Proceeds of Crime Act 2002

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PROCEEDS OF CRIME ACT 2002

GUIDANCE JANUARY 2008

This guidance supersedes all previous guidance on the Proceeds of Crime Act 2002. Guidance on the Money Laundering Regulations 2007 has already been published and should be read by all whose practice may bring them within the regulated sector [link to Money Laundering Regulations Guidance] None of the guidance is a substitute for the relevant legislation:-

Proceeds of Crime Act 2002, as amended. Most recently schedule 9 of the Proceeds of Crime Act 2002 has been amended by the Proceeds of Crime Act 2002 (Business in the Regulated Sector and supervisory Authorities) Order 2007 which came into force on 15th December 2007 and by the Terrorism Act 2000 and the Proceeds of Crime Act 2002 (Amendment) regulations 2007 which came into force on 26th December 2007
[http://www.england-legislation.hmso.gov.uk/si/si2007/uksi_20073398_en_2]

The Money Laundering Regulations 2007 which came into force on 15th December 2007 [link to ML regs 2007]
See also the decision of the Court of Appeal in Bowman v Fels [2005] EWCA Civ.226 [http://www.soca.gov.uk/downloads/BowmanvFels.pdf]
You may also wish to read the relevant EU directives:
[http://europa.eu]

The website of the Serious and Organised Crime Agency is useful www.soca.gov.uk

INTRODUCTION

1. Money Laundering is now a familiar concept. It is the process whereby assets which are the proceeds of crime and the true ownership of those proceeds are changed or disguised so that they appear to come from a legitimate source.

Part 7 of POCA

2. Part 7 of POCA may affect members of the Bar. The main offences are set out in sections 328 and 330. The old section 333 (Tipping Off offence) has been repealed and replaced by sections 333A to 333D. These new sections apply only to the regulated sector but are broader in scope than the old section 333 (see below under Regulated Sector). Section 342 remains in force.

Section 328

3. By section 328(1) a person commits an offence if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person.

4. Criminal Property is defined at section 340(3). It is a wide definition. Property is criminal property if

(a) it constitutes a person’s benefit from criminal conduct or represents such benefit (in whole or part and whether directly or indirectly), and
(b) the alleged offender knows or suspects that it constitutes or represents such a benefit.
For example property that represents the benefit of the non payment of tax constitutes criminal property for the purposes of the Act.

5. Section 328(2) provides defences. By Section 328(2)(a) a person does not commit an offence if he makes an authorised disclosure under section 338 and (if the disclosure is made before he does the act mentioned in subsection (1) he has the appropriate consent.
Disclosure is considered at paragraphs below.

6. There is no definition of what constitutes becoming “concerned in an arrangement” for the purposes of section 328. The decision in Bowman v Fels is extremely helpful in this regard. The Court of Appeal held that

(i) Section 328 does not extend to the involvement of a barrister in the ordinary conduct of litigation or its consensual resolution and
(ii) even if it did the section would be subject to a full saving for common law legal professional privilege (LPP) notwithstanding the absence of any express statutory saving for LPP in that section.

7. In the light of the decision in Bowman v Fels a barrister will only fall within the ambit of section 328 if he is not involved in the ordinary conduct of litigation (see paragraph 83) but in the extraordinary conduct of litigation. Although the Court of Appeal nowhere sets out what it has in mind by the extraordinary conduct of litigation, the Bar Council submissions had put forward an example of bogus or sham litigation, where the barrister instructed came to suspect that there was no genuine dispute between the parties, but a dispute concocted as a cover for the transfer of ill gotten gains; and this seems to be reflected in other passages of the judgment (see for example paragraph 101). Clearly such cases will be extremely rare. When they do arise barristers must consider carefully whether an authorised disclosure should be made, so as to avoid committing a section 328 offence.

Disclosure and consent

8. Section 328(2) provides that a person does not commit an offence if he makes an authorised disclosure under section 338 and (if the disclosure is made before he does the act mentioned in subsection (1)) he has the appropriate consent. Thus where a member of the Bar is instructed to advise or appear in court in circumstances where he might commit a section 328 offence (for example because he suspects the litigation is a sham or because he is being asked to provide advice which he foresees may be used for money laundering purposes) he must consider whether he should make a disclosure before continuing to act.

