M O N E Y L AU N D E R I N G U P DA T E

Is Soca An Alsatia?
1. 2. 3. K Ltd v National Westminster Bank Plc [2006] EWCA Civ 1039 UMBS v SoCA [2007] EWCA Civ 406 Shah v HSBC Private Bank (UK) Ltd [2010] EWCA Civ 31

Scope of Money Laundering Offences

Money laundering for minor handling offences 4. R (Wilkinson) v DPP[2006] EWHC 3012 (Admin), [2007] 1 Archbold News 5 Criminal at time of Receipt 5. International Instruments 6. Loizou [2005] EWCA Crim 1579 7. Kensington International Limited v Republic of Congo [2008] 1 WLR 1144 8. Geary [2010] EWCA Crim 1925

Mens Rea
Knowledge Suspicion 9. Da Silva [2006] EWCA Crim 1654 10. K Ltd v National Westminster Bank Plc [2006] EWCA Civ 1039 Reasonable Grounds to Suspect vs Suspicion 11. Griffiths and Pattison [2006] EWCA Crim 2155 (re sentence) 12. Saik [2006] UKHL 18, [2007] 1 AC 18, [2006] Crim LR 998 Conspiracy requires knowledge not just suspicion 13. Saik [2006] UKHL 18, [2007] 1 AC 18, [2006] Crim LR 998 14. Ramzan [2006] EWCA Crim 1974 15. R (Director of Revenue and Customs Prosecutions) v Criminal Cases Review Commission [2006] EWHC 3064 (Admin) 16. El Kurd and others [2007] EWCA Crim 1888 17. Criminal justice and immigration act 2008 18. Loizou [2005] EWCA Crim 1579

The nature of the underlying offence

No de minimis in English Law Tax fraud 19. Gabriel[2006] EWCA Crim 229 20. IK [2007] EWCA Crim 491 Specifying the kind of Criminality involved 21. Craig [2007] EWCA Crim 2913 22. R v N, Prosecution appeal (No 11 0f 2007) [2008] All ER (D) 141 (Jan) 23. Anwoir [2008] EWCA Crim 1354 24. F & B , 17 July 2008

Location of conduct

Conduct which is an offence in the UK but not in the country where it was committed The overseas conduct exception 25. Proceeds of Crime Act 2002 (Money Laundering Exceptions to Overseas Conduct Defence) Order 2006 Conduct which is criminal in the country where it was committed but not in the UK Conduct which is only an offence in the UK because of something peculiar to the United Kingdom

Defences
26. Hogan v DPP [2007] EWHC 978 (Admin) Adequacy of consideration 1. Davis [2008] EWCA Crim 2756 2. Kauser [2009] EWCA Crim 2242 ABUSE 3. 4. Revenue and Customs Prosecutions Office v C [2010] EWCA Crim 97: Crown Prosecution Service v Mattu [2009] EWCA

Ceasing to be Criminal Property 5. Afolabi [2009] EWCA Crim 2879 Power to Prosecute 6. R. v Rollins; R. v McInerney [2009] EWCA Crim 1941 LOSS OF PRIVELEGE 7. JSC BTA Bank v Ablyazov [2009] EWCA Civ 1124

I S SO C A AN A L S A TI A ?

1. 2.

K LTD V NATIONAL WESTMINSTER BANK PLC [2006] EWCA CIV 1039 UMBS V SOCA [2007] EWCA CIV 406

Where, under Proceeds of Crime Act 2002, a bank has made an authorised disclosure under s.338, and, under s.335, the Serious Organised Crime Agency has seven days to refuse consent to allow the bank to continue to operate the account, and thereafter the relevant bank account is effectively frozen for 31 days, SOCA should not withhold consent without good reason. However, it was not possible for the Court to require SOCA to disclose the facts which had given rise to the original suspicion, or the nature of the investigations it was conducting; and accordingly the Court had to operate in the dark in assessing the rationality of SOCAs decisions (K Limited v National Westminster Bank [2006] 4 All E.R. 907. SOCA acknowledged a duty to keep a refusal of consent under continuous review. A letter from SOCA that stated that a consent affecting the claimant (the customer of a customer of the bank) would not be revisited unless there was a further request for consent by the bank, and a change in circumstances, was inconsistent with that duty. Sedley L.J.: In setting up the Serious Organised Crime Agency, the state has set out to create an Alsatiaa region of executive action free of judicial oversight. Although the statutory powers can intrude heavily, and sometimes ruinously, into civil rights and obligations, the supervisory role which the Court would otherwise have is limited by its primary obligation to give effect to Parliaments clearly expressed intentions. But, except where the statute prevents it, the scheme must also accommodate what Byles J.in Cooper v Wandsworth Board of Works (1863) 14 C.B.N.SN 180 called the justice of the common law. That is the duality we have sought to recognise in deciding this case [Alsatia: common name for the Whitefriars area to the south and west of Fleet Street, a sanctuary against most writs and therefore an area without the law, until abolished by Parliament in 1697].
3. SHAH V HSBC PRIVATE BANK (UK) LTD [2010] EWCA CIV 31

However, a bankcannot rely on the Alsatia in a later trial for damages flowing from its failure to carry out his instructions. It was for H to prove that it suspected S of money laundering and it would be unusual to grant summary judgment in favour of the party who bore the burden of proving a primary fact that was in issue. The decision in K Ltd, in which it was held that the only admissible evidence of suspicion was that of the bank's solicitor, had to be seen in its context, that being the customer's summary application for an interim injunction, in which the tipping-off provision in s.333 of the Act was of importance. It did not follow that if the customer initiated ordinary, non-summary, proceedings against the bank, the bank should be able to obtain reverse summary relief merely by authorising its solicitor to make a witness statement to the effect that various unidentified people in the bank entertained a suspicion. By the time of any trial it was unlikely that the tipping-off provision would be relevant and it would almost certainly be known whether any investigation was taking place which any disclosure in court proceedings would be likely to prejudice within the meaning of s.333(1). The court could be informed of any such investigation in an admissible manner.

S CO P E O F M O N EY LA U N D E RI N G O F F E N C E S 329 Acquisition, use and possession (1) A person commits an offence if he-(a) (b) (c) acquires criminal property; uses criminal property; has possession of criminal property.

