The End of Money‐Laundering Prosecution in the City?

Publication Date01 April 1999
DOIhttps://doi.org/10.1108/eb027222
Pages128-131
Date01 April 1999
AuthorMichael Chan
SubjectAccounting & finance
Journal of Money Laundering Control Vol. 3 No. 2
The End of Money-Laundering Prosecution
in the City?
Michael Chan
Money laundering is established as a criminal offence
and, to date, the prosecution of money laundering has
been the responsibility of the Criminal Prosecution
Service (CPS) and the Serious Fraud Office (SFO).
However, the Financial Services and Markets Bill
will provide the Financial Services Authority (FSA)
with the power to bring a prosecution for offences
under the Money Laundering Regulations.1 This
may result in some confusion as to who should pro-
secute, particularly as it is established that all three
bodies cannot prosecute the same crime since this
would allow the defendant to claim double
jeopardy.2 It should be noted that the FSA has
stated that it will only prosecute for failing to
maintain adequate controls against money laundering
and that prosecutions for money laundering itself will
be left to the criminal prosecution authorities.3
Despite this limitation there will still be an overlap
between offences that the CPS, SFO and FSA may
prosecute. The situation is further clouded, as the
FSA will also be able to undertake a disciplinary
action. A disciplinary action for money laundering
has not been specifically mentioned in the Financial
Services and Markets Bill. However, the FSA is
most likely to introduce an and money-laundering
statement of principle,4 particularly as the reduction
of financial crime is one of the objectives of the
FSA.5 If a regulated person or institution is found
to breach this, they will be subject to a penalty
imposed under disciplinary proceedings.6 In addition,
a blanket provision of 'misconduct' would also trig-
ger the imposition of a penalty.7 Therefore, the possi-
bility arises of a criminal prosecution by the FSA for
failing to maintain adequate controls against money
laundering, a prosecution by the CPS or SFO for
money laundering itself and for failure to maintain
adequate controls as well as an FSA disciplinary action.
The SFO, CPS and FSA are presently drafting a
Memorandum of Understanding to clarify which
body should prosecute in a certain situation. The
contents of the Memorandum of Understanding are
unknown but it is submitted that the present situation
should be expanded, allowing money laundering
involving a regulated person or institution to be
prosecuted by the FSA, especially as they already
have experience and knowledge of regulated persons
and firms. Also, the present situation, where the CPS
or SFO prosecutes money laundering
itself,
is
inconsistent with the approach to market manipula-
tion and insider dealing. For this, the FSA can
launch criminal proceedings as well as disciplinary
proceedings for the substantive offence and failure
to maintain adequate controls.8 Moreover, this
would provide the FSA with the discretion to pro-
ceed with either disciplinary or criminal proceedings
or both.
This is significant as to date few money-laundering
cases have been successfully brought.9 Part of the
reason is that like many other white-collar offences,
money laundering is difficult to detect and even
harder to prove, especially to a criminal standard.
Thus,
there have been calls for increased use of the
civil or regulatory law, as it is better suited to punish-
ing financial
crime.10
The arguments for and against
the use of the civil or regulatory law are numerous
and well
documented.11
They centre on the differing
standards of
proof,12
who the proof
is
aimed
at13
and
the accessibility of
disclosure.14
The proposal for the FSA to prosecute money
laundering would provide a method to circumvent
the problems of proof and disclosure, as the FSA
would have the discretion to launch disciplinary pro-
ceedings instead of the CPS or SFO having to initiate
a criminal prosecution in the courts. The main
advantage of this would be that disclosure would be
more readily available as it is an offence to refuse to
provide evidence to the FSA without a reasonable
excuse. 15
However, this will not necessarily mean an
explosion in the number of penalties awarded against
money launderers. Although the FSA will decide
cases on a civil basis on the 'balance of probabilities',
a sliding scale exists for this standard of proof in
certain situations. This existence of this scale was
confirmed by the then Denning LJ in Hornal v
Neuberger:16 '. . . the more serious the allegation,
the higher the degree of probability that is
required . . .
'.17
This was reiterated in R v Hampshire
Journal of Money Laundering Control
Vol.
3,
No.
2,1909, pp 128-131
© Henry Stewart Publications
ISSN 1363-5201
Page 128

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