Crim. L.R.

Prosecuting Money Launderers 571

Prosecuting Money Launderers: Do

the Prosecution Have to Prove the
Predicate Offence?
By Vivian Walters*
Barrister, Chambers of Simon Draycott Q.C., 5 St Andrew's Hill

L
'T Criminal conduct; Money laundering; Proceeds of crime; Proof; Prosecutions

Recent decisions of the Court of Appeal have drawn attention to the difficulty for
law enforcement in prosecuting so-called "free-standing" money launderers; those
who do not themselves generate the proceeds of crime, but instead provide a service
for drug dealers, fraudsters and others, by washing the money. These launderers
often neither know nor care what has been the actual source of the money and they
operate at arm's length from the criminals and the crimes that generated it. Should
they for that reason be immune from prosecution?
Current estimates put the value of the criminal economy in the United Kingdom
at up to L40 billion, with the value of criminal profits laundered at L 1 5 billion.
Much of this money is transferred outside the jurisdiction, using methods ranging
from the formal banking network or alternative remittance systems, such as hawala
banking, to simply transporting caseloads of cash out of the country.
It was thought by some that the Proceeds of Crime Act 2002, and in particular
s.340 defining "criminal property", had ended the argument that the prosecution
had to be able to prove the offence, or the type of offence, which had generated
criminal property before bringing a prosecution for money laundering, It would
appear this may yet not be the case because this is the very question which has
recently been occupying the Court of Appeal in a number of cases.
In the recent cases of Anwoir' and F,"he Court of Appeal has certified a point
of law of general public importance in the following terms:
"Whether in a prosecution under sections 327 or 328 of the Proceeds of
Crime Act 2002, section 340 requires the Crown to prove at least the class or
type of criminal conduct that it is alleged generated the proceeds of crime."
It is of course not a new issue. There has been a volume of case law on the point
which started before the Proceeds of Crime Act. A brief examination of the history
demonstrates how the problem started. It was originally generated by the fact that
there were two different statutory regimes, one which criminalised dealing with the
proceeds of drug trafficking, the other with the proceeds of all other crime.
The Criminal Justice (International Co-operation) Act 19903 introduced into
domestic legislation three new offences of "concealing or transferring [the] proceeds

*I am grateful to Andrew Bird and Martin Evans for their contribution to this article.
Arrwoir [2008] EWCA Crim 1354; [2008] 2 Cr. App. R. 36.
F [2008] EWCA Crim 1868; [2009] Crim. L.R. 45.
See s.14.
572 Criminal Law Review 120091

of drug trafficking". These provisions were later repealed and re-enacted in the
Drug Trafficking Acts. Unsurprisingly, these offences related solely to the proceeds
of drug trafficking. Laundering the proceeds of other crimes was criminalised by
the Criminal Justice Act 1993.4 Because there were already offences in existence
relating to the proceeds of drug trafficking, the scope of the new provisions was
restricted to the proceeds of all other criminal conduct.
The problem which arose when it was impossible to point to the particular crime
or class of crime which had generated the proceeds in question was considered by
the Court of Appeal in El K ~ r d The. ~ appellant had been charged with alternative
counts of conspiracy; the first involving property which represented the proceeds
of criminal conduct (under the Criminal Justice Act) and the second the proceeds
of drug trafficking (under the Drug Trafficking Acts). T h e jury convicted of the
former and acquitted of the latter. The appeal was founded on the argument that,
although there was clear evidence of money laundering, there was no evidence from
which a jury could properly conclude beyond reasonable doubt that the money
involved was the proceeds of criminal conduct rather than drug trafficking. In
giving judgment Latham L.J. "expressed [the court's] concern that Parliament has
created this dichotomy with the attendant difficulties which this case exemplifie~".~
He observed that the way round the problem as it stood at the time would be to
charge one compendious count of conspiracy.7
The issue was considered yet again in Singh (Rana).' Auld L.J. observed9 that:
"The scope for such an issue in future money-laundering cases has now been
removed by the creation in Part 7 of the Proceeds of Crime Act 2002, of a
new statutory offence of money-laundering and the repeal of the substantive
offences under the 1994 and 1988 Acts the subjects of this indictment. The
new offence is one of dealing in various forms in 'criminal property', namely
property constituting a benefit from or representing such a benefit, from
'criminal conduct', defined in the broadest terms in section 340 as 'conduct
which constitutes an offence in any part of the United Kingdom'."
The argument was then considered by the House of Lords in M ~ n t i l l a . ' ~It was
held that in a prosecution for substantive offences under s.93C(2) of the Criminal
Justice Act 1988 and s.49(2) of the Drug Trafficking Act 1994, the Crown had
to prove that the property in question was in fact proceeds of criminal conduct
and drug trafficking respectively. In relation to the s.93C(2) offence, the opinion of
the House (delivered by Lord Hope) did not suggest that the Crown had to prove
that the cash that was exchanged by the defendants into Dutch guilders came from
any particular offence or offences, or even a type of offence. He concluded his
speech with consideration of the way that Parliament had sought to resolve for the
future the dichotomy issues which had arisen with the Drug Trafficking Act and
the Criminal Justice Act:

Inserting s.93A-F into the Criminal Justice Act 1988.

