Act 1976, and sections 23 and 25 of the Financial Services and Markets Act 2000 (sections 327(2A), 328(3) and 329(2A) POCA)).
The prosecution must also prove that the alleged money launderer knew or suspected that the property is criminal property – ie, they ‘must think there is a possibility, which is more than fanciful, that the relevant facts exist’ and a ‘vague feeling of unease’ would not be sufficient – R v Da Silva (2006) EWCA Crim 1654.
It is also immaterial who carried out the criminal conduct, who benefited from it and whether it occurred before or after the coming into force of POCA (section 340 POCA).
It is a defence to a principal money laundering offence if: (i) an ‘authorised disclosure’ (a suspicious activity report or SAR) is made to the National Crime Agency (NCA), requesting consent to undertake the relevant activity; and (ii) appropriate consent (also called a ‘Defence Against Money Laundering’ (DAML) by the NCA) is given or deemed given before any act is done.
A person does not commit an offence under section 329 POCA if she or he acquired, used or had possession of the criminal property for ‘adequate consideration’ (section 329(2)(c) POCA) (ie, where the value of the consideration is not significantly less than the value of the property and the consideration does not assist another to carry out criminal conduct). This defence is available, for example, where the criminal property has been acquired through receipt of monies in relation to/in return for the provision of legitimate services that do not assist another to carry out criminal activity.
There are carve-outs from criminal liability where, for example, financial institutions are taking deposits of sums below a prescribed amount (currently £1,000) or where regulated sector (for the purposes of POCA) advisers who return such sums when terminating a relationship.
Money Laundering under the Terrorism Act 2000 (TA)
The TA, which, among other things, provides for offences of terrorist financing also created a ‘laundering of terrorist property’ offence if a person enters into or becomes concerned in an arrangement that facilitates the retention or control by or on behalf of another person of terrorist property.
‘Terrorist property’ means money or any other form of property that is likely to be used for the purposes of terrorism (including any resources of an organisation proscribed in Schedule 2, TA), or the proceeds of the commission of acts of terrorism and of acts carried out for the purposes of terrorism (section 14 TA).
‘Proceeds’ include any property that, wholly or partly and directly or indirectly, represents the proceeds of the act in question, as well as any payments or other rewards received in connection with its commission.
It is a defence if a person can prove that he or she did not know and had no reasonable cause to suspect that the arrangement related to terrorist property.
Criminal offences under MLRs
Failure to meet obligations (eg, to understand a firm’s customer, its beneficial owner(s) and source of wealth or funds) under the MLRs is a criminal offence (under Regulation 86). The MLRs also create other offences relating to AML (eg, prejudicing an investigation and providing false or misleading information).Answer contributed by Daniel Hudson
3. What are the predicate offences to money laundering? Do they include foreign crimes and tax offences?
Money laundering offences under POCA relate to criminal property, which is defined as any property that constitutes or represents a person's benefit from criminal conduct (in whole or in part and whether directly or indirectly) (section 340(3) POCA).
Criminal conduct is any conduct that constitutes a criminal offence in any part of the United Kingdom or would do if it occurred within the jurisdiction. This means that any type of conduct that is a criminal offence in the UK or that would be if it occurred in the UK, potentially gives rise to money laundering (section 340(2) POCA), that money laundering is not restricted to tax or any other types of crimes, but is, essentially, an ‘all crimes’ regime.
Foreign crimes are, therefore, predicate offences if the conduct in question would be criminal under UK law had it occurred in the UK, provided it would have been punishable by at least 12 months' imprisonment had it occurred in the UK (or currently certain offences under the Gaming Act 1968, the Lotteries and Amusements Act 1976, and sections 23 and 25 of the Financial Services and Markets Act 2000 (sections 327(2A), 328(3) and 329(2A) POCA)).Answer contributed by Daniel Hudson
4. Is there extraterritorial jurisdiction for violations of your jurisdiction’s money laundering laws?
Where acts of or in furtherance of laundering take place in the UK in relation to criminal property generated overseas, such acts will plainly come under the scope of the primary money laundering offences in POCA, provided the underlying conduct would have been criminal had it occurred in the UK.
Where criminal acts take place and have an impact upon victims in the UK, the laundering of the proceeds in a foreign jurisdiction may fall within the jurisdiction of the UK courts under POCA (R v Rogers (Bradley) and others  EWCA Crim 1680). The court in Rogers concluded that Parliament intended the money laundering offences under POCA to have to have extra-territorial effect, but acknowledged that where the conversion of criminal property takes place in another jurisdiction and relates to conduct, and impacts victims, outside the UK, the UK courts will not claim jurisdiction.Answer contributed by Daniel Hudson
5. Is there corporate criminal liability for money laundering offences, or is liability limited to individuals?
Criminal liability attaches to both legal and natural persons under UK criminal law, unless relevant provisions set out otherwise. Therefore, a corporate entity may be criminally liable for committing a money laundering offence under POCA or the TA or a criminal offence under the MLRs.