MONEY LAUNDERING FOR MINOR HANDLING OFFENCES

CPS Guidance on the website states:

Handling stolen goods It is important to note that money-laundering offences are not confined to cases involving money. Under the Proceeds of Crime Act, the prosecution must prove that the laundered proceeds are "criminal property", as defined in section 340: that is to say that the property constitutes a person's benefit from criminal conduct. Therefore, there will need to be a careful judgement in those cases where the prosecution could charge money laundering based on possession or an offence of handling stolen goods. Prosecutors may consider charging a money laundering offence where either a defendant has possessed criminal proceeds: in large amounts; or in lesser amounts, but repeatedly and where assets are laundered for profit.

Prosecutors should take into account that charging money laundering will trigger the lifestyle provisions of POCA.
4. R (WILKINSON) V DPP [2006] EWHC 3012 (ADMIN), [2007] 1 ARCHBOLD NEWS 5

The claimant, aged 19, was arrested when he was riding a stolen mini motor cycle two days after it was stolen in a burglary on 4th March 2005. In due course he was charged, not with burglary or handling stolen goods but with an offence under section 329(1)(c) of the Proceeds of Crime Act 2002. He brought judicial review proceedings of the decision to charge him as a money launderer and not a handler. MAURICE KAY LJ: No doubt when that offence was created in the 2002 Act it was in the context of legislation directed primarily at money laundering and matters of serious criminality The CPS Guidance seems to me to be encouragement to crown prosecutors to resort to offences under the 2002 Act in serious cases. They are less obviously expressed as discouragement to resort to offences in less serious cases, of which this is one. I make it clear that if this case had come before me sitting in the Crown Court, I would have [encouraged] the Crown Prosecution Service to substitute a charge of handling stolen goods. But encouragement is where it would stop. It is ultimately a matter for them.
CRIMINAL AT TIME OF RECEIPT

5.

INTERNATIONAL INSTRUMENTS

For example the Third EC Money Laundering Directive defines money laundering by acquisition, use or possession in Article 1 (2) (c) as follows
(c) the acquisition, possession or use of property, knowing, at the time of receipt, that such property was derived from criminal activity or from an act of participation in such activity

The UN Convention Against Transnational Organized Crime (Palermo Convention 15th November 2000) is consistent with this. Article 2 (h) defines predicate offence as ;
any offence as a result of which proceeds have been generated that may become the proceeds of an offence as defined in article 6 of this Convention Article 6 states that each party shall adopt...such legislative.....measures.....to establish as criminal offences...(a) the conversion or transfer.....concealment or disguise...of property knowing that such property is the proceeds of crime...(b) subject to the basic concepts of its legal system (i) the acquisition, possession or use of property, knowing, at the time of receipt, that such property is the proceeds of crime...

6.

LOIZOU [2005] EWCA CRIM 1579 30. In our view, the natural meaning of section 327(1) of the 2002 Act is that the property concealed, disguised, converted or transferred, as the case may be, must be criminal property at the time it is concealed, disguised, converted or transferred (as the case may be). Put the other way round, in a case of transfer, if the property is not criminal property at the time of the transfer, the offence is not committed.

7.

KENSINGTON INTERNATIONAL LIMITED V REPUBLIC OF CONGO [2008] 1 WLR 1144

In Kensington International Limited v Republic of Congo [2008] 1 WLR 1144 in which Moore-Bick LJ had said
"Mr Gruder submitted that by giving a bribe a person necessarily enters into an arrangement which he knows facilitates the acquisition of criminal property by the recipient, since the bribe, once received, constitutes the latter's benefit from criminal conduct. I accept that section 328 is of broad application, but in my view that seeks to stretch its scope too far. As section 340(3)(b) makes clear, the mental element of the offence includes knowledge or suspicion on the part of the defendant that the property in question is criminal property, but that cannot be the case until it has been acquired by means of criminal conduct. In order for an offence under section 328 to be committed, therefore, the arrangement into which the defendant enters, or in which he becomes involved, must be one which facilitates the acquisition, retention, use or control by another of property which has already become criminal property at the time when it becomes operative. That requirement is not satisfied if the only arrangement into which he enters is one by which the property in question first acquires its criminal character. A person who gives a bribe may know that it will constitute criminal property in the hands of the recipient, but that does not make him guilty of entering into an arrangement which facilitates the acquisition of what is already criminal property."

Approved in Geary para 23.

8. GEARY [2010] EWCA CRIM 1925

Geary is authority for the proposition that property must be criminal at the time a money laundering arrangement is entered into within the meaning of section 328 POCA 2002. D was charged with an offence contrary to section 328(1) of the Act. The particulars of offence were that he had
"entered into or become concerned in an arrangement which [he] knew or suspected facilitated . . . the acquisition, retention, use or control of criminal property, namely a credit balance of 123,600 belonging to Aviva plc/Norwich Union, by or on behalf of another person".

T, who worked in a bank, stole money from his employers and diverted it to H. H. in turn, passed 123,600 to D. Ds case was that H had approached him and asked him to receive the money as he was going through a divorce and wanted to hide it from his wife. D agreed to help and retained 5000. The judge ruled that D was guilty of an offence contrary to section 328 on his own version of events. D pleaded guilty was sentenced to 22 months imprisonment and then appealed. On appeal the Court of Appeal considered the issue of whether it was necessary before an offence was committed under section 328 for property which was the subject matter of the arrangement to be criminal at the time when the arrangement attaches to it (see paragraph 18). The Court decided that (paragraph 19 per Moore-Bick LJ) ;
In our view the natural and ordinary meaning of section 328(1) is that the arrangement to which it refers must be one which relates to property which is criminal property at the time when the arrangement begins to operate on it. To say that it extends to property which was originally legitimate but became criminal only as a result of carrying out the arrangement is to stretch the language of the section beyond its proper limits.

