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Money Laundering Offences

Updated: 2 June 2021|Legal Guidance, Proceeds of crime

Introduction

This guidance sets out different types of Money Laundering offences and the approach to be taken when prosecuting the offences.

Headlines

  • Money laundering offences are found in Part 7 of Proceeds of Crime Act 2002 (‘POCA’).
  • Money laundering describes offences concerning the possession, concealment, conversion, transfer or making of arrangements relating to the proceeds of crime. This is not limited to money or cash.

Definitions

Money laundering is defined in the POCA as “the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin, so that they can be retained permanently or recycled into further criminal enterprises”.

Money laundering can be broken down into two categories:

  • Those who commit offences and then launder the proceeds of those criminal offences. The criminal offences are referred to as “predicate offences”.
  • Those whose only criminal involvement is to launder the proceeds of crime committed by others.

Interpretation

Criminal Property

The Crown has to prove that the laundered proceeds are "criminal property". Section 340 of POCA sets out that property is criminal property if:

  • 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
  • The alleged offender knows or suspects that it constitutes or represents such a benefit.

Property is widely defined under POCA and includes:

  • Money;
  • All forms of property or real estate;
  • Things in action and other intangible or incorporeal property.

Due to the definition of criminal property, there is no distinction between the proceeds of the defendant's own crimes and of crimes committed by others (see section 340(4)).

Criminal Conduct

For the purposes of POCA ’criminal conduct’ is conduct which:

  • Constitutes an offence in any part of the UK, or
  • Would constitute an offence in any part of the UK if it occurred there.

Offences

There are two main types of money laundering prosecution. There are:

  1. "Mixed" cases in which money laundering can be charged or included on an indictment in which the underlying predicate offence is included. These are:
    1. "Own proceeds" or "self-laundering", where the defendant in a money laundering case may also be the author of the predicate crime; or
    2. Laundering by a person or persons other than the author of the predicate offence.
  2. Cases where money laundering is the sole charge capable of proof or the most appropriate charge.

Public Interest

Where the evidential stage of the relevant test of the Code for Crown Prosecutors (The Code) is met, prosecutors should consider the public interest stage (paragraph 4.14 of The Code). The following public interest factors should also be considered:

  • Whether the predicate offence gives sufficient sentencing power to the court or whether an additional money laundering offence is needed to reflect the overall criminality;
  • The importance of making it more difficult for criminals to legitimise their ill-gotten gains;
  • The importance of deterring professional launderers;
  • The importance of protecting the integrity of financial institutions domestically and internationally;
  • The importance of depriving criminals of the proceeds of their crimes.

The above list is not exhaustive. Each case must be considered on its own particular facts.

Selection of Charges

Prosecutors should select charges in accordance with section 6 of the Code for Crown Prosecutors.

Predicate Offence - Joinder

Including a money laundering count on the same indictment as a predicate offence, may lead to a legal argument to sever the counts on the basis that there is no link between the property in question and the predicate offence. The rationale for charging both offences should therefore be explained, as part of the charging decision.

Casework Handling

Proving Proceeds are the Benefit from Criminal Conduct

Where money laundering offences are included on the same indictment as the underlying crimes, the underlying criminal conduct will be proved as part of the proceedings to the requisite standard.  This should also provide the evidence required to prove the money laundering offence, to the required standard.

Where the money laundering proceedings are ‘standalone’, there are two ways of proving criminal property:

  • by proving the type of offending that gave rise to the criminal property, or
  • by relying on evidence that the circumstances in which the property was handled were such as to give rise to an ‘…irresistible inference that it could only have been derived from crime’ (R v Anwoir [2008] EWCA Crim 1354).

Essentially Anwoir states that prosecutors are not required to prove that the property in question is the benefit of a particular or a specific act of criminal conduct because such an interpretation would restrict the operation of the legislation. The prosecution need, as a minimum, to produce sufficient circumstantial evidence or other evidence from which an “irresistible inference” can be drawn, to the required criminal standard, that the property in question has a criminal origin. In other words, there could be no reason for the circumstances other than a criminal one.

