Money Laundering & Criminal Proceeds (Recovery) Act 2009 - Module Flashcards
Money Laundering & Criminal Proceeds (Recovery) Act 2009 - Module
Introduction
This chapter covers the offence of money laundering and criminal proceeds
recovery (the seizure of assets and monies accumulated through significant
criminal activity).
Money is the prime reason for engaging in many types of criminal activity.
Money-laundering is the method by which criminals disguise the illegal
origins of their wealth and protect their asset bases, so as to avoid the
suspicion of law enforcement agencies and prevent leaving a trail of
incriminating evidence50
.
The Criminal Proceeds (Recovery) Act 2009 enables the proceeds of crime
to be forfeited in several ways. Firstly, in cases where a criminal charge has
not been laid or a conviction secured, the Court, in a civil proceeding,
utilising a balance of probabilities test, can issue a Profit or Asset Forfeiture
Order.
Secondly, in criminal matters, the Court can issue an Instrument Forfeiture
Order for property regarded as an instrument of a crime if a conviction has
been entered. Forfeiture is a mandatory consideration ahead of criminal
sentencing.
Legislation
Money Laundering
Section 243 Crimes Act 1961
Money laundering
(1) For the purposes of this section and sections 243A, 244 and 245,— Act includes any omission
Conceal: in relation to property, means to conceal or disguise the property, and
includes, without limitation:
(a) to convert the property from one form to another:
(b) to conceal or disguise the nature, source, location, disposition, or ownership of
the property or of any interest in the property.
Deal with: in relation to property, means to deal with the property in any manner and
by any means, and includes, without limitation:
(a) to dispose of the property, whether by sale, purchase, gift or otherwise
(b) to transfer possession of the property
(c) to bring the property into New Zealand
(d) to remove the property from New Zealand.
Interest: in relation to property, means:
(a) a legal or equitable estate or interest in the property; or
(b) a right, power, or privilege in connection with the property.
Offence: means an offence (or any offence described as a crime) that is punishable
under New Zealand law, including any act, wherever committed, that would be an
offence in New Zealand if committed in New Zealand.
Proceeds: in relation to an offence, means any property that is derived or realised,
directly or indirectly, by any person from the commission of the offence.
Property: means real or personal property of any description, whether situated in
New Zealand or elsewhere and whether tangible or intangible; and includes an
interest in any such real or personal property.
(2) Subject to sections 244 and 245, every one is liable to imprisonment for a term not
exceeding 7 years who, in respect of any property that is the proceeds of an offence,
engages in a money laundering transaction, knowing or believing that all or part of
the property is the proceeds of an offence, or being reckless as to whether or not the
property is the proceeds of an offence.
(3) Subject to sections 244 and 245, every one is liable to imprisonment for a term not
exceeding 5 years who obtains or has in his or her possession any property (being
property that is the proceeds of an offence committed by another person)—
(a) with intent to engage in a money laundering transaction in respect of that
property; and
(b) knowing or believing that all or part of the property is the proceeds of an
offenc], or being reckless as to whether or not the property is the proceeds
of an offence.
(4) For the purposes of this section, a person engages in a money laundering transaction
if, in concealing any property or by enabling any person to conceal any property, that
person—
(a) deals with that property; or
Association Offences 99
(b) assists any other person, whether directly or indirectly, to deal with that
property.
[[(4A) Despite anything in subsection (4), the prosecution is not required to prove that the
defendant had an intent to—
(a) conceal any property; or
(b) enable any person to conceal any property.
(5) In any prosecution for an offence against subsection (2) or subsection (3),—
(a) it is not necessary for the prosecution to prove that the defendant knew or
believed that the property was the proceeds of a particular … offence or a
particular class of … offence:
(b) it is no defence that the defendant]] believed any property to be the proceeds
of a particular … offence when in fact the property was the proceeds of
another … offence.
(6) Nothing in this section or in sections 244 or 245 limits or restricts the operation of any other provision of this Act or any other enactment.
[[(7) To avoid doubt, for the purposes of the definition of offence in subsection (1), New
Zealand law includes, but is not limited to, the Misuse of Drugs Act 1975.]] ]
Charges for money laundering
Section 243A, Crimes Act 1961
A person may be charged under section 243(2) or (3) in respect of any property that is the proceeds of an offence to which section 243(2) or (3) applies even though the person who committed the offence—
(a) has not been charged with that offence; or
(b) has not been convicted of that offence.
Section 243 not to apply to certain acts committed outside New Zealand
This section sets out a defence to a charge of money laundering.