The Court further decided in Geary that sections 327, 328 and 329 should be interpreted in accordance with their natural meaning in the interests of legal certainty (paragraph 37) ;

Part 7 of the Act, as the heading indicates, is concerned with money laundering and sections 327, 328 and 329 are all directed to dealing with criminal property in one way or another. In each case the natural meaning of the statutory language is that in each case the property in question must have become criminal property as a result of some conduct which occurred prior to the act which is alleged to constitute the offence, whether that be concealing, disguising, converting, transferring or removing it contrary to section 327 or entering into or becoming concerned in an arrangement which facilitates its acquisition, retention, use or control by another contrary to section 328. We think that the same must be true of acquiring, using or having possession of criminal property contrary to section 329(1). Moreover, it follows from what we have said that the only authorities directly in point on the interpretation of sections 327 and 328 support that conclusion.

M E N S RE A

For section s327, 328, 329: 340 Interpretation (3) Property is criminal property if-(a) it constitutes a person's benefit from criminal conduct or it represents such a 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 330 330 Failure to disclose: regulated sector (1) A person commits an offence if the conditions in subsections (2) to (4) are satisfied. (2) The first condition is that he-(a) knows or suspects, or (b) has reasonable grounds for knowing or suspecting, that another person is engaged in money laundering.

KNOWLEDGE

The Joint Money Laundering Steering Group Guidance

Having knowledge means actually knowing something to be true. In a criminal court, it must be proved that the individual in fact knew that [fact]. That said, knowledge can be inferred from the surrounding circumstances; so, for example, a failure to ask obvious questions may be relied upon by a jury to imply knowledge (Paragraph 7.8).

Archbold 2007
Mental states short of actual knowledge, such as wilful blindness, are insufficient to amount to knowledge in the criminal law (Paragraph 17-49).
SUSPICION

The trouble with leaving suspicion as a term for the jury to interpret is that the word gives rise to a spectrum of meaning. In Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2001] UKHL 1, [2003] 1 AC 469 the House of Lords considered the word in a civil context, and Lord Scott said:

Suspicion is a word that can be used to describe a state-of-mind that may, at one extreme, be no more than a vague feeling of unease and, at the other extreme, reflect a firm belief in the existence of the relevant facts.

He went on to conclude that, in the context then under consideration, suspicion must be firmly grounded and targeted on specific facts. Lord Scotts view of the breadth of meaning is confirmed by the dictionary. The Chambers Dictionary defines suspicion as:
act of suspecting . . . the imagining of something without evidence or on slender evidence: inkling: mistrust. 9. DA SILVA [2006] EWCA CRIM 1654

AMT is a company which runs coffee bars. The coffee bars at Kings Cross Railway Station were managed by the husband and wife co-accused who was responsible for submitting employee time sheets to head office upon which employee wage payments were based. Between 7th June 2001 and 21st July 2003, on ten occasions, sums of money representing the wages of three different people, ghost workers, were transferred directly into one of two bank accounts operated by the appellant at the Halifax. The appellant was acquitted of obtaining money by deception, but convicted of laundering the proceeds; knowing or suspecting that her husband was or had been engaged in criminal conduct, she entered into or was otherwise concerned in an arrangement which involved the deposit and withdrawal of sums into and from her bank account facilitating his retention or control of proceeds of his criminal conduct. At the time, the then current edition of the textbook Mitchell, Taylor and Talbot on Confiscation and Proceeds of Crime stated any inkling or fleeting thought that the property might be [criminal property] will suffice. The judge directed the jury along these lines. The appellant appealed on the basis that this gloss should not have been put on the word.

Suspicion defined
What then does the word suspecting mean in its particular context in the 1988 Act? It seems to us that the essential element in the word suspect and its affiliates, in this context, is that the defendant must think that there is a possibility, which is more than fanciful, that the relevant facts exist. A vague feeling of unease would not suffice. We consider therefore that, for the purpose of a conviction under section 93A(1)(a) of the 1988 Act, the prosecution must prove that the defendants acts of facilitating another persons retention or control of the proceeds of criminal conduct were done by a defendant who thought that there was a possibility, which was more than fanciful, that the other person was or had been engaged in or had benefited from criminal conduct. We consider that, if a judge feels it appropriate to assist the jury with the word suspecting, a direction along these lines will be adequate and accurate.

Suspicion vs reasonable suspicion

This court could not, even if it wished to, imply a word such as reasonable into this statutory provision. To do so would be to make a material change in the statutory provision for which there is no warrant. (Contrast s330(2))

Suspicion as a settled state

Where there is some reason to think it appropriate, a jury should also be directed that the suspicion had to be of a settled nature; a case might, for example, arise in which a defendant had entertained a suspicion in the above sense but, on further thought, had honestly dismissed it from his or her mind as being unworthy or as contrary to such evidence as existed or as being outweighed by other considerations.

Suspicion vs inkling
The use of words such as "inkling" or "fleeting thought" was liable to mislead. Most cases could more conveniently be dealt with solely by reference to the suggested direction above.
10. K LTD V NATIONAL WESTMINSTER BANK PLC [2006] EWCA CIV 1039

Civil division applied the same definition

A banker, who knows or suspects that money in a customers account is criminal property, would commit a criminal offence were they to proceed to process the customers cheque into the account of another person without having made an authorised disclosure under section 338 and having obtained appropriate consent under section 335. It would be no defence to criminal proceedings that the bank was contractually obliged to obey its customers instructions, so there would be no basis upon which an injunction could be granted by a court during the periods prescribed by section 335 requiring the bank to act for the customer, unless it was shown that there was no basis upon which criminal liability would arise because there was no suspicion on the part of the bank. ? If the customer can show that the money is not a persons benefit of criminal conduct, the property is not criminal property and the banks suspicion is irrelevant This was not argued. Surprisingly, the court held, the banker with suspicion may not be cross-examined as to that suspicion. See also Squirrell Ltd v. National Westminster Bank plc (Customs and Excise Commissioners intervening) [2006] 1 W.L.R. 637, Ch. D. See also HSBC v Shah above.
REASONABLE GROUNDS TO SUSPECT VS SUSPICION