9. Where the barrister considers that he should make a disclosure in order to continue to act without committing a criminal offence (and his solicitor has not already done so) then (subject to his assessment of the impact of sections 333 (as amended) and 342 he should inform his solicitor and his client that he must make a disclosure to a constable, customs officer or SOCA (in practice, usually SOCA) and seek consent before continuing to act. He should also inform his solicitor and his client that in order for them to proceed without committing a criminal offence they too should seek consent from SOCA. The solicitor (who is subject to the same regulation as the barrister) will almost certainly support the barrister in making disclosure, and advising the client of the wisdom of doing so. Thereafter events will take one of three courses:-

a) The client objects to this course of action, in which case he will no doubt withdraw his instructions. If he does so there is no difficulty and there is no need for the barrister to make a disclosure under section 328 (although a duty may still arise under section 330, subject to the LPP defence, see below).

b) If the client objects to the report and does not withdraw instructions, the barrister should withdraw from the case to avoid committing the offence. Having withdrawn, there is no duty upon the barrister under section 328 to make a disclosure (although a duty may still arise under section 330, subject to the LPP defence).

c) If the client agrees to the proposed course of action, the barrister makes disclosure to SOCA and seeks consent. The barrister should consider (and advise his client in this regard) whether he should make a disclosure jointly with his solicitor and/or his client. If the client makes a report, he also has the protection of the defence. In practical terms it may well be the case that the disclosure is made jointly by barrister, solicitor and client.

10. A disclosure report must be made in writing. The report can be downloaded from www.soca.gov.uk . Consent may be express or deemed. SOCA has 7 working days (the notice period) within which to notify the person making the disclosure of its consent/refusal, starting with the first working day after the person makes disclosure. If no notice is received from SOCA during the notice period a person is deemed to have appropriate consent. If a notice of refusal is served on the person making disclosure there is then a moratorium period (31 days starting with the day on which the person receives notice of refusal). At the expiry of that period the person is deemed to have consent.

REGULATED SECTOR

11. The definition has been amended and is set out in the new schedule 9. It is consistent with the definition within the Money Laundering Regulations 2007.
Subparagraphs 1(m) and (n) are most likely to be relevant to some barristers;

1 A business is in the regulated sector to the extent that it consists of…
……
m) the provision of advice about the tax affairs of other persons by..a sole practitioner..who by way of business provides advice about the tax affairs of other persons
n)the participation in financial or real property transactions concerning
i) the buying and selling of real property …or business entities
v) the creation operation or management of trusts, companies or similar structures
by …a sole practitioner who by way of business provides legal or notarial services to other persons

12. As set out above it is implicit in the Court of Appeal’s reasoning in Bowman v Fels that a barrister involved in the ordinary conduct of litigation or its consensual resolution does not fall within the regulated sector (see in particular paragraphs 58-62 and paragraph 99). A barrister will fall within the regulated sector if he is undertaking non contentious advisory or transactional work of the type set out in paragraph 1 above. A barrister within the regulated sector must comply with sections 330 and 333A and with the Money Laundering Regulations 2007.

13. Section 330

By section 330 a person in the regulated sector commits an offence if four conditions are satisfied.

a) That he
i) knows or suspects, or
ii) has reasonable grounds for knowing or suspecting,
that another person is engaged in money laundering.

b) that the information or other matter
i) on which his/her knowledge or suspicion is based, or
ii) which gives reasonable grounds for such knowledge or suspicion
came to him in the course of a business in the regulated sector

c) that he
i) can identify the other person engaged in money laundering or the whereabouts of any of the laundered property, or
ii) he believes, or it is reasonable to expect him/her to believe, that the information or other matter mentioned above will or may assist in identifying that other person or the whereabouts of any of the laundered property

d) that he does not make the required disclosure to the appropriate recipients as soon as is practicable after the information or other matter came to him”

14. Section 330 and Legal Professional Privilege

There is, however, an express statutory saving for legal professional privilege (“LPP”); Section 330 (6) provides that a person does not commit an offence under the section if he is a professional legal adviser and the information came to him in privileged circumstances. Section 330 (10) defines LPP for these purposes. Nearly all information that will be provided to a barrister in the context of non-contentious advisory work will be privileged, and, if the information is privileged, no disclosure to SOCA should be made.