Typically, evidence of the criminal origin of proceeds may be established by:

  • The unlikelihood of the property being of legitimate origin. Where the prosecution proves D has no legitimate explanation for possessing the property in question a jury may be willing to draw an inference that it is proceeds of crime (for example if a large amount of cash is found in the home of someone with no visible means of support);
  • Complex audit trails;
  • Analysis of business accounts or audit records to show excessive or unexplained transactions or profits;
  • Circumstantial evidence. This could be social media entries demonstrating a lavish lifestyle which is not supported by legitimate income, or there could be messages and / or pictures stored on digital devices indicating the individual is in possession of high value items (e.g. cars) which are not supported by legitimate income;
  • Accomplice evidence (for example evidence provided by criminal associates usually as part of an assisting offender agreement);
  • Bad character evidence. This would only be part of the evidential picture and would need to be supported but other evidence.
  • Large amounts of cash concealed in property and vehicles.

Concealing Criminal Property Etc.

The actus reus of the offence under section 327 is:

  • Concealing criminal property;
  • Disguising criminal property;
  • Converting criminal property;
  • Transferring criminal property;
  • Removing criminal property from England and Wales or from Scotland or from Northern Ireland.

One offence is committed whether all, several or just one of the above actions take place in relation to the same property.

A person convicted of an offence under this section is liable to imprisonment for 14 years, a fine, or both.

Concealing or disguising criminal property is defined as concealing or disguising its nature, source, location, disposition, movement or ownership or any rights with respect to it (section 327(3)).

Arrangements

Section 328 states that “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 includes a wide range of activity involving those who launder on behalf of others, usually at the layering and integration stages. It can catch individuals who work in financial or credit institutions, accountants or other professionals, who facilitate money laundering by or on behalf of others, in the course of their work. This can include legal advisors however, it was held in Bowman & Fels [2005] EWCA Civ 226, that section 328 does not cover or affect the ordinary conduct of litigation.

The prosecution has to prove that:

  • The defendant 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 does not cover the making of arrangements by an individual where that individual is the beneficiary of the arrangement.

The laundered assets need not belong to the accused individual.

The offence is either way and carries the same maximum penalty as offences under section 327.

Express Limitations to Concealing Criminal Property Etc. or Arrangements

POCA sets out specific limitations on the scope of these offences.  These include that an offence is not committed if a person makes an "authorised disclosure" to a constable, a customs officer, or a nominated officer and, if the disclosure is made before he does the prohibited act, and he has the appropriate consent. This  includes disclosures, such as suspicious activity reports (SAR’s) to the police and to nominated officers within companies made within the  timescales in section 338. The defence also applies to those who intended to make such a disclosure but had a reasonable excuse for not doing so.

Section 327(2)(c) also exempts acts done in carrying out a function relating to enforcement of any provision of POCA or of any other enactment relating to criminal conduct or the benefit from criminal conduct. It is not uncommon for the police or other enforcement authorities to take possession of criminal property in the course of their official duties and to convert or transfer it, e.g. into an interest-bearing account pending further investigation.

In addition, under section 327(2A) and 328(3) an offence is not committed where the person knows, or believes on reasonable grounds, that the relevant criminal conduct occurred outside the UK, the criminal conduct was not unlawful in that country or territory, and the criminal conduct is not proscribed by the Proceeds of Crime Act 2002 (Money Laundering: Exceptions to Overseas Conduct Defence) Order 2006As a matter of statutory construction, the case of Hogan v DPP [2007] EWHC 978 (Admin) confirmed that these express limitations do not operate as defences.  Once the issue has been raised by the evidence, the prosecution will need to prove the non-application of the limitation to the ordinary criminal standard.  Whilst this case addressed a question arising out of the interpretation of s329 of POCA, the reasoning is equally applicable to these offences. 

Acquisition, Use and Possession

Under section 329 a person commits an offence if he:

  • acquires criminal property;
  • uses criminal property; or
  • has possession of criminal property.

It is an either way offence attracting the same maximum penalties as offences under sections 327 and 328.