11. GRIFFITHS AND PATTISON [2006] EWCA CRIM 2155 (RE SENTENCE)

The case of Griffiths and Pattison is an example of a case in which the jury made a distinction between knowing or suspecting and having reasonable grounds for knowing or suspecting. Leslie Pattison, an estate agent who also provided financial services, was convicted of offences of entering into a money laundering arrangement, contrary to section 328(1) of the Proceeds of Crime Act 2002, and acquiring criminal property, contrary to section 329(1) of the Act. He purchased a property worth 150,000 from a convicted drug dealer who had pending confiscation proceedings. He bought the property for 43,000 grossly under value. He was convicted after a trial and was sentenced to three years imprisonment concurrent on each count. He was 45 years old, or good character, and had lost his livelihood as a consequence of the conviction. The Court of Appeal held that the appropriate sentence for the one off attempt to hide profit in this case was one of 27 months imprisonment. Philip Griffiths, was a solicitor responsible for the conveyance of the property which was the subject of the Pattisons conviction. The jury acquitted him of being party to a money laundering arrangement, and of acquiring criminal property but convicted him of failing to make the required disclosure under section 330. The Court of Appeal noted that the jurys verdict meant that he could only he could not have known or suspected that the property was the proceeds of criminal conduct (or they would have convicted of the money laundering offences), only that he had reasonable grounds for suspicion. He was 45 years old, or good character, and had lost his livelihood as a consequence of the conviction. His sentence of 15 months was reduced by the Court of Appeal to one of six months.
12. SAIK [2006] UKHL 18, [2007] 1 AC 18, [2006] CRIM LR 998

To have reasonable grounds to suspect has been held to be a part subjective test; the person must actually suspect, as well as having reasonable grounds to do so. In effect reasonable grounds to suspect means to suspect on reasonable grounds. This by application of authorities on powers of arrest e.g. O'Hara v Chief Constable of the Royal Ulster Constabulary [1997] AC 286 reasonable grounds for suspecting that a person is concerned in acts of terrorism In part it is a subjective test, because he must have formed a genuine suspicion in his own mind that the person has been concerned in acts of terrorism. In part also it is an objective one, because there must also be reasonable grounds for the suspicion which he has formed. In his commentary on Saik, Professor Ormerod states: in s.330 of the 2002 Act it is a sufficient mens rea either that the defendant suspected, or that he had reasonable grounds to suspect the relevant facts. On their Lordships' analysis, proof of the latter will necessarily involve proof of the former. "Reasonable grounds to suspect" would then seem to be a redundant alternative because no prosecutor is likely to take the more onerous route. It may be that the practical reality is that there is little difference--Lord Hope commented that "the subsection [93C(2)] assumes that a person who is proved to have had reasonable grounds to suspect that the property had a criminal origin did in fact suspect that this was so" (at [53]). ? This was not argued in Griffiths though it tends to suggest that the verdicts were inconsistent

CONSPIRACY REQUIRES KNOWLEDGE NOT JUST SUSPICION

13. SAIK [2006] UKHL 18, [2007] 1 AC 18, [2006] CRIM LR 998

Mens rea for conspiracy must be knowledge. Suspicion is not enough.

14. RAMZAN [2006] EWCA CRIM 1974

The Court of Appeal dealt with a number of joined appeals in cases where juries had been given the wrong (in light of Saik) direction in conspiracy to money launder cases. Where applications were made for leave to appeal out of time, the court refused them in the light of the practice of the Court of Appeal not to grant leave to appeal out of time where the conviction was entirely proper under the law as it stood at the time of trial unless substantial injustice would otherwise be done to the applicant. Some cases were before the Court upon a reference by the Criminal Case Review Commission (CCRC) and these were allowed because, pursuant to section 9(2) of the Criminal Appeal Act 1995, a reference stands as if leave has been granted and the court had no option but to consider the safety of the conviction. In these cases, where the court allowed the appeal, it ordered a retrial.
15. R (DIRECTOR OF REVENUE AND CUSTOMS PROSECUTIONS) V CRIMINAL CASES REVIEW COMMISSION [2006] EWHC 3064 (ADMIN)

Following this further references were made by the CCRC. The Director of Revenue and Customs Prosecutions challenged the decision of the CCRC to refer cases, arguing that the CCRC should adopt the same practice as the Court of Appeal in change of law cases. The challenge to the reference failed the administrative court stating that the CCRC was under no obligation to have regard to, still less to implement, a practice of the CACD which operates at a stage [the leave stage] with which the Commission is not concerned.
16. EL KURD AND OTHERS [2007] EWCA CRIM 1888

Ultimately, the further appeals by way of reference by the CCRC were allowed by the Court of Appeal.
17. CRIMINAL JUSTICE AND IMMIGRATION ACT 2008

Section 42 inserts 16C into the Criminal Appeal Act 1968: Where the only ground for allowing an appeal would be that there has been a development in the law since the date of the conviction and the court would not think it appropriate to grant leave had it been an application for leave to appeal. Thereby closing off the El Kurd route.
18. LOIZOU [2005] EWCA CRIM 1579

An example of facts upon which the prosecution may rely to prove their assertion as to knowledge can be seen from the case of. 87,010 of cash was passed between two motor vehicles parked in the car park of a Holiday Inn. Those who were party to the transfer were prosecuted under section 327 for the transfer of criminal property, namely the cash. The prosecution set out in their case summary the facts from which they alleged that the jury could infer that the defendants knew that the money transferred was the proceeds of crime: (a) the Defendants' anti-surveillance tactics; (b) the co-ordinated movement of vehicles from each location to the final destination, culminating in the Vectra and Polo parking adjacent to one another; (c) the circumstances in which the money came to be passed over, between the two vehicles; (d) the contents of the paperwork and its proximity to the events in this case; (e) the contemporaneity of the mobile phone messages to Loizou which explains the purpose behind the hand-over; (f) the other mobile phone evidence, which is summarised above, demonstrating that the presence of the Defendants could not be considered coincidental;

(g) the fact that no person has come forward to claim the money.

TH E N AT U R E O F TH E U N D E R LYI N G O F F E N C E

340 Interpretation (2) Criminal conduct is conduct which-(a) constitutes an offence in any part of the United Kingdom, or (b) would constitute an offence in any part of the United Kingdom if it occurred there. (3) Property is criminal property if-(a) it constitutes a person's benefit from criminal conduct or it represents such a 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. (4) It is immaterial-(a) who carried out the conduct; (b) who benefited from it; (c) whether the conduct occurred before or after the passing of this Act. (5) A person benefits from conduct if he obtains property as a result of or in connection with the conduct. (6) If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage.
NO DE MINIMIS IN ENGLISH LAW

Second Money Laundering Directive

Criminal activity includes drug offences, organised crime, fraud, corruption and any offence which may generate substantial proceeds and which is punishable by a severe sentence of imprisonment in accordance with the penal law of the Member State.