El Kurd [2001] Crim. L.R. 234 CA (Crim Div).
El Kurd [2001] Crim. L.R. 234 CA (Crim Div) at [30].
7A course which was later approved in Hussain [2002] EWCA Crim 6; (20021 2 Cr.
App. R. 26.
' Singh (Rana) (20031 EWCA Crim 3712.
Singh (Rana) [2003] EWCA Crim 3712 a t [26].
l o Montilla [2004] UKHL 50; [2005] 1 Cr. App. R. 26.
Crim. L.R. Prosecuting Money Launderers 573

"The problem [of having to prove that property is either the proceeds of
drug trafficking or other crime] appears to have been solved for the future
by the approach which is taken in the 2002 Act to the definition of criminal
property." ' l
Under s.340 of the Proceeds of Crime Act 2002, property is criminal property if,
"(a) it constitutes a person's benefit from criminal conduct or it
represents such a benefit (in whole or in part and whether directly
or indirectly), and
(b) the alleged offender knows or suspects that it constitutes or
represents such a benefit".
However, Lord Hope's prediction may have turned out to be less than accurate.
Two decisions of differently constituted Courts of Appeal appeared to reach
contradictory conclusions within a few weeks of each other on what was required
to prove criminal property.
On November 15, 2007, the appeal of Craig12 was heard by the Court of Appeal.
The appellant had been convicted of money laundering offences under Pt 7 of the
Proceeds of Crime Act 2002 (ss.327 and 328). Mr Craig, it appears, had been
enjoying a lifestyle which could not be justified on the wages he earned. In particular
he had spent large amounts of cash despite his tax and National Insurance records
showing that he had been unemployed during the period. The prosecution invited
the jury to conclude that there was an overwhelming inference that Mr Craig's funds
were derived from criminal activity. They did not attempt to identify the criminal
activity in question, save to allege (due to a high level of drug contamination or,
some of the cash) that it was most likely to have come from drug dealing.
In the course of argument, counsel for the Crown pointed out that the statutory
definition of criminal property is non-specific as to the way in which the property
became "criminal property". The Court of Appeal considered a decision by
Butterfield J. sitting in Plymouth Crown CourtL3in which he concluded in relation
to the definition of criminal conduct in s.340 of the Proceeds of Crime Act that
there is nothing in the wording which imports any requirement that the prosecution
prove that the property emanated from a particular crime or a specific type of
criminal conduct. The court in Craig considered that this was "a correct statement
of principle". The appeal was, however, allowed on other grounds.
Seven days later, a differently constituted Court of Appeal heard the case of
NW.14 The defendants were all charged with numerous offences contrary to ss.327
and 328 of the Proceeds of Crime Act 2002. It was alleged by the Crown that during
the period between July 2003 and July 2005 the defendants had sent considerable
sums to Jamaica (always in cash)-a total of more than E105,OOO. None of the
defendants had declared any income and some were in receipt of benefits.
There had been argument as to the admissibility of evidence and it would seem
that the judge had excluded the evidence on which the Crown relied to demonstrate
the provenance of the money. However, the Crown continued with the case, inviting

" Montilla [2004] UKHL 50; [2005] 1 Cr. App. R. 26 at [44].

l 2 Craig[2007] EWCA Crim 29 13.
l3 Kelly Unreported March 2005 Plymouth Crown Court.
l 4 N W [2008] EWCA Crim 2; [2008] Crim. L.R. 900; now also reported as Prosecurion
Appeal (No. 11 of 2OO7), Re R v W , R v C.
574 Criminal Law Review 120091