It does not attract the lifestyle assumptions on conviction under schedule 2 POCA 2002.

The prosecution has to prove:

  • Acquisition, use or possession of criminal property; and
  • That the defendant had the necessary knowledge or suspicion that the property represented a benefit from criminal conduct.

Express Limitations to Acquisition, Use and Possession

Corresponding limitations to those applicable to s327 and s328 are mirrored in section 329.  In addition, a person does not commit an offence under s329 if he acquired, used or had possession of the property for "adequate consideration" (section 329(2)(c)). This  covers  cases where the funds or property have been acquired by a purchase for a proper market price or similar exchange and to cater for any injustice which might otherwise arise: for example, in the case of tradesmen who are paid for ordinary consumable goods and services in money that comes from crime.

It will also apply where professional advisors (such as solicitors or accountants) receive money for, or on account of costs (whether from the client or from another person on the client's behalf). It would not apply if the value of the work carried out or intended to be carried out was significantly less than the money received for or on account of costs.

Additional clarification of what constitutes inadequate consideration is included in section 329(3).  This section also sets out that if a person pays proper consideration but it is established that he knows or suspects the payment may help another carry out criminal conduct, he is not treated as having paid proper consideration (section 329(3)(c)).

As with other offences under this Part, an offence is not committed under section 329(2A) where the person knows, or believes on reasonable grounds, that the relevant criminal conduct occurred outside the UK, the criminal conduct was not unlawful in that country or territory, and the criminal conduct is not proscribed by the Proceeds of Crime Act 2002 (Money Laundering: Exceptions to Overseas Conduct Defence) Order 2006.

Failure to Disclose

An offence is committed under Section 330 where a person:

  • receives information in the course of a business in the regulated sector, as defined in Schedule 9, and
  • thereby knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in money laundering, and
  • can identify that other person or the whereabouts of any of the laundered property or believes, or it is reasonable for them to believe, that the information will or may assist in identifying that person or whereabouts of any of the laundered property; and
  • fails to disclose to a nominated officer (see sections 338(5), 336(11) and 340(12)), or a person authorised for the purposes of Part 7 by the Director General of the NCA, the information on which his knowledge or suspicion is based as soon as is practicable after the information comes to him.

The inclusion of the wording “has reasonable grounds for knowing or suspecting” reflects the fact that individuals who carry out activities in the regulated sector are expected to exercise a higher level of diligence in handling transactions than those employed in other businesses.

The disclosure of the following is required in accordance with section 330(5):

  • The identity of the person mentioned, if known;
  • The whereabouts of the laundered property, so far as he knows it; and
  • The information or other matter mentioned.

The offence is triable either way with the same maximum penalty on indictment up to 5 years imprisonment.

Note that section 330 can be a standalone charge; it is not necessary to prosecute the defendant or other persons for money laundering under sections 327-329, although consideration should be given to this where the evidence is available.

Money Laundering Planned or Undertaken can be Proved

Under section 330 the prosecution has to prove the person:

  • Knows or suspects, or has reasonable grounds for knowing or suspecting, that another person is engaged in money laundering; and
  • The information or other matter on which this knowledge or suspicion is based, or which gives reasonable grounds for such knowledge or suspicion, came to the person in the course of a business in the regulated sector; and
  • Can identify the other person mentioned or the whereabouts of any of the laundered property, or he believes, or it is reasonable to expect him to believe, that the information or other matter mentioned will or may assist in identifying that other person or the whereabouts of any of the laundered property; and
  • Fails to disclose this information or other matter to nominated or authorised persons as soon as practicable.

Evidence of planning or undertaking can support the prosecution in establishing the knowledge of the person that another is engaged in money laundering. Without such evidence of money laundering or planning, the prosecution will have to establish the suspect suspected or had reasonable grounds for suspecting money laundering.

