Money Laundering The Legal Position Andrew Campbell University of Leeds email@example.com Introduction • Why is this important? • Most of us will now be covered to some extent by the anti money laundering regime • There have been a number of successful prosecutions for money laundering offences • “He clearly closed his eyes to the obvious” • Solicitor jailed after home fraud July 2006 • Sale of house at massive undervalue • Some of the UK’s leading banks have been fined for AML failures The Legal Framework • The Substantive Law • The Money Laundering Regulations 2003 • It is important that you are aware of the legal framework The Proceeds of Crime Act • The substantive criminal law is to be found in Part 7 of POCA and the relevant anti-terrorism provisions • Prior to POCA the relevant offences were scattered in a number of separate pieces of legislation Concealing etc. • Section 327 is the first principal offence and it makes it an offence to conceal, disguise, convert, transfer or remove criminal property from England and Wales, Scotland or Northern Ireland. • Section 327(3) provides that this includes concealing or disguising the nature, source, location, disposition, movement or ownership or any rights with respect to it. Arrangements • The second principal money laundering offence is contained in section 328 which provides: • 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. • This offence can be committed in any or more of the five ways referred to. Where a person handles money which is derived from the proceeds of a criminal offence there is potential liability. “..which he knows or suspects…” • Knowledge is a straightforward concept which should not cause any problems but suspicion raises many more issues. What will amount to suspicion for the purposes of this offence? • The Joint Money Laundering Steering Group gives the following guidance: “Suspicion is personal and subjective and falls far short of proof based on firm evidence. • Suspicion has been defined by the courts as being beyond mere speculation and based on some foundations i.e. ‘a degree of satisfaction and not necessarily amounting to belief but at least extending beyond speculation as to whether an event has occurred or not”. Acquisition etc. • The third principal offence is in section 329(1) which makes it an offence to acquire, use or have possession of criminal property. Disclosure and Tipping Off • The other two offences are concerned with either failing to make a disclosure or to “tip off” that a disclosure has been made. • Sections 330-332 are concerned with failures to disclose. Section 330 applies where a person has failed to make a disclosure where a person knows or suspects money laundering and also where there are reasonable grounds for such knowledge or suspicion. • The offence only applies where the information is gained in the course of a regulated business. Regulated business now goes beyond the financial services sector and includes, for example, solicitors and accountants. • Once a disclosure report has been made it is an offence to tip off another person that a report has been made. This carries a penalty of up to five years imprisonment and is clearly considered a serious offence. Defences • Section 328(2) provides a defence where the accused makes a disclosure in the proper manner. It is also a defence where the accused can show that he or she had a reasonable excuse for not making the disclosure – section 328(2)(b). There is no judicial authority as yet to clarify what would be required to satisfy this defence • There is also the defence of ‘adequate consideration’ see section 329(2)( c). • But will not apply if you know or suspect that the goods or services have been or will be used in criminal conduct. The Regulations • The Money laundering Regulations 2003 (came into effect on 1st March 2004) • They are the implementation of the Second European Money laundering Directive • Failure to comply with the Regulations is a criminal offence • The Regulations apply to businesses and persons within the regulated sector. Universities? • The Regulations require that the following are complied with: • (a) training of staff • (b) customer/client identification • (c ) record keeping • (d) reporting procedures • The Regulations will only apply to ‘relevant business’ • What is relevant business? • Reg 2(2) (n) – “the activity of dealing in goods of any description by way of business….whenever a transaction involves accepting a total cash payment of 15,000 Euro or more” Regulation 3 • All persons carrying on relevant business are to establish such procedures of internal control and communication as may be appropriate for the purpose of forestalling and preventing money laundering. • Procedures have to be established to cover: • Training - Reg 3 • Client identification – Reg 4 • Record keeping – Reg 6 • Reporting – Reg 7 Scenarios • An overseas student turns up and wants to pay tuition fees in cash • She opens her bag and produces £10,000 in cash • What should you do? • An overseas student has paid tuition fees by way of a bank transfer and has arrived in Leeds • He now wants to pay for his hall of residence in cash • Any problems with this? • What if he is a home student? • A student from a high risk country has paid tuition fees • Then decides to withdraw and wants a refund payable by cheque to another person • What should you do? • The Department of Computing has a significant amount of slightly out of date equipment it wants to sell • Advertises in local media • Buyer wants to buy for cash • Makes an offer of £10,000 A supplier, who you have not used before, pays you a cheque for £8,000 which you bank right away When checking the invoice it is noticed that the payment should have been for £3,000 The supplier asks you to write a cheque for the difference payable to a third party Some observations • Keep a sense of proportion • Use common sense • Don’t try to be Sherlock Holmes or Hercule Poirot!