3.3.6.1 The UK
Money laundering was initially criminalised in the United Kingdom in respect of the proceeds of drug-trafficking. The confiscation regime introduced by the Drug Trafficking Act 1986 provided the trial judge with the power to confiscate from
105 Ibid,Art 6.
106 Council Directive 91/308/EEC, OJ L166/77, Art 11.
107 Ibid,Art 7.
108 Council Directive 2001/97/EC 109 Ibid,Art 1(E).
110 Ibid,Art 2a.
111 Ibid,Art 3.
112 Ibid,Art 6.
113 Ibid,Art 11.
114 Under these rules communications between a legal adviser and a client for the purposes of obtaining legal advice are privileged. Thus legal professional privilege will apply when a lawyer is giving advice relating to contemplated legal proceedings, or if proceedings are not contemplated, the advice relates merely to the client determining their legal position.
115 See Chapter 9.
116 For a comprehensive account of the law and practice in the UK, see B Rider and C Nakajima,Anti- Money Laundering Guide,2003, Bicester: CCH.
convicted defendants proceeds from drug-trafficking activities. When assessing the amount to be paid, the court can assume that assets accrued by the defendant in the six years prior to the commencement of proceedings were derived from criminal conduct. Arguments that this statutory assumption infringes the European Convention on Human Rights have so far been unsuccessful.117Although the confiscation regime was initially limited to drug-trafficking cases, it has subsequently been extended to cover other offences. The 1986 Act has now been replaced by the Drug Trafficking Act 1994. Further anti-money laundering provisions appeared in a range of legislation, including the Criminal Justice Act 1993, which took account of the Council Directive 91/308/EEC. Subsequently, with a view to increasing the efficiency of the confiscation procedure, the Prime Minister requested an assessment of the recovery of illegally obtained assets regime. The report prepared by the Performance and Innovation Unit (PIU) in the Cabinet Office was published in 2000 and recommended the consolidation of existing legislation dealing with confiscation and money laundering. In 2001, the Proceeds of Crime Bill was introduced which incorporated many of the recommendations from the PIU report.
The Proceeds of Crime Act 2002, which came into force in February 2003, consolidates the existing confiscation provisions relating to drug-trafficking and other criminal offences and creates new powers of civil forfeiture without conviction. In addition to creating three specific money laundering offences, this legislation removes the distinction between laundering money from drug-trafficking and laundering the proceeds of other forms of criminal activity. This legislation also provides prosecuting authorities with a range of measures, including new powers of investigation, restraint orders and confiscation orders, which will make the recovery of unlawfully held assets more effective; it also includes provisions on international co-operation and mutual legal assistance. The three principal money laundering offences, which apply to the laundering of the offender’s own proceeds of crime as well as the proceeds of other people’s criminal activity,118criminalise concealing,119 arranging,120acquiring, using or possessing121criminal property. These offences all carry a maximum penalty of 14 years’ imprisonment. The offence of concealing is committed when a person conceals, disguises, converts, transfers or removes from the jurisdiction criminal property. Similarly, it is an offence for someone to be concerned in arrangements which they know or suspect would make it easier for
117 InPhillips v UK(2002) 11 BHRC 280, the Strasbourg Court considered that although an issue relating to fairness may arise in circumstances where a confiscation order was based on hidden assets, in this case the relevant provisions were confined within reasonable limits, given the importance of what was at stake, and the Court was unanimous in holding that the operation of the statutory assumption did not violate the notion of a fair hearing. Similarly, inR v Benjafield and Rezvi[2001] 3 WLR 75, the appellant argued that a confiscation order imposed under Pt VI of the Criminal Justice Act 1988 did not accord with his rights under the Convention. In dismissing the appeal, the House of Lords considered that the legislation amounted to a proportionate response to the problem it was designed to address and represented a fair balance between the interests of the individual and the public.
However, when considering an application for an order the trial judge must avoid any serious or real risk of injustice. If there was such a risk, the court should not make an order.