Currently, generally, corporate criminal liability must be established under the ‘identification principle’. This requires the identification of a person or persons representing the ‘controlling mind and will’ of the company, who are of sufficient seniority and who have sufficient control such that their acts are attributable to the company itself. From 26 December 2023, a corporate or partnership will be criminally liable for, among other economic crimes, substantive money laundering under POCA or the TA or a criminal breach of the MLRs, where its senior managers, acting within the actual or apparent scope of their authority, commit a relevant offence.
For these purposes, a senior manager is someone who plays a significant role in, either:
- the making of decisions about the management/organisation of (or a substantial part of the activities of) the body corporate/partnership; or
- the actual managing or organising of the whole or a substantial part of those activities (section 196 Economic Crime and Corporate Transparency Act 2023 ECCTA).
(The government has also included a provision in the Criminal Justice Bill – which entered Parliament on 14/11/23 – seeking further to extend corporate/partnership criminal liability where their senior managers commit any criminal offences (and not just the economic crimes set out in ECCTA).Answer contributed by Daniel Hudson
6. Which government authorities are responsible for investigating violations of the money laundering laws?
The police, the NCA and HM Revenue & Customs (HMRC) are the main authorities that investigate money laundering offences.
The Serious Fraud Office (SFO) investigates and prosecutes allegations involving serious or complex fraud/corruption, and such investigations can sometimes involve money laundering allegations.
The Financial Conduct Authority (FCA) investigates and prosecutes matters involving regulated entities or activities and often investigates allegations relating to money laundering, particularly breaches of the MLRs.
The FCA, HMRC, the Gambling Commission and 22 other professional bodies act as supervisory authorities under POCA and the MLRs. The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) was established in 2018 and is based within the FCA. Its aim is to improve the consistency of professional body AML supervision. It has the power to ensure that the 25 professional body supervisors meet the standards required by the Regulations. The Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations 2017/1301 set out OPBAS’s duties and powers.Answer contributed by Daniel Hudson
7. Which government agencies are responsible for the prosecution of money laundering offences?
Where the police, NCA or HMRC investigate matters such as money laundering offences, the Crown Prosecution Service is responsible for prosecuting them. The SFO and FCA also have the power to prosecute matters they investigate, which can involve money laundering activities.
Supervisory authorities may also take other regulatory action in relation to failures in money laundering systems and controls.Answer contributed by Daniel Hudson
8. What is the statute of limitations for money laundering offences?
There is generally no statute of limitations (or limitation period) for criminal offences under UK law. The money laundering offences under POCA can only be committed after 24 March 2003 (when the relevant provisions of POCA came into force).Answer contributed by Daniel Hudson
9. What are the penalties for a criminal violation of the money laundering laws?
For individuals the maximum sentence for committing:
- a substantive money laundering offence under POCA or TA, is 14 years’ imprisonment or an unlimited fine (or both);
- an offence of ‘failing to disclose’, ‘prejudicing an investigation’ and ‘tipping-off’ (as relevant under POCA or TA) is five years’ imprisonment or an unlimited fine (or both); and
- an offence under the MLRs is two years’ imprisonment or an unlimited fine (or both).
For corporates or legal persons, all these offences carry a maximum sentence of an unlimited fine.Answer contributed by Daniel Hudson
10. Are there civil penalties for violations of the money laundering laws? What are they?
In addition to criminal enforcement and potential penalties upon conviction for committing offences under POCA, TA and MLRs, the FCA and HMRC can pursue a civil investigation and take civil enforcement steps in relation to persons for failure to comply with the anti-money laundering provisions of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the ‘MLRs’ – see Chapter 2 of Part 9).
Such enforcement steps may include:
- the imposition of a monetary penalty in a sum that appears appropriate to the regulator;
- removing ‘fit and proper’ status from relevant individuals;
- suspending a firm or individual from undertaking regulated activities;
- refusing, suspending or cancelling a business’ registration or authorisation;
- making a public statement censuring a business;
- imposing a temporary or permanent prohibition on an individual having a management role within a relevant organisation; and
- obtaining a High Court injunction in respect of likely (further) breaches of a relevant requirement.