Money Laundering Cannot be Proven

Prior to this guidance update, the CPS did not charge under section 330 where there was insufficient evidence to establish that money laundering was planned or undertaken.

p>It is noted that during the passage of the POC Bill (now POCA), in a parliamentary debate on 25 March 2002, the former Attorney General Lord Goldsmith QC stated that “The Concern that the negligence offence is unfair overlooks the fact that the offence in Clause 330 of failing to report to the authorities is permitted only if the prosecution proves that money laundering was planned or undertaken.”

However, Lord Goldsmith’s statement cannot be taken as a binding undertaking on prosecutors on how section 330 should be applied. The issue is one of statutory construction. This can be seen in the case of Ahmad v HM Advocate [2009] HCJAC 60, in which the High Court of Justiciary in Scotland, distinguishing R v Montila [2004] 1WLR 3141, ruled that there is nothing in the language of section 330(2) that required money laundering to be taking place.

Therefore, it is possible to charge an individual under section 330 even though there is insufficient evidence to establish that money laundering was planned or has taken place. Section 330 therefore creates an obligation to report suspicions of money laundering to the authorities, regardless of whether money laundering actually takes place. This means that where individuals in the regulated sector receive information giving rise to a suspicion, or provides reasonable grounds for suspecting, that another is engaged in money laundering, an offence is committed by failing to make a report under section 330, regardless of whether it subsequently transpires that the money laundering cannot be proven, or that it did not occur.

Prosecutors should only pursue standalone s.330 prosecutions in these cases where the offence took place after the date on which this guidance is published, for clarity the effective date is the 2 June 2021 – therefore this approach will not be retrospective.

In these cases, the prosecution has to prove the individual:

  • suspects, or has reasonable grounds for suspecting, that another person is engaged in money laundering; and
  • the information or other matter on which this suspicion is based, or which gives reasonable grounds for such suspicion, came to the individual in the course of a business in the regulated sector; and
  • can identify the other person mentioned or the whereabouts of any of the laundered property, or he believes, or it is reasonable to expect him to believe, that the information or other matter mentioned will or may assist in identifying that other person or the whereabouts of any of the laundered property; and
  • fails to disclose this information or other matter to a nominated or authorised persons as soon as practicable.

Prosecutors considering a charge on this basis should refer the case to the Specialist Fraud Division in line with the Referral of Cases legal guidance.

Additionally, consideration should also be given to charges under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) (see below).

Express Limitations to Non-Disclosure

There are again express limitations on the scope of the offence of non-disclosure. These include that a person does not commit an offence if:

  • He has a reasonable excuse for failing to disclose this suspicion (Subsection 6); or
  • He knows or believes, on reasonable grounds, that the money laundering is occurring outside of the UK and this money laundering is not unlawful in that country (Subsection 7A).

Regulatory Offences

Where a person who receives information in the course of a business knows or suspects that another person is engaged in money laundering, and fails to comply with the relevant requirements of the MLRs, prosecution under Regulation 86 should also be considered. The MLRs apply to those conducting business in specified areas listed in Chapter 1 of the MLRs.

Regulation 86 applies to a person who contravenes a ‘relevant requirement’. Note that it is not necessary to prove Money Laundering in order to prosecute a breach of MLRs. The prosecutor simply needs to prove that the relevant requirements of the regulation were not followed.

The meaning of ‘relevant requirement’ is contained within paragraphs 5 to 11 of Schedule 6 of the MLRs, the relevant requirements include:

  • Risk assessment by relevant persons (Regulation 18) - Appropriate steps taken to identify the risks of money laundering the business is subjected to. 
  • Policies, controls and procedures (Regulation 19 and 20) - A relevant person must establish relevant policies and maintain such policies, controls and procedures to mitigate the risks of money laundering identified in any risk assessment. These must be regularly reviewed and updated and include risk management practices, internal controls, customer due diligence, reliance and record keeping. The policies and controls must provide the identification and scrutiny of any case where a transaction is complex, unusually large or has an unusual pattern of transactions and such transactions have no economic or legal purpose. 
  • Customer due diligence (Regulation 27, 28, 29) - A relevant person must apply customer due diligence measures where the person:
    1. Establishes a business relationship;
    2. Carries out an occasional transaction that amounts to a transfer of funds (see also provisions on high value dealers);
    3. Suspects money laundering; or
    4. Doubts the adequacy of documents or information obtained for the purposes of identification. 

