Legal Services - Proceeds of Crime Act 2002 (3) Flashcards
What is the Proceeds of Crime Act 2002?
Proceeds of Crime Act 2002: POCA 2002 criminalises a number of money laundering offences.
(1) Direct Handling Offences: Direct involvement with money laundering (incidental or otherwise).
(2) Awareness Offences: Disclosure and tipping-off offences relevant to the regulated sector.
What are direct handling offences?
Direct Handling Offences: There are three ‘direct handling’ offences.
(1) Arranging: Entering an arrangement with knowledge or suspicion of criminal property use (s328).
(2) Acquisition: Acquisition, use or possession of criminal proceeds (s329).
(3) Concealment: Concealment, conversion or domestic removal of criminal proceeds (s327).
Arranging
Arranging: Entering or becoming concerned in an arrangement with knowledge or suspicion that it facilitates the acquisition, retention, use or control of criminal property by or on behalf of another (s328).
(1) Knowledge/Suspicion: Defendant believes there is a possibility which is more than fanciful (R v Da Silva).
(2) Criminal Property: Property is the direct or indirect result of criminal conduct, meaning a criminal offence either committed in the UK or capable of being illegal in the UK (s340).
(3) Penalty: Punishable by up to 14 years’ imprisonment.
(4) Defences: There are three defences to arranging.
Litigation Defence: Relevant litigation is not ‘arranging’, provided it is not sham (Bowman v Fels).
Overseas Defence: If criminal conduct occurred overseas, but was lawful in that country, then the solicitor has a full defence. The Secretary of State can override this provision.
Authorised Disclosure Defence: Authorised disclosure defence (below).
Acquisition
Acquisition: Acquiring, using or possession of criminal property (s329).
(1) Penalty: Punishable by up to 14 years’ imprisonment.
(2) Defences: There are three defences to acquisition.
Adequate Consideration Defence: If funds were obtained as ‘reasonable consideration’ for sale of goods or services, it is okay, provided there is no knowledge or suspicion.
Overseas Defence: The overseas defence applies.
Authorised Disclosure Defence: Authorised disclosure defence (below).
Concealment
Concealment: Concealment, disguise, conversion or transfer of criminal property, or removal from UK (s327).
(1) Defences: There are two defences to concealment.
Overseas Defence: The overseas defence applies.
Authorised Disclosure Defence: Authorised disclosure defence (below).
What is the authorised disclosure defence?
Authorised Disclosure: A solicitor will have a defence to the direct handling offences if they make an ‘authorised disclosure’ to a ‘relevant person’ in relation to the potential offence.
(1) Disclosure: Full disclosure of the solicitor’s knowledge or suspicions by a suspicious activity report (online/post).
(2) Relevant Person: This is generally the nominated officer (MLRO).
Disclosure Prior to Transaction
Disclosure Prior to Transaction: Disclosures should be made prior to the transaction, and ‘consent’ obtained to proceed. Failure to disclose and obtain consent is a criminal offence.
(1) Consent: Once reported to the MLRO, the MLRO will request consent from the NCO to proceed.
Direct Consent: The NCA may consent outright.
Silent Consent: If the NCA does not reply within 7 working days of request, then consent is implied.
Refused Consent: If the NCA expressly refuses consent, but provides no more information or consent after, then the MLRO may provide consent after 31 days of refusal.
Disclosure During Transaction
Disclosure During Transaction: If knowledge or suspicion only arises during a transaction, the solicitor should make a disclosure as soon as practicable after becoming aware, and should cease to act until consent is gained (s338(2A)).
Disclosure After Transaction
Disclosure After Transaction: Solicitors may make disclosure after a transaction, provided they had good reason for earlier failure, as soon as practicable after becoming aware (s338(3)).
No Disclosure Defence
No Disclosure Defence: Solicitors may have a defence for total failure to disclosure if they have a ‘reasonable excuse’. This is very difficult to establish, and documented evidence is expected.
What are awareness offences?
Awareness Offences: There are three main ‘awareness’ offences.
(1) Failure to Disclose: Both solicitors and MRLOs may commit an offence by failing to disclose their knowledge or suspicion (s330).
(2) Tipping Off: It is an offence for a regulated person to ‘tip off’ a party about a relevant laundering investigation (s333A).
(3) Prejudice: It is an offence for a non-regulated person to ‘prejudice’ a relevant laundering investigation through improper disclosure (s342).
