1. What laws in your jurisdiction prohibit money laundering?
The principal laws prohibiting money laundering in the UK are the Proceeds of Crime Act 2002 (POCA) and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the Regulations).
Under UK law, there are no parallel state or provisional criminal offences. There are three separate criminal justice systems: England and Wales; Scotland; and Northern Ireland. POCA’s money laundering offences under Part 7 apply throughout the UK.
The governing principle is that a person will be prosecuted under the criminal justice system in which the conduct occurred or is justiciable.Answer contributed by Jonah Anderson
White & Case
2. What must the government prove to establish a criminal violation of the money laundering laws?
POCA applies to alleged money laundering conduct that occurred on or after 24 February 2003. There are three primary substantive money laundering offences under POCA, which are considered in further detail below.
Underlying each money laundering offence is the concept of ‘criminal property’ (ie, the proceeds of crime). In relation to each money laundering offence, the prosecution must prove that the property in question is criminal property. Criminal property is defined in section 340 POCA as property that constitutes a person’s benefit from ‘criminal conduct’ or represents such a benefit, in whole or part, and whether directly or indirectly. Criminal conduct is conduct that constitutes an offence in any part of the UK, or would constitute an offence in any part of the UK if it had occurred there (section 340 POCA). For the purposes of POCA, it is immaterial who carried out the criminal conduct that gave rise to the criminal property, who benefitted from it and whether it occurred before or after the coming into force of POCA.
The prosecution must also prove that the person accused of money laundering knew or suspected that the property is criminal property. The threshold for suspicion required to prove that a person knows or suspects that property is criminal property (ie, the proceeds of crime) is low. For these purposes, ‘suspicion’ is as defined by the Court of Appeal in R v Da Silva (2006) EWCA Crim 1654, where the court held that a person ‘must think there is a possibility, which is more than fanciful, that the relevant facts exist’. A ‘vague feeling of unease’ would not be sufficient.
The three primary substantive money laundering offences under POCA are:
- concealing, disguising, converting, transferring or removing criminal property from England and Wales or from Scotland or Northern Ireland (section 327 POCA);
- entering into or becoming concerned in an arrangement, and knowing or suspecting that it facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person (section 328 POCA); and
- acquiring, using or possessing criminal property (section 329 POCA).
It is a defence to a primary money laundering offence if: (i) an ‘authorised disclosure’ is made in the form of a suspicious activity report (SAR) to the National Crime Agency (NCA), requesting consent to undertake the transaction or activity; and (ii) appropriate consent is given or deemed given before any act is done. Such a SAR is also known as a ‘Defence Against Money Laundering SAR’ (DAML SAR).
A person does not commit an offence under section 329 POCA if he acquired, used or had possession of the property for ‘adequate consideration’ (section 329(2)(c) POCA). This defence is available, for example, where the criminal property has been acquired through receipt of monies in relation to the provision of services by a professional advisor (such as a solicitor or accountant). The limitations of this defence are set out in section 329(3) POCA.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 cover obligations that regulated firms have in relation to anti-money laundering (AML) and counter-terrorist financing (CTF), and implement the Fourth and Fifth EU Money Laundering Directives. The UK opted out of implementing the Sixth EU Money Laundering Directive in September 2017, and has since exited the EU.
Failing to meet obligations under the Regulations is a criminal offence under Regulation 86; the Regulations also create other offences (eg, prejudicing an investigation and providing false or misleading information).Answer contributed by Jonah Anderson
White & Case
3. What are the predicate offences to money laundering? Do they include foreign crimes and tax offences?
Money laundering offences under POCA are on an ‘all crimes’ basis, which means that the money laundering offences are not restricted to a particular or limited type of predicate offence. Tax offences have always been predicate crimes for the purposes of the money laundering offences under POCA.
Part 7 of POCA defines ‘criminal conduct’ as conduct that constitutes an offence in the UK, or would constitute an offence in the UK if it had occurred there. It is also immaterial who carried out the conduct, who benefited from it and whether the conduct occurred before or after the coming into force of POCA (section 340).
Foreign crimes are therefore also predicate offences if the conduct in question would be unlawful under UK criminal law if it had occurred in the UK. In other words, if the conduct constituting the foreign crime would not constitute an offence in the UK, it would not fall within the definition of ‘criminal conduct’ and therefore no money laundering offence is committed in the UK.
There are also some narrow exceptions relating to overseas conduct under a statutory instrument.Answer contributed by Jonah Anderson
White & Case
4. Is there extraterritorial jurisdiction for violations of your jurisdiction’s money laundering laws?
The courts have held that the primary offences have some extraterritorial application. A person who is not in the UK can be prosecuted for a money laundering offence in the UK where there is a UK nexus. For example, where their conduct took place entirely outside the UK in circumstances where a substantial element of the overall criminality took place in the UK and its harmful consequences were felt in the UK (see R v Rogers (2014) EWCA Crim 1680, paragraph 55).
