Contents
1 Introduction
1.1 Who should read this practice note?
All solicitors should read this practice note, particularly managing or senior partners, directors of risk, practice managers, money laundering reporting officers or staff appointed to respond to enquiries from law enforcement.
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1.2 What is the issue?
Solicitors play a key role in facilitating business and financial transactions that underpin the UK economy.
Because of this important role, criminals may target your services to help them commit financial crimes or to launder the proceeds of those crimes.
As a result, law enforcement may seek access to client files to investigate whether the client, and possibly you or a fellow solicitor, have committed a criminal offence.
While you are required to comply with the law, you are also required to keep your client's information confidential.
This practice note aims to provide practical assistance on how to manage these competing obligations and provides a short overview of the main powers available to law enforcement when conducting financial crime investigations.
If you are the subject of a financial crime investigation, or are still unsure of how to appropriately comply with a request from law enforcement, you should seek legal advice from a specialist criminal law solicitor.
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1.3 Professional conduct
The SRA has published a Handbook, which sets out all the SRA 's regulatory requirements. It outlines the ethical standards that the SRA expects of legal practices and practitioners and the outcomes that the SRA expects them to achieve for their clients.
There are ten mandatory principles which apply to all aspects of practice. They can be found in the SRA Handbook. You should always bear in mind the ten principles and use them as your starting point.
Those which are particularly relevant in this context are as follow:
- Uphold the rule of law and the proper administration of justice;
- Act with integrity;
- Do not allow your independence to be compromised;
- Comply with your legal and regulatory obligations and deal with your regulators and ombudsmen in an open, timely and co-operative manner; and
- Behave in a way that maintains the trust the public places in you and in the provision of legal services.
The SRA Handbook includes a Code of Conduct, which replaces the Solicitors' Code of Conduct 2007. The new Code establishes outcomes focused conduct requirements and each chapter outlines outcomes and indicative behaviours.
As detailed below, chapter 4 which pertains to client confidentiality and chapter 5 which pertains to your relationship with the court are particularly relevant when responding to financial crime investigations.
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1.4 Status
Practice notes are issued by the Law Society for the use and benefit of its members. They represent the Law Society's view of good practice in a particular area. They are not intended to be the only standard of good practice that solicitors can follow. You are not required to follow them, but doing so will make it easier to account to oversight bodies for your actions.
Practice notes are not legal advice, nor do they necessarily provide a defence to complaints of misconduct or of inadequate professional service. While care has been taken to ensure that they are accurate, up to date and useful, the Law Society will not accept any legal liability in relation to them.
For queries or comments on this practice note, contact the Law Society's Practice Advice Service: www.lawsociety.org.uk/practiceadvice.
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1.5 Terminology
Must - A specific requirement in legislation or of a principle, rule, outcome or other mandatory provision in the SRA Handbook. You must comply, unless there are specific exemptions or defences provided for in relevant legislation or the SRA Handbook.
Should - Outside of a regulatory context, good practice for most situations in the Law Society's view. In the case of the SRA Handbook, an indicative behaviour or other non-mandatory provision (such as may be set out in notes or guidance).
These may not be the only means of complying with legislative or regulatory requirements and there may be situations where the suggested route is not the best possible route to meet the needs of your client. However, if you do not follow the suggested route, you should be able to justify to oversight bodies why the alternative approach you have taken is appropriate, either for your practice, or in the particular retainer.
May - A non-exhaustive list of options for meeting your obligations or running your practice. Which option you choose is determined by the profile of the individual practice, client or retainer. You may be required to justify why this was an appropriate option to oversight bodies.
Client - the person for whom you act and includes prospective and former clients.
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2 Ethical obligations on disclosure
2.1 General comments
As a solicitor you have a duty of confidentiality to your clients, former clients and in some cases, prospective clients. All references in this practice note to clients, will also include former clients, and where relevant, prospective clients. Some of the information you hold will also be subject to legal professional privilege.
This section covers when those professional and legal obligations apply, how those obligations may be overridden and how to practically manage requests from law enforcement agencies.
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2.2 Confidential information
Chapter 4 of the SRA Code of Conduct provides that you must:
- keep the affairs of clients confidential unless disclosure is required or permitted by law or the client consents.
Chapter 5 of the SRA Code of Conduct provides that you must:
- comply with court orders which place obligations on you.
The obligation of confidentiality extends to all matters revealed to you, from whatever source, by a client, or someone acting on the client's behalf.
This means that you must not volunteer information about a client to law enforcement agencies, but you must provide information where you are required by law or a court order.
If you are approached by a law enforcement agency for information about a client or transaction they are investigating, you must ask if you can either:
- seek the client's consent to provide the information or
- be served with a notice or order requiring disclosure.