118 Proceeds of Crime Act 2002, s 340.
119 Ibid,s 327.
120 Ibid,s 328.
121 Ibid,s 329.
another person to acquire, retain, use or control criminal property and to acquire, use or control criminal property. Criminal property is defined as being property which the alleged offender knows or suspects constitutes or represents benefit from any criminal conduct.122
This legislation creates a new offence of failing to disclose suspicions that someone is engaged in money laundering activities. However, the duty to report is restricted to persons who receive information in the course of a business in the regulated sector, which is defined in Sched 9 to the Act.123Regulated sector businesses are required to nominate a Money Laundering Reporting Officer124who will incur criminal liability for failing to disclose an employee’s suspicion to the National Criminal Intelligence Service (NCIS) as soon as is practicable.125It is also an offence to disclose information likely to prejudice a money laundering investigation.126The maximum penalty for these offences is five years’ imprisonment. The Act provides for confiscation of proceeds derived from the defendant’s criminal conduct. If the court is satisfied that the defendant has a criminal lifestyle, the confiscation order can relate to the proceeds of any criminal conduct whenever it occurred.127In line with earlier confiscation legislation, the court is permitted to make assumptions in respect of the amount the defendant has benefited from criminal conduct.
The Proceeds of Crime Act 2002 also introduces specific coercive powers to assist with investigations into money laundering. These powers are more intrusive than were previously available in an investigation into the proceeds of crime and have been justified on the ground that the government is committed not only to prosecuting crime but also to confiscating the proceeds of crime. A code of practice has been issued to provide guidance to the agencies exercising these powers.128The Act provides that in confiscation and money laundering investigations, applications can be made to a circuit judge for production orders, warrants for entry, search and seizure and customer information and account monitoring orders. Warrants issued under this legislation differ from those issued under the Police and Criminal Evidence Act 1984 (PACE) in that applications can be made without giving notice to the person whose premises will be searched.129However, provision is made to allow some of the search warrant provisions of PACE to apply to search warrants sought under this legislation in respect of money laundering investigations. The new powers of investigation are limited to confiscation investigations, civil recovery investigations and money laundering investigations. Whether this legislation is entirely convention compliant remains to be seen.
122 Ibid,s 340.
123 Ibid,s 330.
124 Money Laundering Regulations 1993, reg 14.
125 Proceeds of Crime Act 2002, s 331.
126 Ibid,s 333.
127 Ibid,s 6.
128 Ibid,s 377.
129 Ibid,s 352.
3.3.6.2 1993 EC Money Laundering Regulations
Exercising powers conferred under s 2(2) of the European Communities Act 1972, the Government introduced the Money Laundering Regulations 1993130to give effect to the Council Directive 91/308/EEC which relates to measures on prevention of the use of the financial system for the purpose of money laundering. This Directive was one of the early international initiatives in the fight against money laundering.
Under the 1993 Regulations, financial institutions are required to establish and maintain procedures which would deter money laundering activities. The Regulations were designed to ensure persons engaged in relevant financial business activities in the UK took appropriate measures to help staff identify and prevent money laundering. Financial institutions were required to establish reporting systems and to set up training programmes for employees on the law and practice relating to anti-money laundering measures. The Regulations also required institutions to obtain adequate evidence of the identity of new applicants for business and, where persons were acting on behalf of another person, to take reasonable measures to obtain satisfactory evidence of the identity of the other person. Failure to comply with these regulations was punishable by a fine or imprisonment. The 1993 Regulations were updated in 2001.131
In December 2001, the European Parliament and the Council adopted a further Directive updating and amending the 1991 Directive. Responding to this new initiative the Government introduced the Money Laundering Regulations 2003, which revoke both the 1993 and 2001 Regulations. The new Regulations, which are also prescribed for the purposes of the Financial Services and Markets Act 2000, enter into force in June 2003. Money laundering for the purpose of these Regulations
‘means an act which falls within s 340(11) of the Proceeds of Crime Act 2002 or an offence under s 18 of the Terrorism Act 2000’.132Under these Regulations, persons seeking to form a business relationship, or conduct a one-off transaction in the course of a relevant business, must ensure compliance with a variety of procedures. These include: record keeping and internal reporting procedures; identification checks on applicants for business; and training to enable staff to recognise money laundering transactions. Casino operators are required to obtain satisfactory evidence of identity of all high spending customers. Failure to maintain these procedures will result in criminal liability. The Regulations require the Commissioners of Customs & Excise to keep a register of money service operators and a register of high value dealers and provide the Commissioners with powers to enter, search and seize documents and, in some circumstances, to impose a civil penalty. The Regulations also impose a duty on a ‘supervisory authority’ to inform the police if it knows or suspects that someone has been involved in money laundering. For the purposes of the Money Laundering Regulations, the Bank of England, the Office of Fair Trading and the Gaming Board of Great Britain are supervisory authorities.
130 SI 1993/1933.
131 SI 2001/3641.
132 A draft of 5 November 2002; SI 2003; Money Laundering Regulations 2003, reg 2.