Where the proceeds of foreign crimes are laundered in the UK, the essential question is whether the property is criminal property; namely property that is or represents, in whole or part and whether directly or indirectly, a person’s benefit from criminal conduct, and the person knows or suspects that it constitutes or represents such a benefit. Laundering the proceeds of foreign crimes is an offence under POCA if the criminal conduct either constitutes an offence in the UK or would constitute an offence in any part of the UK, if it had occurred there. If the conduct constituting the foreign crime would not constitute an offence in the UK, it would not fall within the definition of criminal conduct and therefore no money laundering offence would be committed in the UK.Answer contributed by Jonah Anderson
White & Case
5. Is there corporate criminal liability for money laundering offences, or is liability limited to individuals?
Under UK law, criminal liability attaches to both legal and natural persons. Therefore, a corporate entity may be criminally liable for committing a money laundering offence.
Corporate criminal liability for a substantive money laundering offence 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. In practice, this is limited to a small number of directors and senior managers, and complicates the prosecution of corporates, particularly in relation to large organisations with complex structures.
The effectiveness of the identification principle as the basis for corporate criminal responsibility has been a cause for debate. In June 2022, the Law Commission, a statutory independent body, published its Options Paper assessing options for reform to corporate criminal liability in England & Wales, and put forward an option to extend the ‘identification principle’ to capture the acts of a wider set of senior individuals whose mental acts and states might result in a corporate entity becoming criminally liable.
The criminal offences under the Regulations also apply to corporates. Under the Regulations, a corporate commits an offence if it contravenes a relevant requirement in relation to AML policies and procedures.Answer contributed by Jonah Anderson
White & Case
6. Which government authorities are responsible for investigating violations of the money laundering laws?
The principal authorities that investigate money laundering offences are the police, the National Crime Agency (NCA) and HM Revenue & Customs (HMRC).
The Serious Fraud Office (SFO) investigates and prosecutes allegations involving serious or complex fraud or corruption, which can involve money laundering.
Similarly, the Financial Conduct Authority (FCA) investigates and prosecutes matters involving regulated entities or activities.
The FCA, HMRC, the Gambling Commission and 25 other professional bodies act as supervisory authorities under POCA and the Regulations.
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 Jonah Anderson
White & Case
7. Which government agencies are responsible for the prosecution of money laundering offences?
Following an investigation by either the police, NCA or HMRC, the Crown Prosecution Service (CPS) is responsible for prosecuting money laundering offences.
As well as investigating, the SFO and FCA also have the power to prosecute. The SFO investigates and prosecutes allegations involving serious or complex fraud or corruption, which can involve money laundering, and the FCA investigates and prosecutes matters involving regulated entities or activities.
The FCA, HMRC, the Gambling Commission and 25 other professional bodies act as supervisory authorities under the Regulations, and can take civil or criminal action in relation to breaches of the Regulations or their own regulatory rules. Supervisory authorities may also take other regulatory action in relation to failures in money laundering systems and controls.Answer contributed by Jonah Anderson
White & Case
8. What is the statute of limitations for money laundering offences?
Under UK criminal law, there is no limitation period for the prosecution of offences, save in respect of summary-only offences (which are offences triable only in the magistrates’ court, the lower criminal court). This applies equally to money laundering offences. The only requirement is that the money laundering offence was committed after the POCA commencement date (24 February 2003); the date of the underlying criminal conduct that gave rise to the criminal property is immaterial.Answer contributed by Jonah Anderson
White & Case
9. What are the penalties for a criminal violation of the money laundering laws?
For individuals, the primary money laundering offences under POCA carry a maximum penalty of 14 years’ imprisonment or an unlimited fine, or both. Offences under the Regulations are punishable with a maximum penalty of two years’ imprisonment or an unlimited fine, or both.
The offences of failing to disclose, prejudicing an investigation and tipping-off are offences triable either summarily or on indictment. The failure to disclose offences are punishable with a maximum of five years’ imprisonment (or an unlimited fine, or both) while the maximum penalty for tipping off and prejudicing an investigation is two years’ imprisonment or an unlimited fine, or both.
For a legal entity, the maximum penalty is an unlimited fine in relation to offences under POCA and the Regulations.