Section 245, Crimes Act 1961
Application of section 243 to acts outside New Zealand
(1) Section 243 applies to an act that has occurred outside New Zealand and that is
alleged to constitute an offence resulting in proceeds only if—
(a) the act was an offence under the law of the place where and when it occurred;
or
(b) it is an act to which section 7 or 7A of this Act applies; or
(c) an enactment provides that the act is an offence in New Zealand, and no
additional requirement exists for the act to be an offence in the place where
and when it occurred.
(2) If a person is charged with an offence under section 243 and
subsection (1)(a) applies, it is to be presumed, unless that person puts the matter at issue, that the act was an offence under the law of the place where and when it
occurred.]
Money laundering elements
Meaning of money laundering
Money laundering is the process of dealing with the proceeds of criminal
activity in such a way as to make the proceeds appear to have been
legitimately acquired.51
There is also an internationally accepted definition that is referred to the
Money Laundering Cycle52. This definition serves to assist with
understanding the process of money laundering – the three stages of the
Cycle are tabled below:
Phase Description Example
Placement Cash enters the financial
system.
An offender makes money
from selling cannabis and
then deposits these
proceeds into an associate’s
bank account.
Layering
Money is involved in a
number of transactions.
The associate transfers the
money into an account held
by a ‘shell’ company that
the offender is the director
of.
Integration
Money is mixed with
lawful funds or integrated
back into the economy,
with the appearance of
legitimacy.
The money is declared as
revenue for the company,
tax is paid, and then the
offender pays himself
director fees or a salary out
of the company account.
The Elements of Money Laundering
The elements of “money laundering” are outlined in s243(2) of the Crimes
Act 1961.
[1] Elements :
in respect of any property
that is the proceeds of an
offence
Explanation:
Property is defined to include both tangible
and intangible property and interests in real
or personal property whether within or
outside NZ
Includes offences, acts, and omissions
committed overseas that would be an
offence in NZ if committed in this country
[2] Elements:
engages in a money
laundering transaction
Explanation:
One must conceal property or enable
another to conceal the property and then
also deal with the property or assist with
such dealing.
This includes disposing or transferring the
property; bringing or removing the
property from NZ; or changing it from one
form to another (eg. Purchasing a vehicle)
[3] Elements:
knowing or believing that
all or part of the property is
the proceeds of an offence
Explanation:
Knowledge is proven via direct evidence
(e.g. admission) and/or circumstantial
evidence.
Knowledge must exist when the property is
dealt with (R v Kennedy53)
[4] Elements:
or being reckless as to
whether or not the property
is the proceeds of an
offence
Explanation:
Recklessness is the conscious and
deliberate taking of an unjustified risk
(Cameron V R)
It should be noted that the New Zealand legislation for money laundering as
outlined in the Crime Act 1961 is much wider than the internationally
recognised Money Laundering Cycle. Therefore, a person may be guilty of a
criminal offence within any one of the three recognised phases of the Cycle.
With this in mind, the Money Laundering Cycle should only be used as a
guide to understand the overall process – but it should not be used as a basis
for decisions about whether the elements of the offence of money laundering
has been fulfilled.
About the Criminal Proceeds (Recovery) Act 2009
Introduction
When asset recovery legislation was introduced its intent was to facilitate
action in stripping assets and wealth from individuals and groups involved in
organised crime.
The legislation moved away from the requirement that there be a conviction
recorded so as to allow for the seizure of assets and monies, to what is
currently in place: a civil-based process where the Crown must prove on the
balance of probabilities that wealth and benefits have been accumulated
through significant criminal activity.
Criminal proceeds action should be considered in all situations where
criminals are benefiting or have acquired assets from significant criminal
activity.
Purpose
Section 3, Criminal Proceeds (Recovery) Act 2009
(1) The primary purpose of this Act is to establish a regime for the forfeiture of
property—
(a) that has been derived directly or indirectly from significant criminal activity;
or
(b) that represents the value of a person’s unlawfully derived income.
(2) The criminal proceeds and instruments forfeiture regime established under this Act proposes to—
(a) eliminate the chance for persons to profit from undertaking or being associated with significant criminal activity; and
(b) deter significant criminal activity; and
(c) reduce the ability of criminals and persons associated with crime or significant
criminal activity to continue or expand criminal enterprise; and
(d) deal with matters associated with foreign restraining orders and foreign
forfeiture orders that arise in New Zealand.
Criminal proceeds definitions
Assets forfeiture order
An Assets Forfeiture Order (AFO) is issued by the High Court on
application. This order must be issued by the court on a successful
application that shows on the balance of probability that specific assets
which have been acquired have been tainted by significant criminal activity.