the jury to infer from the circumstances that the money was "criminal property",
without pointing to any particular criminal activity said to have generated it. The
judge stopped the case at half time. The prosecution appealed under s.58 of the
Criminal Justice Act 2003.
The appeal was dismissed. The Court of Appeal concluded that the prosecution
were required to prove at least the class of crime that produced the criminal
property in question. The court had been assisted in coming to their conclusion by
considering two decisions under the civil recovery provisions of Pt 5 of the Act.15
Laws L.J.'s conclusion16 appears unequivocal:
"We have already referred to the linguistic differences between Part 5 and
s.340. In our judgment they are not so pressing as to yield a conclusion that
the legislature in enacting Part 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 shows, it lies in relation to
Part 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 is so required in a civil enforcement suit."
Although the appeal in NW was heard on November 22, 2007, judgment was not
handed down until January 23, 2008. It is apparent, however, that Laws L.J. was
unaware of the decision in Cmig.
There were therefore two apparently contradictory decisions of the Court of
Appeal; the first in Cmig, the second in NW. However, the decision in Craig being
in fact obiter dicta, the appeal having been allowed on other grounds, it arguably
did not have the same status as that in NW. In neither NW nor Craig, were the
offenders free-standing money launderers, but the implications were clear for such
prosecutions.
However, the story does not end there. Two recent decisions have helped
to clarify the position. In both, judgment has been given by Latham L.J., Vice
President of the Criminal Division of the Court of Appeal, who had also given the
judgment in El Kurd.
First came Anwoir,I7 on June 27, 2008. The appellants had been convicted
of free-standing money laundering arrangement offences contrary to s.328 of the
Proceeds of Crime Act 2002. They had used bureaux de change to launder large
quantities of cash. There was no direct evidence as to the source of the cash,
although there was evidence from which the jury could infer that at least some
of it came from drug trafficking and some from VAT fraud. They appealed on
a number of grounds, one of which was referred to by the court as "the NW
ground". That ground is set out at [12] :
"The first ground is what we have described as the NW ground. This ground
is based upon the decision of this court in R v NW, SW, RC and C C [2008]
EWCA Crim 2. It is submitted that in that case, this court held that for the
purposes of a prosecution under section 328 of POCA the prosecution, whilst
it did not have to establish precisely what crime or crimes had generated

l 5 Director of the Assets Recovery Agency w Green [2005] EWHC 3168 and Director of the
Assets Recovery Agency w Szepietowski [2007] EWCA Civ 766.
l 6 N W [2008] EWCA Crim 2; [2008] Crim. L.R. 900 at [37].
l 7 Anwoir [2008] EWCA Crim 1354; [2008] 2 Cr. App. R. 36.
Crim. L.R. Prosecutinp: Monev Launderers 575

the property in question, it did have to establish at least the class or type of
criminal conduct involved. It is acknowledged on the part of the appellants
that this decision would appear to conflict with another decision of this court,
R v Craig [2007] EWCA Crim 2913 which does not appear to have been
drawn to the attention of the court in NW."
Latham L.J. reviewed NW in some detail. He concludes that the decision does
not mean that in every case the Crown must show that the property derives from
conduct of a specific kind. The important paragraph is [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, orb) 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 [ZOO71 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 ~ 6 July ' ~ZOOO)."
Most recently, the Court of Appeal considered the case of F.lR The defendants
had been arrested at Heathrow about to board a flight for Tehran. Their four
checked-in suitcases contained over a million pounds, mostly in used E l 0 and A20
notes, wrapped in newspaper packages or stuffed into rucksacks. In interview one
of the defendants said he was given the money to take to Iran by another man. H e
said he had taken cash to Iran for this man in the same way a number of times
before and he knew what he was doing was wrong. Airline records show that this
was in fact the thirtieth flight the defendants had made to Iran in the past 12
months. On each occasion they checked in a substantial weight of suitcases. The
man named by the defendant as the source of the money could not be located.
The prosecution could not point to any source of the cash. They invited the
jury to infer from the circumstances that the cash was criminal property. The
judge at first instance heard legal argument at the close of the prosecution case. At
that point, although Anwoir had been argued, the court had not yet handed down
judgment. The decision in Craig, in so far as it related to this point was, it was
conceded, obiter. The judge therefore, following NW, acceded to a submission of
no case from the defence. The prosecution appealed under s.58.
The appeal was heard on July 17, 2008. Latham L.J., following his own decision
in Anwoir, allowed the appeal and directed a retrial.
In both Anwoir and F, the court certified a point of law of general public
importance. In both cases they refused leave to appeal. Petitions for leave have also
been refused by the House of Lords.
It remains possible for law enforcement authorities to prosecute the free-standing
money launderers, subject of course to the quality of evidence obtained against
them. However, NW remains good law. Those of us who had found it hard to
reconcile with Craig have been assisted by the clarification given by Latham L.J.,
but some may feel that the debate is not over.

l8 F [2008] EWCA Crim 1868; [2009] Crim. L.R. 45.