The agency may make reference to section 29 of the Data Protection Act, which provides that you will not be in breach of that Act when providing information for the purposes of the prevention, detection or investigation of crime.
However this section does not override your obligation of confidentiality under the SRA Code of Conduct.
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2.3 Information subject to legal professional privilege
2.3.1 What is legal professional privilege?
Legal professional privilege (LPP) is a privilege against disclosure, ensuring clients know that certain documents and information cannot be disclosed at all. It recognises the client's fundamental human right to be candid with his legal adviser, without fear of later disclosure to his prejudice.
LPP does not extend to all information that lawyers have a duty to keep confidential. LPP only protects those communications falling under either of the two heads of privilege – advice privilege or litigation privilege. LPP only applies to information held by solicitors and their employees, barristers and in-house lawyers.
Part 7 of the Proceeds of Crime Act 2002 (POCA) introduces the concept of privileged circumstances, which extends to tax advisors, auditors and accountants, as well as independent legal advisors where they act in the regulated sector for the purposes of anti-money laundering laws (‘relevant professionals'). Privileged circumstances may provide an exemption from the requirement to make a disclosure under POCA, but this exemption does not provide any protection for the purposes of responding to the orders and notices covered by this practice note.
Read more about privileged circumstances in the Law Society's anti-money laundering practice note.
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2.3.2 Advice privilege
Communications between a lawyers, acting in his capacity as a lawyer, and a client, are privileged if they are both:
- confidential, and
- for the purposes of seeking legal advice from a solicitor or providing it to a client
Communications are not privileged merely because a client is speaking or writing to you. The protection applies only to those communications which directly seek or provide advice or which are given in a legal context, that involve the lawyer using his legal skills and which are directly related to the performance of the lawyer's professional duties. [Passmore on Privilege 2 nd edition 2006]
All communications between a lawyer and his client relating to a transaction in which the lawyer has been instructed for the purpose of obtaining legal advice are covered by advice privilege, not withstanding that they do not contain advice on matters of law and construction, provided that they are directly related to the performance by the solicitor of his professional duty as legal adviser of his client. [Three Rivers District Council and others v the Bank of England [2004] UKHL 48 at 111]
This will mean that where you are providing legal advice in a transactional matter (such as a conveyance) the advice privilege will cover all:
- communications with,
- instructions from, and
- advice given to
- the client, including any working papers and drafts prepared, as long as they are directly related to your performance of your professional duties as a legal adviser.
Case law helps further define what advice privilege covers.
Communications subject to advice privilege include:
- A solicitor's bill of costs and statement of account [Chant v Brown (1852) 9 Hare 790]
- Information imparted by prospective clients in advance of a retainer will attract LPP if the communications were made for the purpose of indicating the advice required [Minster v Priest [1930] AC 588 per Lord Atkin at 584]
Communications not subject to advice privilege:
- notes of open court proceedings [ Parry v News Group Newspapers (1990) 140 New Law Journal 1719 ] are not privileged, as the content of the communication is not confidential.
- conversations, correspondence or meetings with opposing lawyers [ Parry v News Group Newspapers (1990) 140 New Law Journal 1719 ] are not privileged, as the content of the communication is not confidential.
- a client account ledger maintained in relation to the client's money [ Nationwide Building Society v Various Solicitors [1999]P.N.L.R. 53. ]
- an appointments diary or time record on an attendance note, time sheet or fee record relating to a client [ R v Manchester Crown Court, ex p. Rogers [1999] 1 W.L.R. 832 ] http://www.bailii.org/ew/cases/EWHC/Admin/1999/94.html
- conveyancing documents are not communication so not subject to advice privilege [ R v Inner London Crown Court ex p. Baines & Baines [1988] QB 579 ]
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2.3.3 Litigation privilege
This privilege, which is wider than advice privilege, protects confidential communications made after litigation has started, or is reasonably in prospect, between either:
- a lawyer and a client
- a lawyer and an agent, whether or not that agent is a lawyer
- a lawyer and a third party
These communications must be for the sole or dominant purpose of litigation, either:
- for seeking or giving advice in relation to it
- for obtaining evidence to be used in it
- for obtaining information leading to obtaining such evidence
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2.3.4 Crime/fraud exception
LPP protects advice you give to a client on avoiding committing a crime [ Bullivant v Att-Gen of Victoria [1901]AC 196 ] or warning them that proposed actions could attract prosecution [ Butler v Board of Trade [1971] Ch 680 ]. LPP does not extend to documents which themselves form part of a criminal or fraudulent act, or communications which take place in order to obtain advice with the intention of carrying out an offence [ R v Cox & Railton (1884) 14 QBD 153 ]. It is irrelevant whether or not you are aware that you are being used for that purpose [Banque Keyser Ullman v Skandia [1986] 1 Lloyds Rep 336 ].