Tainted property
Section 5, Criminal Proceeds (Recovery) Act 2009
Interpretation
Tainted property
(a) means any property that has, wholly or in part, been—
(i) acquired as a result of significant criminal activity; or
(ii) directly or indirectly derived from significant criminal activity; and
(b) includes any property that has been acquired as a result of, or directly or
indirectly derived from, more than 1 activity if at least 1 of those activities is a
significant criminal activity
Qualifying instrument forfeiture offence
Section 5, Criminal Proceeds (Recovery) Act 2009
Interpretation
Qualifying instrument forfeiture offence
(a) Means an offence punishable by a maximum term of imprisonment of 5 years
or more; and
(b) Includes an attempt to commit, conspiring to commit, or being an accessory to
an offence if the maximum term of imprisonment for that attempt, conspiracy,
or activity is 5 years or more.
Significant criminal activity
Section 6, Criminal Proceeds (Recovery) Act 2009
Meaning of significant criminal activity
(1) In this Act, unless the context otherwise requires, significant criminal activity means an activity engaged in by a person that if proceeded against as a criminal offence would amount to offending–
(a) that consists of, or includes, 1 or more offences punishable by a maximum
term of imprisonment of 5 years or more; or
(b) from which property, proceeds, or benefits of a value of $30,000 or more
have, directly or indirectly, been acquired or derived.
Unlawfully benefited from criminal activity
Section 7, Criminal Proceeds (Recovery) Act 2009
Meaning of unlawfully benefited from significant criminal activity
In this Act, unless the context otherwise requires, A person has unlawfully benefited from significant criminal activity if the person has knowingly, directly or indirectly, derived a benefit from significant criminal activity (whether or not that person undertook or was involved in the significant criminal activity).
Profit Forfeiture Order
Section 55, Criminal Proceeds (Recovery) Act 2009
(1) The High Court must make a profit forfeiture order if it is satisfied on the balance of probabilities that—
(a) The respondent has unlawfully benefited from significant criminal activity
within the relevant period of criminal activity; and
(b) the respondent has interests in property.
Case Study: Unlawfully benefited from significant criminal
activity
Whether a person benefited from the activity undertaken can be
demonstrated in the case of Pulman v Commissioner of Police55
.
Pulman, a pharmacist, was convicted as a party to methamphetamine
manufacture and was subsequently the subject of a profit forfeiture order
under s55 of the Criminal Proceeds (Recovery) Act 2009.
Pulman had sold significant quantities of precursor substances over several
years, in the knowledge they were to be used in the manufacture of illicit
drugs.
Pulman claimed that the precursors were sold for cash which, after being
received by him, was then secured in a cash box and allegedly used by his
employer to pay wages.
Pulman argued that he had not benefited personally from the sale of the
precursor substance because his employer had ultimately received all of the
sales proceeds.
In this case the Court held that the purpose of the forfeiture regime was not
only to prevent the ability of a person to actually profit from undertaking
significant criminal activity but also the “chance” that they may be able to
do so and also to deter significant criminal activity.
Pulman had therefore unlawfully benefited as soon as he received the cash
from the purchasers. How he then dealt with that cash was irrelevant. His
appeal was dismissed.
Instrument of crime
Section 5, Criminal Proceeds (Recovery) Act 2009
Interpretation
Instrument of crime means–
(a) Property used (wholly or in part) to commit or facilitate the commission of a
qualifying instrument forfeiture offence.
(b) in relation to a qualifying instrument forfeiture offence that is an offence
against section 8(1) or (2A) of the Terrorism Suppression Act 2002, includes
funds (as defined in section 4(1) of that Act) allocated for the purposes of
committing that offence; and
(c) in relation to any property referred to in paragraphs (a) and (b), the proceeds
of any disposition of that property or any other property into which that
property is converted, after the commission of the qualifying instrument
forfeiture offence, except to the extent provided otherwise by any order of a
court under this Act or the Sentencing Act 2002, excluding any severable
interest or granting relief.
Obligations of prosecutor to notify court of relevant property
Section 142B of the Sentencing Act 2002 places obligations on the
prosecutor to consider notifying the court of any relevant property that is an
instrument of crime so that forfeiture of that property can be considered as
part of the sentencing process. This could include vehicles and property
used to facilitate the commission of an offence.
Example:
A house used in the manufacture of methamphetamine or a motor vehicle
used in the delivery of illegal drugs.
Example:
Where an offender uses his old beat up car, worth little, to make his drug
deliveries, the prosecutor may think there is no need for the court to consider
forfeiture.