Third Money Laundering Directive

Criminal activity has been re-defined to include any involvement in "serious crimes", which now includes all offences which are punishable by deprivation of liberty or a detention order for a maximum of more than one year.
TAX FRAUD

19. GABRIEL[2006] EWCA CRIM 229

The appellant lived with her husband and three teenage sons at 63 Garden Street, Padiham. The source of the household income was approximately 500 per week in benefits. On 3 July 2003, police officers searched the house and seized 11,700 in cash (under the water bed!!!). On 16 September 2003, another team of police officers searched the house and found 6,070 in cash in various locations in the house. 3,000 of that sum was found concealed behind the lining of a plastic air rifle carrying case. Within the house officers observed a 42 inch plasma television screen, an ornate mahogany fireplace, a conservatory with a swimming pool and sauna, a large fridge, spa jets in the bathroom, a computer, good quality stereo equipment throughout the house, and Playstation games and DVDs. There was also a closed-circuit television set up outside the house which could be viewed from a monitor in the living room. The appellant was arrested. On legal advice she made no comment to questions asked of her. She was tried for possession of criminal property on the basis that this could not be from the benefits. She said it all came from bingo winnings and savings.

The jury asked "Does the regular buying and selling of goods to supplement household income without declaring this constitute a criminal offence, given the declarations made on application for benefit (or lack of declaration to the Inland Revenue)?" The recorder replied yes, provided that there is dishonesty on the part of the person concerned. The Court of Appeal held that a failure to declare, to the Inland Revenue or the Department for Work and Pensions, profits made from trading in legitimate goods did not convert those profits into criminal property, and allowed the appeal. Gage LJ: There can be no doubt that the money laundering provisions of the Proceeds of Crime Act 2002 are draconian. The scope of section 329 is wide. It requires proof of no more mens rea than suspicion. The danger is that juries will be tempted to think that it is for the defence to prove innocence rather than the prosecution to prove guilt. In R v Louizou and Others [2004] EWCA 1579 the prosecution had set out the factors upon which it relied and from which it submitted the jury could draw proper inferences. In our judgment it is a sensible practice for the prosecution, as was done in Louizou, either by giving particulars, or at least in opening, to set out the facts upon which it relies and the inferences which it will invite the jury to draw as proof that the property was criminal property. In doing so it may very well be that the prosecution will be able to limit the scope of the criminal conduct alleged. Before this court Mr O'Brien very frankly admitted that at the start of the trial he did not have in mind any form of benefit fraud. Had this happened in this case, we very much doubt that an allegation of income tax fraud or benefit fraud would have been included in the alleged criminal conduct. If it had, the defence would have been alerted to the necessity of dealing with such an allegation.
20. IK [2007] EWCA CRIM 491

The Court of Appeal held that the decision in Gabriel did not mean that the fact that undeclared takings were derived from a legitimate business meant those takings could not amount to criminal property. Whilst profits made from a legitimate business without declaring them for tax purposes did not become criminal property simply by reason of the failure to declare the profits, they were capable of doing so where there was a prima facie case of the offence of cheat. A person who cheats the Revenue obtains a pecuniary advantage as a result of criminal conduct within the meaning of section 340(6) of POCA It has been argued that s340(6), properly read, does not apply to a tax evader's dealings with his own profits which merely represent a deferral of a debt which deferral will, because the tax will be due and interest payable, have a negligible value. The House of Lords has already ruled in confiscation proceedings, on a provision worded identically to s.340(6) (s.76(5) of POCA), that the whole of the unpaid tax is liable to be confiscated.
SPECIFYING THE KIND OF CRIMINALITY INVOLVED

21. CRAIG [2007] EWCA CRIM 2913

Where there are multiple possible underlying offences, the judge need not direct the jury that they must agree as to which offences were proven (The Brown Direction).
22. R V N, PROSECUTION APPEAL (NO 11 0F 2007) [2008] ALL ER (D) 141 (JAN)

The Crown appealed against the judges ruling allowing a submission of no case to answer. The respondents had been charged with offences of entering into an agreement to acquire, retain, use, or control criminal property, and removing criminal property, contrary to Proceeds of Crime Act 2002, ss.328 and 327 respectively. The Crown case was that they could prove transactions showing the existence and movement of the relevant property (money), and that it must have been the product of criminal conduct by NW, the prime mover, because he had no visible lawful means of support. The jury should therefore accept the inference that it represented criminal property. On appeal, it was contended (contrary to the judges ruling) that to show that something was criminal property (s.340 of the 2002 Act) did not require the Crown to identify, or categorise, the criminal conduct concerned. The respondents argued that on its proper construction, s.340 required the Crown to prove at least the type or class of crime which had generated the benefit which the alleged criminal conduct represented. The Court of Appeal considered the existing case law. While neither Gabriel [2007] 2 Cr.App.R. 11 nor IK [2007] 2 Cr.App.R. 10 was in terms concerned with the question, at the least they offered no support to the Crown, and sat better with the respondents contention. By contrast, in respect of the civil enforcement provisions in Pt 5 of the Act, the law was settled: the Director of the Assets Recovery Agency must prove at least the class of crime said to constitute the unlawful conduct

referred to in ss.240242: R.(Director of Assets Recovery Agency) v Green [2005] EWHC Admin 3168 and R. (Director of Assets Recovery Agency) v Szepietowski and others [2007] EWCA Civ 766. The question was whether this conclusion had to be read across to the differently worded provision in s.340, in Pt 7 of the Act. In coming to conclusions on Pt 5, neither Sullivan J. (in Green) nor the Court of Appeal, Civil Division (in Szepietowski) limited their reasoning to narrow considerations of language. Such differences of language as there were were not so pressing as to yield a conclusion that the legislature in enacting Pt 7 intended, in the context of criminal measures, to strike the balance between civil rights and the protection of the public at a markedly different place from where, as authority showed, it lay in relation to Pt 5. Indeed it would be anomalous, not to say bizarre, if the Crown were not required to identify the class of crime in question in a criminal prosecution while the Director was so required in a civil enforcement suit. Sullivan J.s description of the legislative purpose of the Act (at [25]: ...the Act deliberately steered a careful middle course between, at the one extreme, requiring the Director to prove (on the balance of probabilities) the commission of a specific criminal offence or offences by a particular individual or individuals and, at the other, being able to make a wholly unparticularised allegation of unlawful conduct and in effect require a respondent to justify his lifestyle. ...), adopted by Moore-Bick L.J., was no less apt as a guide for the application of Pt 7 as it was for that of Pt 5.
23. ANWOIR [2008] EWCA CRIM 1354

