Money laundering: from failure to absurdity
| Pages | 303-319 |
| Published date | 17 October 2008 |
| DOI | https://doi.org/10.1108/13685200810910385 |
| Date | 17 October 2008 |
| Author | Andrew Haynes |
| Subject Matter | Accounting & finance |
Money laundering: from failure
to absurdity
Andrew Haynes
School of Law, University of Wolverhampton, Wolverhampton, UK
Abstract
Purpose – The purpose of this paper is to examine the UK law relating to money laundering in the
aftermath of the three statutory instruments that came into effect in December 2007. In particular
the suitability and impact of the law is considered.
Design/methodology/approach – The method adopted is to analyse the current content of the law
and consider whether the approach utilised in its drafting will result in the aims behind the law being
achieved.
Findings – The result of this analysis is to conclude that the law as drafted is not designed in a way
that can be effectively applied and that in addition the entire approach is flawed. In particular there are
five key areas where problems arise: there is a requirement to report suspicion or knowledge of
criminal offences or proposed terrorist acts but not other proposed criminal offences; the requirement
to report only relates to information that comes into the reporter’s possession in the course of their
trade or profession; the 2007 Regulations create requirements that many of those on whom they are
imposed will not be able to effectively apply; the new s.333A appears to limit the offence of tipping off
to the regulated sector but will not work as drafted; and in addition there are clear human rights issues
associated with the overall regime.
Originality/value – This original and topical paper explains the law as it now exists and provides
analysis of its impact and undoubted failings.
Keywords Money laundering,Legislation, United Kingdom
Paper type Research paper
1. Introduction
The law in this area saw significant recent changes in December 2007 with the arrival
of the Money Laundering Regulations[1] and two additional statutory instruments[2]
meant to strengthen the law in this area. The reality however is more questionable.
This paper explains the law as it now exists and goes on to analyse its impact and
undoubted failings. The law is mainly found in the Proceeds of Crime Act 2002 which
creates three principal laundering offences in sections 327-329. This act has been
amended by the Serious Organised Crime and Police Act 2005. In addition there are
two other relevant statutes: the Terrorism Act 2000 and the Anti-terrorism, Crime and
Security Act 2001, which together with the Terrorism (United Nations) Order 2001[3]
determine the position with relation to funds that are suspected of being used to further
the ends of terrorism.
1.2 Concealing, etc. the proceeds of crime
It is an offence under s.327 to conceal, disguise, convert, transfer or remove crimin al
property from the jurisdiction. This extends to concealing, etc. its nature, source,
location, disposition, movement, ownership or any rights in relation to it. There are
defences in as much that it is not an offence if the person concerned has made a protected
disclosure under s.338, usually to the Serious Organised Crimes Agency (the SOCA),
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From failure
to absurdity
303
Journal of Money Laundering Control
Vol. 11 No. 4, 2008
pp. 303-319
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685200810910385
and has been given consent to continue to act. Likewise if he was going to make such a
disclosure but there was “a reasonable excuse” for not doing so. There is unfortunately a
lack of clarity in that no definition has been provided to determine what a “reasonable
excuse” is, nor is there yet any relevant case law to assist. Finally the re is a third defence
where the act that has been done consists of carrying out a function he has in relation to
enforcing any provision of the Proceeds of Crime Act 2002 or of any other statute relating
to criminal conduct or benefiting there from. “Criminal property” is defined by s.340(3) as
being someone’s benefit from criminal conduct where the alleged offender know s or
suspects that it represents such a benefit.
Under s.327(2C) a deposit taking body that converts or transfers criminal property
does not commit an offence provided it does the act concerned in operating an account
which it maintains and the value of the criminal property concerned does not exceed
the threshold amount. At present the threshold amount has been set at £250. Given the
volumes of money being laundered this figure seems absurdly low. It inevitably gives
rise to suspicion that behind the fac¸ade of combating organised crime and terrorism the
reality is a target of minimising illegal tax evasion.
1.2 Arrangements
It is an offenceunder s.328 to enter into or become concernedin an arrangement which that
person knows, or suspects, facilitates the retention, use or control or criminal property.
Since the case of Bowman v. Fels[4] it has been clear than an “arrangement” will cover
the relationship between solicitors, and other professionals, and their clients. This case
arose as a result of a property dispute betweenex-cohabitees. Shortly before a hearing in
the County Court the solicitor for one party submitted a suspicious transaction report
concerningthe other party. The legaladviser to that party then requestedan adjournment
because “appropriate consent” was not anticipated. The Law Societyintervened seeking
clarification on the meaning of “arrangements” under s.328 Proceeds of Crime Act. The
Bar Council and the NCIS (forerunners of SOCA) were given permission to intervene.
The case was settled between the original parties but the resulting court of appeal
decision arose from the court wishing to provide clarification on how the Proceeds of
Crime Act impacted on litigation. The key point was that certain activities are excluded
from the scope of proceedings related to s.328. The ruling appears to relate to:
.litigation from the issue of proceedings;
.securing injunctive relief;
.a freezing order up to is final disposal; or
.the final division of assets in accordance with a judgment or settlement including
the handling of assets which are criminal property.
The decision did not specifically refer to alternative dispute resolution arrangements.
However, the general view seems to be that they are probably caught by the judgment
as well.
The effect of this is that those involved in litigation and related settlements are not
involved in “arrangements” under s.328. Essentially, privilege is not overridden by the
statute. The only exception to this would be where it appears to be false litigation
taking place so that the party defending could settle out of court to launder money
to the plaintiff. Any property however dealt with after the judgment could still be
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