In some instances, the FCA may issue a warning notice before finally concluding whether or not there has been a breach of the requirements. And individual convicted of offences, including a money laundering offence may be disqualified from acting as a company director for a certain period.Answer contributed by Daniel Hudson
11. Is asset forfeiture possible under the money laundering laws? Is it part of the criminal prosecution? What property is subject to forfeiture?
There are various processes available to the UK courts/authorities to seek to deprive a criminal of the (use of the) proceeds of crime, including in respect of convicted money launderers. While many of the relevant provisions governing these processes are contained within POCA (the statute that also criminalises money laundering) the processes are not peculiar to money laundering offences.
Where a convicted defendant is considered by the court (usually at the instigation of the relevant prosecutor) to have obtained property as a result of his or her general or particular criminal conduct it will proceed to determine whether a confiscation order should be made.
A confiscation order may be made against a person (natural or legal) following a conviction for a criminal offence in the Crown Court or following a committal (or sending) for sentence (or for the purposes of confiscation) from the magistrates’ court to the Crown Court.
A confiscation order does not attach to specific property but is made for the recovery of a sum said to represent the value of the benefit from criminal conduct – the ‘recoverable amount’ (and in certain circumstances, ie, depending on whether the court determines that the offender has a ‘criminal lifestyle’, the court can make a rebuttable presumption that all the assets in the offender’s possession represent the offender’s benefit from criminal conduct that is liable to confiscation).
Where a relevant convicted defendant can show that the total assets in their possession – minus any existing obligations to pay court orders (including any criminal fine ordered in the instant criminal proceedings) and any ‘preferential debts’ – is less than the ‘recoverable amount’ then the confiscation order will be made for no more than this ‘available amount’.
In respect of individual defendants when making a confiscation order the court will set a period of imprisonment in the event that the defendant defaults on payment.
The prosecution agencies may apply to court for a ‘restraint order’ under POCA to prevent someone, who is the subject of criminal investigation or proceedings, from dealing (for the time being) with property held by them, where there are reasonable grounds to suspect that they have benefited from criminal conduct. The purpose of a restraint order is to preserve property for potential confiscation proceedings.
Under the deferred prosecution agreement (DPA) regime (which is an alternative way of resolving investigations into criminal conduct that does not result in a trial or conviction), a corporate that enters into a DPA may be required to disgorge a sum representing the profits from alleged criminality (along with paying a financial penalty and potentially agreeing to monitorship or other conditions/requirements).
Where a defendant is convicted of a crime that resulted in victims suffering loss or damage, the court is under a duty to consider making a compensation. However, this process is only, currently, suited to relatively straightforward cases of loss or damage.Answer contributed by Daniel Hudson
12. Is civil or non-conviction-based asset forfeiture permitted under the money laundering laws? What property is subject to forfeiture?
POCA provides for a civil recovery regime that is not dependent on any convictions being obtained. Under Part 5 of POCA, a Civil Recovery Order (CRO) may be sought from the High Court by certain UK enforcement authorities against any person it considers that holds ‘recoverable property’.
By section 241 POCA, recoverable property constitutes property that is or represents property obtained through ‘unlawful conduct’ that is:
- conduct that is unlawful under UK criminal law;
- in relation to conduct outside the UK – is conduct that is criminal under the criminal law of the jurisdiction where the conduct occurred and would be criminal under UK law had it occurred in the UK; or
- is conduct that occurs outside the UK and constitutes, or is connected to, the commission of a gross human rights abuse or violation and (irrespective of whether it is criminal in the jurisdiction where the conduct took place) would be an indictable offence if it had occurred in the UK.
Whether property has been obtained through unlawful conduct is assessed on the balance of probabilities and a CRO attaches to the property itself, rather than the person holding it.
Asset freezing and forfeiture
Under POCA, certain UK authorities have the power to freeze monies held in bank and building society accounts and to forfeit cash in summary (magistrates’ court) proceedings.
An account freezing order (AFO) may be made where there are reasonable grounds to suspect that money (at least £1,000) held in a bank account is recoverable property (ie, obtained through unlawful conduct) or intended for use in unlawful conduct. An AFO may last up to two years. Similar provisions are available in relation to detaining cash.
At the end of, or at any point during, the period of cash detention or account freezing, the authorities may apply for the relevant sums to be forfeited. Although there is a higher evidence bar to be satisfied as compared with an AFO (the court must be satisfied that the money or part of it was actually obtained by unlawful conduct, or is intended by any person for use in unlawful conduct), but there is no requirement for a criminal conviction to have been obtained against any party (or even a criminal investigation to have been opened).Answer contributed by Daniel Hudson