21. We consider that in the present case the Crown are correct in their submission that there are two ways in which the Crown can prove the property derives from crime, a) by showing that it derives from conduct of a specific kind or kinds and that conduct of that kind or those kinds is unlawful, or b) by evidence of the circumstances in which the property is handled which are such as to give rise to the irresistible inference that it can only be derived from crime. This in our judgment gives proper effect to the decision in Green, and is consistent with the decisions of this court in Gabriel [2007] 2 CAR 11, IK [2007] 2 CAR 10 and, of course, Craig. We consider that it is also consistent with the approach of this court in R v El Kurd (unreported CA 26th July 2000). Certified a point. Petition pending.
24. F & B , 17 JULY 2008

Follows Anwoir

LO C A T I O N O F C O N D U C T

The location of the conduct is immaterial to the question of whether it is criminal conduct. The question is: would the conduct in question constitute an offence in any part of the UK if it occurred there? This question requires the consideration of a number of criminal regimes; most notably the criminal law of England and Wales, the criminal law of Scotland and any system of offence creating by-laws:
Accordingly a person could launder the proceeds of crime in England of an offence committed in, say, Peru, even if the conduct in Peru was only matched by it being criminal conduct in Scotland because it breached a by-law of a local council in Scotland.

So, if the predicate offence is said to be a theft in Peru, there is no need for the English court to enquire into the theft laws of Peru, rather ask itself whether the conduct would amount to theft under the English Theft Act 1968, or an equivalent Scottish offence.

CONDUCT WHICH IS AN OFFENCE IN THE UK BUT NOT IN THE COUNTRY WHERE IT WAS COMMITTED THE OVERSEAS CONDUCT EXCEPTION

Bull-fighting is both lawful and popular in Spain; the top matadors earn salaries akin to those of top soccer players. Bullfighting in the UK is an offence carrying 51 weeks imprisonment. If a top matador wishes to invest his money in the London stock market, would it be money laundering to allow him to do so? The answer is that the bull-fighting is criminal conduct under the Act, and therefore to deal with a persons benefit from bull-fighting would be money laundering unless the following overseas conduct exception applies.

25. PROCEEDS OF CRIME ACT 2002 (MONEY LAUNDERING EXCEPTIONS TO OVERSEAS CONDUCT DEFENCE) ORDER 2006

Each money laundering offence now contains a clause in the following terms:
[A person does not commit an offence if] (a) he knows, or believes on reasonable grounds, that the relevant criminal conduct occurred in a particular country or territory outside the United Kingdom, and (b) the relevant criminal conduct (i) was not, at the time it occurred, unlawful under the criminal law then applying in that country or territory, and

(ii) is not of a description prescribed by an order made by the Secretary of State.

The Proceeds of Crime Act 2002 (Money Laundering Exceptions to Overseas Conduct Defence) Order 2006 prescribes for these purposes all conduct which would carry a maximum term of over 12 months in any part of the United Kingdom:
2. (1) Relevant criminal conduct of a description falling within paragraph (2) is prescribed for the purposes of sections 327(2A)(b)(ii), 328(3)(b)(ii) and 329(2A)(b)(ii) of the Proceeds of Crime Act 2002 (exceptions to defence where overseas conduct is legal under local law). Such relevant criminal conduct is conduct which would constitute an offence punishable by imprisonment for a maximum term in excess of 12 months in any part of the United Kingdom if it occurred there other than (a) an offence under the Gaming Act 1968; (b) an offence under the Lotteries and Amusements Act 1976, or (c) an offence under section 23 or 25 of the Financial Services and Markets Act 2000.

(2)

The combined effect of these two legislative measures is that conduct overseas which is not criminal in the country where it occurs, is exempt from money laundering offences, provided it carries 12 months imprisonment or under in the UK and is not one of the offences listed in (a) (b) (c) above. Hence the proceeds of bull-fighting in Spain, which would carry 51 weeks imprisonment in the UK, are exempt from the money laundering offences.
CONDUCT WHICH IS CRIMINAL IN THE COUNTRY WHERE IT WAS COMMITTED BUT NOT IN THE UK

Example Exchange controls are often enforced by criminal sanctions in foreign jurisdictions, but this is not the case in the UK. The Exchange Control Act 1947 which criminalised breaches of UK exchange controls was repealed by the Finance Act 1987. Therefore the breach of a countrys exchange controls is not criminal conduct within the meaning of the Act, and dealing with the proceeds of such breaches will not be money laundering under POCA. A person breaching local exchange controls may well treat the proceeds in a furtive manner so as to avoid detection by that countrys authorities. That furtive conduct should not be treated as evidence that the property is criminal property in the UK. Example A Dutch entrepreneur A operates a chain of retail outlets in Amsterdam. These sell cannabis for smoking on the one hand, and tulip bulbs on the other. He is looking to expand the bulb business into London, and negotiates to buy a shop off D. A tells D that the money comes from his business empire at large, including the cannabis caf part of it. Should D accept payment for the shop? The question is not whether the cannabis cafs are lawful in Amsterdam, or merely tolerated, it is whether or not the supply of cannabis is an offence in any part of the United Kingdom. It is. The money is criminal property, and D knows it. If he accepted the payment he could be committing a money laundering offence, subject to any other considerations.