In such cases, the relevant person must:

  1. Identify the customer and verify the identity; and
  2. Assess/obtain information on the purpose of the business relationship or occasional transaction.

Note verification must be completed before the establishment of a business relationship or the carrying out of a transaction. Alternatively it must be carried out as soon as practicable during the establishment of the business relationship if it is necessary not to interrupt the normal conduct of business and where there is little risk of money laundering and terrorist financing (Regulation 30).

Note also that simplified customer due diligence measures may apply where the business relationship or transaction is assessed as low degree of risk (Regulation 37) or in some cases relating to “electronic money” (Regulation 38).

  • Requirement to cease transactions (Regulation 31) - Where the relevant person is unable to apply customer due diligence measures, that person must not conduct the following actions:
    1. Must not carry out any transaction with the customer through a bank account;
    2. Must not establish a business relationship with the customer otherwise than through a bank account;
    3. Must terminate any existing business relations with the customer; and
    4. Consider whether a disclosure must be made.
  • Enhanced customer due diligence(Regulation 33) - This is in addition to the customer due diligence measures required in Regulations 27-29. Enhanced customer due diligence measures should be applied in the following circumstances:
    1. Where it has been identified that there is a high risk of money laundering by the relevant person or in the information made available to the relevant person;
    2. In any business/transaction with a person established in a high-risk third country;
    3. Where the relevant person has determined that a customer or a family member is a Politically Exposed Person (PEP);
    4. Where the relevant person discovers that a customer has provided false identification or stolen identification and despite knowing so, continues to deal with that customer;
    5. Where the is an unusual or complex transaction and such transactions have no legal purpose; and
    6. Any other case where there is a high risk of money laundering.

Under Regulation 86, a person who contravenes these requirements is liable, on conviction on indictment, to imprisonment for a term not exceeding two years, to a fine, or to both.

In deciding whether a person has committed an offence under Regulation 86, consideration must be given to whether the person followed any guidelines issued by the FCA or any other supervisory authority or appropriate body and approved by the Treasury. (Regulation 86(2))

Where the person has taken all reasonable steps and exercised all due diligence to avoid committing the offence, that person will not be guilty of an offence.

Tipping Off

Under section 333A it is an offence for a person to disclose information, likely to prejudice an investigation, where that information came to the person in the course of business in the regulated sector.

A person guilty of an offence under this section is liable on conviction on indictment to imprisonment for a term exceeding 2 years, or to a fine, or to both.

Conspiracy

Where consideration is given to charging a conspiracy to commit an offence under sections 327–329 prosecutors should take into account the decision of the House of Lords in R v Saik [2006] UKHL 18. This stated that:

  • An intention that the property to be laundered would be “criminal property” (see definition above) is required where the property had not been identified at the time of the agreement; and
  • Where the property had been so identified, knowledge (i.e. know rather than suspect) that the property was “criminal property” is required.

Handling Stolen Goods

The Court of Appeal has considered criticisms of the use of (in particular) section 329 of POCA rather than an offence of handling stolen goods in some cases. This is particularly the case where the defendant is found in possession of only a small amount or value of stolen goods that do not immediately suggest that the defendant is routinely involved in money laundering activities.

In the cases of CPS Nottinghamshire v Kevin Rose and The Queen v Gareth Lee Whitwam [2008] EWCA Crim 239 the court indicated a preference for the use of handling stolen goods in straightforward cases, but did not go so far as to say that it was wrong in principle or unlawful to use the offences in POCA.

When making a decision between a handling stolen goods charge and a money laundering charge, note that the mens rea for handling stolen goods offences is knowledge or belief while the mens rea for money laundering offences is knowledge or suspicion. Prosecutors should identify the most appropriate charge to reflect the suspect’s criminality, rather than consider the provisions of sections 327 to 329 of POCA as providing an alternative to offences of handling stolen goods in all cases.

Further reading

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