Failure to Disclose
Failure to Disclose: A regulated person may commit an offence by failing to disclose relevant information regarding their knowledge or suspicion of a person money laundering, if the obtained in course of business (s330).
(1) Point of Disclosure: Solicitors must disclose to the MLRO or NCA as soon as reasonably practicable, and the MLRO to the NCA as soon as reasonably practicable.
(2) Knowledge or Suspicion: Reasonable person would know or suspect a person is engaging in money laundering. This is an objective test.
(3) Relevant Information: Information which may assist in the identification of a launderer or the location of laundered money. There is no breach if there is no information, though this is unlikely.
(4) Course of Business: Information which came to them in the course of regulated business, meaning any information which came as part of their legal service provision (Sch 9).
(5) Defences: There are a number of applicable defences.
Reasonable Excuse: Solicitor/MLRO has a reasonable excuse not to disclose.
Training: Solicitor had no subjective knowledge or suspicion and was not properly trained.
Legal Professional Privilege: Solicitors need not disclose legally privileged information.
Advice: Communications between a client and solicitor in the legal capacity.
Litigation: Communications in respect of ongoing or prospective litigation, inc. third parties.
Exception: If communication is intended to further criminal acts, it must be disclosed.
Overseas: Overseas defence applies.
(6) Penalty: Failure to disclose may result in up to 5 years’ imprisonment.
Tipping Off
Tipping Off: It is an offence to ‘tip off’ someone suspected of money laundering, or their associate, that they are subject to a potential or ongoing laundering investigation (s333A). Information must have come from the regulated sector.
(1) Tipping Off Disclosure: It is an offence to ‘tip off’ about a relevant disclosure having been made, provided it is likely to prejudice any related investigation.
(2) Tipping Off Investigation: It is an offence to ‘tip off’ about an ongoing or potential investigation, provided it is likely to prejudice that investigation.
(3) Defences: There are two main defences.
No Prejudice: If solicitor had no knowledge or suspicion their communication would be prejudicial.
Dissuasion: If solicitor tipped off for the purpose of dissuading the alleged offence - high bar.
(4) Penalty: Failure to disclose may result in an unlimited fine and up to 2 years’ imprisonment.
Prejudicing Investigation
Prejudicing Investigation: It is an offence for a non-regulated person to prejudice an investigation (s342). Same as above.
What is the regulatory overlap between POCA and SRA Principles and Regulations?
Regulatory Overlap: POCA overlaps with the SRA Principles and Regulations, and will often result in disciplinary proceedings and sanctions.
SRA ‘Warning Signs’
SRA Warning Signs: The SRA publishes the ‘Warning Notice: Money Laundering and Terrorist Financing’ which firms must pay attention to. This outlines relevant laundering warning signs.
(1) Client Nature: Secrecy, evasion, lack of personal contact, inadequate information, criminal affiliates.
(2) Funding: Large cash payments, TP funding, unconventional loans, foreign or multiple accounts.
(3) Transaction: Loss-making, repetitive instructions, urgency, no commercial purpose, sham litigation.
(4) Instructions: Instructions outside firm expertise, non-local clients, high-paying clients, unconcerned clients.
(5) Geography: Unexplained international transactions, connections with high-risk jurisdictions.
Aside from POCA, what other legislation may be relevant?
Criminal Finances Act 2017
Criminal Finances Act 2017: Firms must employ reasonable measures to prevent criminal tax evasion.
(1) Relevant Offences: Includes evasion of VAT, income tax, NI, and common law ‘cheating the public revenue’.
(2) Liability: Firms are strictly liable for not imposing measures, so must exercise and evidence measures, provided they are reasonable.
(3) Penalty: Breach is a corporate offence, incurring unlimited fine and asset confiscation.
UK Financial Sanctions Regime
UK Financial Sanctions Regime: Firms must comply with certain requirements in respect of entities on UK, EU or UN ‘Sanctions Lists’. These lists are public.
(1) Reporting: Firms must notify the Office of Financial Sanctions Implementation of knowledge or reasonable suspicion that it is dealing with a sanctioned entity, or an entity who has offended financial sanctions regimes.
(2) Authorisation: Firms must seek authorisation to provide services to sanctioned entities, and may only charge ‘reasonable fees’.
(3) Liability: Firms are strictly liable, even with no knowledge or suspicion that an entity is on the sanctions list. They may be subject to an unlimited fine (ECA 2022).