Unlike an individual defendant, a corporate defendant in cases prosecuted by the SFO and CPS can enter into a deferred prosecution agreement (DPA) in relation to the money laundering offences under POCA and the criminal offence under the Regulations of contravening a relevant requirement in relation to AML policies and procedures. A DPA requires an admission of some wrongdoing but avoids a criminal conviction. A DPA usually contains conditions requiring the payment of a fine, disgorgement of any benefit from the wrongdoing and the payment of the prosecution costs. It can also require continued cooperation with an ongoing investigation and a period of monitoring of policies and procedures. A DPA is for a fixed period, agreed between the parties and must be approved by a judge. At the successful conclusion of a DPA, the criminal proceedings against the corporate defendant are concluded.
The sentencing process may result in ancillary orders (eg, a confiscation order), which are covered in more detail below.Answer contributed by Jonah Anderson
White & Case
10. Are there civil penalties for violations of the money laundering laws? What are they?
In addition to criminal sanctions, the FCA and HMRC can impose civil measures for failing to comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the Regulations). These are set out in the Regulations in Chapter 2 of Part 9. These may include the imposition of a monetary penalty in a sum that appears appropriate to the regulator; removing ‘fit and proper’ status from an individual; suspending a firm or individual from undertaking regulated activities; refusing, suspending or cancelling a business’ registration or authorisation; and making a public statement censuring a business. A regulator can also impose a temporary or permanent prohibition on an individual having a management role within a relevant legal person. An injunction may also be obtained in the High Court where there is or may be a breach of a relevant requirement.
In some instances, a supervisory authority such as the FCA may issue a warning notice.
An individual convicted of a money laundering offence may be disqualified from acting as a company director for a fixed period.Answer contributed by Jonah Anderson
White & Case
11. Is asset forfeiture possible under the money laundering laws? Is it part of the criminal prosecution? What property is subject to forfeiture?
A number of procedures are available to deprive a money laundering offender of the proceeds of crime. In the case of a convicted defendant, the authority that investigates or prosecutes is usually the authority that has conduct of the confiscation or forfeiture proceedings.
A confiscation order may be made against a person following a conviction for a criminal offence in the Crown Court and following a committal (or sending) for sentence (or for the purposes of confiscation) from the magistrates’ court to the Crown Court. The order is not directed at a specific property but is made for the recovery of a sum said to represent the value of the benefit from criminal conduct. A period of imprisonment in default of payment of that sum must be set by the court at the time of making the confiscation order.
A restraint order prevents a specified person, who is under criminal investigation or subject to criminal proceedings, from dealing with property held by them, where there are reasonable grounds to suspect that they have benefited from criminal conduct. The restraint order is designed to preserve property for confiscation proceedings.
A compensation order is an order made by the court requiring the payment of a sum of money to a victim for loss or damage suffered as a result of the criminal conduct.
Under the deferred prosecution agreement (DPA) regime, a corporate that enters into a DPA may be required to pay a disgorgement figure representing the profits from any wrongdoing.Answer contributed by Jonah Anderson
White & Case
12. Is civil or non-conviction-based asset forfeiture permitted under the money laundering laws? What property is subject to forfeiture?
The UK has a non-conviction-based asset recovery regime, called the civil recovery regime. Civil recovery applies to the proceeds of ‘unlawful conduct’, defined in section 241 POCA as conduct that is unlawful under UK criminal law or, where the conduct occurred outside the UK, is unlawful under the criminal law of that territory and, if it had occurred in the UK, would be unlawful under UK criminal law. Unlawful conduct also includes conduct that occurs outside the UK, constitutes or is connected to the commission of a gross human rights abuse or violation and, if it had occurred in the UK, would be an indictable offence.
Part 5 of POCA provides for the making of a civil recovery order (CRO) by the High Court for the recovery of property that is or represents property obtained through unlawful conduct. The question of whether property has been obtained through unlawful conduct is decided on the balance of probabilities. A CRO does not require a criminal conviction or any criminal proceedings; it targets property, not the person holding it. An enforcement authority may obtain a CRO against any person it thinks holds recoverable property.
Asset freezing and forfeiture
POCA provides certain authorities with the power to freeze monies held in bank and building society accounts and to forfeit cash in summary proceedings.
An account freezing order (AFrO) may be made where there are reasonable grounds to suspect that money (being a minimum of £1,000) held in a bank account is recoverable property (ie, obtained through unlawful conduct) or intended for use in unlawful conduct. An AFrO may last up to two years.
Where an AFrO is in place, the court may make an account forfeiture order (AFO) An AFO allows all or part of the funds in the account frozen under the AFrO to be forfeited and paid into the Consolidated Fund. To grant an AFO, the court must be satisfied that the money or part of it was obtained by unlawful conduct, or is intended by any person for use in unlawful conduct.Answer contributed by Jonah Anderson
White & Case