The obligation to notify the court is on the prosecutor - defined in s5 of the
Criminal Proceeds (Recovery) Act 2009 as the person for the time being in
charge of the criminal file and includes:
(i) any other employee of the person or agency by whom the prosecutor is
employed who has responsibilities for any matter directly connected
with the proceedings; and
(ii) counsel representing the person who commenced the proceedings
(iii) in the case of a private prosecution person who commenced the
proceedings or counsel representing that person
Duties of prosecutor if offender guilty of qualifying instrument forfeiture offence
Section 142B, Sentencing Act 2002
If a person is convicted of a qualifying instrument forfeiture offence and any property was used to commit, or to facilitate the commission of, that offence, the prosecutor must, if in the prosecutor’s opinion the court should consider whether to make an instrument forfeiture order in respect of that property, notify the court in writing of—
(a) the details of that property:
(b) the name and identifying details of any person (other than the offender) who,
to the knowledge of the prosecutor, has an interest in the property.
Practical application
In practice it will be incumbent on the Officer in Charge of the criminal file
to notify their counsel for the Crown Solicitor that there is property that is an
instrument of crime. In your referral to the Crown Solicitor request that they
file a ‘Prosecutor’s Notice’ with the Court, advising them that the court
should consider making an instrument forfeiture order (ss 142A to 142Q
Sentencing Act 2002 and subpart 4 of Part 2 of the Criminal Proceeds
(Recovery) Act 2009).
Restraint of instrument of crime
Property that is an instrument of crime may need to be restrained while the
criminal proceedings take their course, to prevent disposal of the asset or
erosion of its value by being further encumbered (eg mortgage on a house).
Where such circumstances exist it is recommended that this action is taken.
This will require an ‘application for restraining order relating to instrument
of crime’, under s26 of the Criminal Proceeds (Recovery) Act 2009.
Application is on notice (as far as practicable) to any person with an interest
in the property (s19(b) and (c)). However, application can be made without
notice if the Court is satisfied there is a risk to the property being
destroyed/disposed/altered/concealed if notice was given (ss21 and 22).
Assessment process
Before preparing such an application an assessment process is required. The
assessment process is conducted to determine:
* the value of the asset
* equity in the asset
* any third party interest in the asset
* the cost of action in respect of the asset.
Note:
Consultation with the Financial Crime Group is required regarding the cost of action, as it is they who incur the cost associated with assessment and storage (where applicable) of the asset until such time as a final determination is made, by the Courts, in respect of the property.
Affidavit required for application
Such an application will require a straight forward affidavit from the officer
in charge of the file outlining:
* Officer in Charge:
− details.
* Offender(s):
− details
− charges
− criminal convictions.
* Search warrant - describe the nature of the offending discovered at or
involving the property (asset) concerned. Note: Where the value of the
asset is high you need to demonstrate that the offending was at more of a
commercial level.
* Admissions made during interview(s).
* Property:
− describe property sought to be restrained and its value
− show that offender owns, has custody or control.
Seek guidance from Asset Recover Unit
Guidance for completing a restraint application needs to be sought from
Prosecutions and/or the Asset Recovery Unit.
An application pursuant to s26 of the Act may be made without notice in
circumstances of risk and where justified, eg where a gang headquarters is
the property concerned.
Where no conviction entered
Where no conviction is entered, any restraint order will lapse and there will
be no instrument of forfeiture.
Instrument Forfeiture Order
Means an order made under s142N of the Sentencing Act 2002.
Note:
Following a hearing under s142K of the Sentencing Act 2002, the court may, if it is satisfied that the property described in the notice given under s142B of the same Act is an instrument of crime, order that the instrument of crime or any part of it specified by the court be forfeited to the Crown.
What must occur before Criminal Proceeds action can be taken
A restraining order is the first step in the asset seizure process. In the case of
tainted property and benefits from crime an application made to the High
Court must show reasonable grounds for belief that the property is tainted –
that it has been acquired, or directly or indirectly derived, from “significant
criminal activity”.
Significant Criminal Activity
Section 6 of the Criminal Proceeds (Recovery) Act 2009
Is defined as activity engaged in by a person that if proceeded against as a criminal offence
would amount to offending—
(a) that consists of, or includes, 1 or more offences punishable by a maximum
term of imprisonment of 5 years or more; or
(b) from which property, proceeds, or benefits of a value of $30,000 or more
have, directly or indirectly, been acquired or derived.
Property partly used may result in forfeiture of whole
In the case of an instrument forfeiture order, reasonable grounds must be
provided to show the instrument was used to facilitate significant criminal
activity. Even if the property has only been partly used for the purposes of
crime, the entire property is an instrument of crime and may be subject to
forfeiture.