CONDUCT WHICH IS ONLY AN OFFENCE IN THE UK BECAUSE OF SOMETHING PECULIAR TO THE UNITED KINGDOM

Some offences are defined in terms of UK institutions or processes, such as a failure to comply with a requirement to register with a UK institution. Where equivalent conduct is carried out in a foreign jurisdiction, the UK institution is missing, so the offence is not made out and the conduct is not criminal conduct within the meaning of the Act. Fraudulent trading An example is the offence of fraudulent trading, is committed in respect of a company. A company is defined within the Companies Act as a company formed and registered under this Act. Plainly, it is impossible to commit the offence with respect to a business other than one that has been registered under the Act. This requires registration through Companies House. A foreign business may have an equivalent status to a UK limited company, but because it is not registered under the UK Companies Act, it could not be the subject of a fraudulent trading offence. So the proceeds of conduct akin to fraudulent trading with respect to the foreign equivalent of a limited company are not criminal property within the meaning of the Act. Tax Fraud It is arguable the tax fraud and cheating the public revenue fall within this category. The offences are defined in terms of the Inland Revenue and the Crown, each of which are UK institutions. The underlying rules as to how much tax is to be paid by whom under what circumstances are peculiar to the UK. So arguably the proceeds of foreign tax fraud do not fall within the definition of criminal property. It is certainly the case that resolving such cases can be enormously complex. If a particular payment is made to a Russian company in breach of that countrys tax laws, would it also be an offence under the UK regime? In the BBA Tax Panels briefing note on Money Laundering and Tax Evasion, John Rhodes states that it was not Parliaments intention to apply the previous money laundering regimes to foreign revenue laws some of which are arbitrary and confiscatory

DEFENCES

(2) But a person does not commit such an offence if-(a) 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; (b) he intended to make such a disclosure but had a reasonable excuse for not doing so; (c) he acquired or used or had possession of the property for adequate consideration; [for 329 Acquisition, use and possession only] (d) the act he does is done in carrying out a function he has relating to the enforcement of any provision of this Act or of any other enactment relating to criminal conduct or benefit from criminal conduct.

Mitchell, Taylor and Talbot

In Confiscation and the Proceeds of Crime, edited by Mitchell, Taylor and Talbot, the authors take the view that:
It is for the defendant to establish that he come within one or other of the exceptions and to establish that exception on the balance of probabilities.

Archbold
It is notable that the wording of the POCA provision is distinct from that used in the previous money laundering regimes:
In section 93B of the Criminal Justice Act 1988

(2) It is a defence to a charge of committing an offence under this section that the person charged acquired or used the property or had possession of it for adequate consideration. In section 50 Drug Trafficking Act 1994, "In proceedings ... under this section, it is a defence to prove that ... ".

The editors of Archbold 2007 are of the view that the change of wording is indicative of the fact that parliament intended that each limitation is a part of the offence itself and therefore for the Crown to disprove beyond reasonable doubt (para 3310)
It is manifest from the use of the word "But" at the beginning of a subsection that follows immediately upon the subsection that defines the positive aspects of the offence, that the two subsections are intended to be read together, as much as if their contents were in the same subsection, separated only by a comma or semi-colon. They are properly to be regarded as limitations on the ambit of the offences, rather than as "defences". It is submitted that the use of this drafting technique, including the avoidance of the word "defence", was deliberate and was intended to avoid argument as to burden and standard of proof. 26. HOGAN V DPP [2007] EWHC 978 (ADMIN)

Defendant was charged between 21 March 2005 and 6 October 2005, in Lincolnshire, possessed criminal property, namely scaffolding. The Administrative Court held, in relation to the adequate consideration limitation, that: Once the issue is raised, in my view the appellant is correct and it is for the Crown to show that there was not adequate consideration, and to do so in relation to both halves of that question, namely the fact of the consideration advanced and the adequacy of the consideration, if proved. The courts reasons were: 1. The drafting change from the 1988 Act appeared deliberate. 2. The wording of the section was expressed not as an exception or a proviso, but as a necessary ingredient of the offence. 3. Where there is ambiguity in statutory wording in the context of a penal statute such as the 2002 Act, that ambiguity should be resolved so as to narrow rather than broaden criminal liability. The reasoning of the court in Hogan applies equally to the other limitations and it seems likely that in each case it would be for the prosecution to prove the facts beyond reasonable doubt, once the issue had been raised.

ADEQUACY OF CONSIDERATION

1.

DAVIS [2008] EWCA CRIM 2756

The Criminal Court of Appeal considered Hogan without adverse comment in Davis.
17. The submission in this case is that the Recorder ought to have emphasised that the defence of adequate consideration was separate from that of not knowing or suspecting that the money was the proceeds of crime. Indeed, Mr Cogan submitted that it was incumbent upon the Recorder to direct the jury using words substantially the same as those to be found in the passage in Hogan to which we have referred. 18. However, it seems to us that the nature of the direction required in any particular case will depend on the circumstances of that case. Here the issue was very simple: was the 82,000 paid in settlement of a gambling debt? Having dealt with the need to prove knowledge or suspicion, the Recorder told the jury that the prosecution also had to prove that the money was not acquired for adequate consideration, in other words not in satisfaction of a gambling debt. It is accepted that that was a correct statement of the law and

in our view it was an adequate direction to the jury. Moreover, he went on to summarise the defendants' case in a nutshell by saying that they neither knew nor did they suspect that the money credited to their accounts was the proceeds of crime, and also pointed to the fact that it was acquired for adequate consideration.

It will often be the case that the issue under knowledge and under adequate consideration will be that same. Here if the defendants may have believed that the money was payment for a gambling debt then they did not know it was criminal money and they gave adequate consideration: the debt.
2. KAUSER [2009] EWCA CRIM 2242