15. NB Section 330 (11) makes it clear that LPP does not extend to information which is communicated with the intention of furthering a criminal purpose. Under the criminal law, one intends something if one can foresee its natural consequences . It is not clear whose intention is relevant for the purposes of this section. At common law, the client’s fraudulent intention is sufficient to throw aside the cloak of LPP even if the legal adviser is unaware of it: see Cox v Railton 14 QBD 153. However, in Bowman v Fels the Court of Appeal expressed some sympathy for the view that unless a barrister is actually aware of his client’s intention to further a criminal purpose, the information would be protected from disclosure and no offence would be committed: see paragraphs 93 and 94. Given the serious penal consequence of the statute for barristers if they do not make a relevant disclosure, the Bar Council believes the views tentatively expressed by the Court of Appeal in those passages are correct.

16. SECTION 333A (TIPPING OFF)
This offence no longer applies outside the regulated sector. It is markedly different from its predecessor and the relevant provisions are set out in full below.

By Section 333A: regulated sector

(1) A person commits an offence if -
(a) the person discloses any matter within subsection (2);
(b) the disclosure is likely to prejudice any investigation that might be conducted following the disclosure referred to in that subsection; and
(c) the information on which the disclosure is based came to the person in the course of a business in the regulated sector

(2) the matters are that the person or another person has made a disclosure under this Part-
(a) to a constable,
(b) to an officer of Revenue and Customs,
(c) to a nominated officer, or
(d) to a member of staff of the Serious Organised Crime Agency authorised for the purposes of this Part by the Director General of that Agency,
of information that came to that person in the course of a business in the regulated sector.

(3) A person commits an offence if -
(a) the person discloses that an investigation into allegations that an offence under this Part has been committed is being contemplated or is being carried out;
(b) the disclosure is likely to prejudice that investigation; and
(c) the information on which the disclosure is based came to the person in the course of a business in the regulated sector.

17. There are a number of exceptions. Most relevant to the Bar are likely to be those set out at Section 333D which provides

(1) A person does not commit an offence under section 333A if the disclosure is -
(a) to the authority that is the supervisory authority for that person by virtue of the Money Laundering Regulations 2007 [here, the General Council of the Bar]; or
(b) for the purpose of-
(i) the detection, investigation or prosecution of a criminal offence (whether in the UK or elsewhere),
(ii) an investigation under this Act, or
(iii) the enforcement of any order of a court under this Act.

(2) A professional legal adviser…does not commit an offence under section 333A if the disclosure -
(a) is to the adviser’s client, and
(b) is made for the purpose of dissuading the client from engaging in conduct amounting to an offence.
(3) A person does not commit an offence under section 333A (1) if the person does not know or suspect that the disclosure is likely to have the effect mentioned in section 333A(1)(b)
(4) A person does not commit an offence under section 333A(3) if the person does not know or suspect that the disclosure is likely to have the effect mentioned in section 333A(3) (b).

18. The mischief at which the section is aimed is clear; to prevent those about whom disclosures have been made from acting so as to frustrate the investigation. It is not aimed at preventing all disclosure. The wording of section 333A would allow a barrister in the regulated sector to tell his own client of a disclosure made about (eg) another party – provided that to do so was not likely to prejudice any subsequent investigation.

19. As to disclosures to a client about whom a disclosure has been made a barrister in the regulated sector must not inform his client of a disclosure or investigation unless he does so in order to dissuade him from engaging in conduct amounting to an offence (subsection 333D (2)). It is not apparent how this will work in practice.

Section 342 of POCA sets out the offences of prejudicing an investigation which are unchanged.

General Council of the Bar
January 2008