Case study: The practical application of a partial forfeiture
In the case of R v Elliot56 , Elliot was convicted of cultivation of cannabis on
a significant scale, having used his property (home and garage) in doing so
over several years.
The property concerned had been paid for earlier by legitimate funds.
Following his conviction he was the subject of an instrument forfeiture order
under s10B of the Sentencing Act 2002.The nature of the property meant
that it was indivisible and so it was believed that forfeiture was to be all or
nothing.
In a subsequent appeal, Elliot v R57 , the Court of Appeal held that s142N(1)
of the Sentencing Act 2002 authorises a partial forfeiture of property which
was an instrument of crime. It held that s142N(3) and/or (5) of the Sentencing Act 2002 enables the Courts to give practical effect to an order forfeiting to the Crown part only of a property which is an instrument of crime.
While such a property vests entirely in the Crown under s70 of the Criminal Proceeds (Recovery) Act 2009, the offender’s interest in the property is recognised by fixing his interest in it, either as a specified partinterest or as a fixed dollar amount. Section 142N(3) and/or (5) of the Sentencing Act then allows orders to be made to give effect to that direction.
In so holding the Court overruled the lower court’s finding. The lower court
had established that the Sentencing Act 2002 does not allow for
circumstances such as undue hardship, in respect of the offender, to have an
effect on whether such orders should be made.
This was because any sentence imposed is subject to adjustment so as to take
into account the financial impact of the forfeiture of such property on the
offender. A balancing act is required regarding the harshness of any penalty
suffered by the offender through the forfeiture versus the reduction of an
otherwise appropriate sentence. The Court of Appeal did not specifically
consider the issue of undue hardship.
In this case, Elliot’s earnings were estimated at approximately one quarter of
the property’s total value. The High Court had ruled that Elliot should lose
his property in its entirety and receive a sentence of 12 months’ supervision;
he would have otherwise been imprisoned for 3.5 years had the forfeiture
order not been made.
The Court of Appeal quashed the sentence of 12 months’ supervision and
sent the matter back to the High Court for the issue of forfeiture to be
reconsidered. The High Court subsequently ordered that 60% of Elliot’s
interest in the property was to be forfeited to the Crown. Elliot was resentenced and received 9 months’ home detention.
Restraining Orders
The Criminal Proceeds (Recovery) Act 2009 empowers the Commissioner
of Police to apply for restraining orders, assets forfeiture orders and profit
orders. The Commissioner has delegated these functions solely to members
in Asset Recovery Units.
Only members of Asset Recovery Units may apply for restraining orders
(apart from those relating to Instruments of Crime), assets forfeiture orders
and profit orders.
In relation to specific property
For an order to be made under s24(1) of the Criminal Proceeds (Recovery)
Act 2009 the Court has to be satisfied it has reasonable grounds to believe
that the “property“ is “tainted property“ – ie that it has been either acquired
as a result of, or directly or indirectly derived, from “significant criminal
activity”.
In relation to all or part of respondent’s property
For an order to be made under s25(1) of the Criminal Proceeds (Recovery)
Act 2009, the Court has to be satisfied that it has reasonable grounds to
believe that the respondent has unlawfully benefited from “significant
criminal activity”, and that the “respondent“ has an “interest” in the
“property“ to be restrained.
In relation to an Instrument of Crime
For an order to be made under s26(1) of the Criminal Proceeds (Recovery)
Act 2009, two criteria must be met: either the “respondent” must have been
charged with a “qualifying instrument forfeiture offence” (or the Court must
be satisfied it has reasonable grounds to believe that the respondent will be
so charged within 48 hours), and the Court must be satisfied that it has
reasonable grounds to believe that the “property” which will be the subject
of the order was used to commit, or to facilitate the commission of, the
“qualifying instrument forfeiture offence”.
Valid for one year
A restraining order is valid for one year from the date on which the order is
made. The court may issue an extension before the expiry of the original
order. The extension is also valid for one year. The restraining order remains
in force for the prescribed time or until the making or declining of an assets
or profit forfeiture order, whichever is the earlier.
Investigative procedure
Introduction
It is important you consult with members of your local Asset Recovery Units
when dealing with matters to do with money laundering and/or proceeds
recovery action.
Suspect interview
When interviewing a suspect about money laundering or where proceeds
recovery action is to be considered, consider the following points:
* suspect’s legitimate income
* suspect’s illegitimate income
* expenditure
* assets
* liabilities
* acquisition of financial records, from banks, financing companies, loan
sharks, family trust documents
* clarification of documentary evidence located, as per above