The appellant owned a property at 104 Buccleuch Road, Stoke-on-Trent, which she let out. The property was unencumbered. She also had rental income from another property at 66 Chaplin Road which had a mortgage of 35,000 with the Halifax Bank. On 12 April 2005 she applied for a "Buy to Let" mortgage from the Royal Bank of Scotland in the sum of 40,000. The mortgage application form was completed by her co-accused, Urfan Akhtar, a mortgage broker. The signatures on the application form were forgeries. Information regarding the appellant's employment and income, namely that she was a sole trader of a grocery store, was also false. Akhtar had pleaded guilty to being concerned in arrangements for money laundering in respect of the appellant's mortgage application. The prosecution case was that the whole purpose behind the mortgage application was a deception from the outset. Its object was to fund a bail application for the appellant's brother, not that which was stated in the mortgage application. The inference was that the appellant was a party to the deception in that she knew or suspected that the false information contained in the mortgage application form would be put before the bank and that it would deceive them and lead to the grant of a mortgage loan. The defence case was that the appellant had not dealt with Urfan Akhtar and had not supplied him with false information. She had therefore no knowledge or suspicion that there would be any deception or any falsehood in the application form. It was also her case that the false information was not material or operational and that therefore there had been no relevant deception. It can be seen that the case as alleged was a fairly straightforward mortgage fraud. If the appellant had been a knowing party to obtaining a mortgage loan by deceiving the lender in the mortgage application, when she received the proceeds of the mortgage she would have committed what is now the offence of fraud by false representation under section 2 of the Fraud Act 2006 and was at the relevant time the offence of obtaining a money transfer by deception contrary to section 15A of the Theft Act 1968. However, instead of being charged with one of these offences, the appellant was charged under section 329(1)(a) of the 2002 Act. Section 329, which is headed "Acquisition, Use and Possession"
13. It is submitted on behalf of the Crown that a promise can never be good consideration in circumstances where the person obtaining the property knows or suspects the property to be the proceeds of crime. In our judgment that submission gives no force to the wording of section 329, where "inadequacy of consideration" is clearly a separate ingredient of the offence.

ABUSE

3.

REVENUE AND CUSTOMS PROSECUTIONS OFFICE V C [2010] EWCA CRIM 97:

A prosecution of a solicitor for money laundering offences under s.93A of the CJA 1988 and s.328 of POCA by Revenue and Customs was stayed by the Crown Court on grounds of delay. The solicitor was accused of allowing suspicious transactions to go through the firms client account between 2001 and 2004. The relevant client had been convicted in 2006, and the solicitor was summonsed in 2008. The prosecution was stayed on the ground that the solicitor was prejudiced in establishing whether he knew or suspected that his firm was assisting a money laundering exercise by the delay and a fair trial was no longer possible. The Court of Appeal emphasised that the judge should have considered whether the process of the trial itself could have rendered the solicitors trial fair, but nonetheless found that the trial judges decision to stay was reasonably reached and the stay should remain.

4.

CROWN PROSECUTION SERVICE V MATTU [2009] EWCA

Following an offender's conviction for conspiracy to supply Class A drugs, it was an abuse of process to later try him for money laundering and deception offences that arose out of the drug offences, where the evidence sought to be relied upon in connection with the money laundering had been available at the earlier trial and was strikingly in conflict with the offender's basis of plea.

CEASING TO BE CRIMINAL PROPERTY

5.

AFOLABI [2009] EWCA CRIM 2879

This case concerned entering into or becoming concerned in money laundering contrary to s.328 of POCA. The case concerned the purchase of a house which had been purchased by criminal funds. The Court of Appeal overturned one conviction on the ground that once property has been sold to a bona fide purchaser it is no longer criminal property. The money from the sale is criminal property, but the property is not. The judge was wrong to find that it was, as such an analysis would be inconsistent with the protection afforded to purchasers under s.329(2) of the Act and any subsequent transaction concerning the property would fall under s.328 or indeed s.327 of the Act.
33... We accept that once the house is sold to a bona fide purchaser then it does not remain criminal property. Although the purchase money is then criminal property, we think the judge was wrong to say as he did that it remains criminal property as it passes through various hands. As Mr Krolick points out, the effect of that would be that the benefit from the initial criminal conduct would multiply exponentially each time the property was sold on. Both the original property and the proceeds of sale on each subsequent sale would represent criminal property. That cannot be the right analysis. 34. We think that is further supported by two considerations. First, the definition of criminal property itself refers to property which constitutes a person's benefit from criminal conduct or property which represents such a benefit. Mr Krolick submits that the word "represents" is appropriate only to cover a benefit which takes the place of the original benefit, and we agree. This is essentially the meaning which that concept has in other provisions in the 2002 Act: see, for example, the provisions, admittedly a different context, dealing with recoverable property in civil actions and in particular sections 305 and 308(1). 35. Second, it would be inconsistent with the protection afforded to purchasers under section 329(2)(c) if the judge's analysis were correct. That provides that someone who acquires or has possession of property for adequate consideration will not commit the offence under section 329. It is plain that that must be even if he otherwise knows or suspects that the property he has acquired is itself criminal property. If the judge's analysis were right, and although there would be a defence to acquiring such property under section 329(2), it would seem to us, though we have had no direct argument on the point, that any subsequent transfer would fall under section 328 or indeed under section 327, which is makes it an offence to transfer criminal property.
POWER TO PROSECUTE

Consider Sabrewatch and the powers of the SIA

6. R. V ROLLINS; R. V MCINERNEY [2009] EWCA CRIM 1941

The FSA have the power to prosecute money laundering offences under s.327 and 328 of POCA, but when doing so they were exercising a right of private prosecution under s.6 of the Prosecution of Offences Act 1985.
LOSS OF PRIVELEGE

7.

JSC BTA BANK V ABLYAZOV [2009] EWCA CIV 1124

D appealed against a decision that it was not entitled to rely upon the privilege against self-incrimination because an offence under the Proceeds of Crime Act 2002 s.328 was a "related offence" within the meaning of the Fraud Act 2006 s.13(4). D contended that were it to comply with the disclosure order, the information sought could be used to found a charge against it under the Proceeds of Crime Act 2002 s.328. The Court of Appeal (Civil Division) held: the matter should be judged by reference to the essential character of the offence rather than one particular manner of committing it. The conduct falling within s.328(1) was entry into or becoming concerned in an arrangement which facilitated by whatever means the acquisition, retention, use or control of criminal property by or on behalf of another person. Such an arrangement enabled one who had

obtained the proceeds of crime to retain the benefit of those proceeds whilst concealing their true source. Whether the alleged offender knew or suspected that the arrangement would facilitate that consequence was not to the point. Thus, the Fraud Act 2006 s.13 had removed the privilege against self-incrimination in respect of an offence under the Proceeds of Crime Act 2002 s.328 because an offence under s.328 of the 2002 Act was a "related offence" within the meaning of s.13(4) of the 2006 Act.