It is not just your client's intention which is relevant for the purpose of ascertaining whether information was communicated for the furtherance of a criminal purpose. It is also sufficient that a third party intends the lawyer/client communication to be made with that purpose (eg where the innocent client is being used by a third party) [ R v Central Criminal Court ex p Francis & Francis [1989] 1 AC 346].
If you know the transaction you're working on is a criminal offence, you risk committing an offence yourself. In these circumstances, communications relating to such a transaction are not privileged and should be disclosed.
If you merely suspect a transaction might constitute a money laundering or other offence, the position is more complex. If the suspicions are correct, communications with the client are not privileged. If the suspicions are unfounded, the communications should remain privileged and are therefore non-disclosable.
If you suspect you are unwittingly being involved by your client in a fraud, the courts require prima facie evidence before LPP can be displaced [ O'Rourke v Darbishire [1920] AC 581 ]. The sufficiency of that evidence depends on the circumstances: it is easier to infer a prima facie case where there is substantial material available to support an inference of fraud. While you may decide yourself if prima facie evidence exists, you may also ask the court for directions [ Finers v Miro [1991] 1 W.L.R. 35 ].
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2.3.5 Can privileged material ever be requested?
LPP information can be disclosed if:
- the client consents or has waived privilege;
- the crime/fraud exception applies; or
- it is inextricably linked to seizable material.
- The power to request or seize documents does not extend to material that is subject to LPP and this should be stated on the face of the relevant notice or order.
- If the order is silent, you should comply with the order on the basis that LPP material is not included, but raise this with the investigating officer.
- If the court is satisfied that either the crime/fraud exception applies this should be recorded on the face of the warrant.
If LPP material is inextricably linked to seizable material and it is not reasonably practicable to separate it out, investigating officers may seize and retain all of the material to examine it elsewhere. However, the use of this power is subject to the provisions in the Criminal Justice and Police Act 2001, which, among other things, give you the right to be present at a review of the material and apply to a judge for the material to be returned.
For example: investigating officers may retain a whole computer hard drive that contains a document which is evidence of an offence, if the rest of the hard drive is needed to prove when that document was created, amended or deleted.
Finally, parliament can override LPP in statute, by the use of express words or necessary implication. Parliament has not decided to adopt this course with any of the powers considered in this note.
If the law enforcement agency claims that the statute they are acting under entitles them to LPP material:
- this should be expressly stated on the face of the notice and the order, and
- the agency must be able to identify the relevant statutory provision to you.
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2.3.6 What happens if there is a dispute over privileged material?
There may be occasions where you believe that certain material is subject to LPP and the law enforcement agency disagrees. Different approaches to managing this dispute may be more appropriate depending on the circumstances.
Client consent
Legal professional privilege belongs to the client, not to the lawyer, so the client can always consent to privilege being waived. However there are issues to consider about whether it is appropriate to discuss a notice or order with the client. (see speaking with clients for more information)
If LPP material is provided to a law enforcement agency without the client's consent, the client can challenge the use of that material in any subsequent trial, bring an abuse of process application against the agency and either make a regulatory complaint or take civil action against you as the solicitor.
Notice to produce
If you have been served with a notice or order to produce information where:
- the court has not indicated that they are satisfied that the crime/fraud exception does not apply, and
- the investigating officer believes that none of the information on the file would be LPP material or that they should have access to the LPP material,
the investigating officer may either:
- ask that you provide the material to an independent counsel to determine whether it is covered by LPP, or
- obtain a further order to specifically state that the crime/fraud exception applies to material in this case.
You may also suggest that the material is reviewed by independent counsel in event of a disagreement.
You will not be in breach of your confidentiality obligations or of LPP if you voluntarily agree to have independent counsel review the material.
If independent counsel is used, the costs will usually be shared between law enforcement and the legal practice.
If you disagree with independent counsel as to whether LPP applies to particular material, you may have to apply to the court for return of the material to resolve the issue.
If a further order is obtained, you should be given the opportunity to attend and make representations to the court.
If the law enforcement agency maintains that they should be given access to all the LPP material and has failed to ensure that this was included on the face of the order, you should not have to bear the costs for the application to rectify this.
However, if the application relates to whether a specific document is privileged or not, the agency may seek costs against you for the application, especially if you declined the opportunity to have independent counsel review the material.
Search warrants
If material is seized pursuant to a warrant, investigating officers may instruct independent counsel to be available during a search to provide an opinion on whether a document is subject to LPP.
Independent counsel must not actively participate in the search or arbitrate disputes over matters such as the scope of the warrant or what material should be provided. Their role is limited to providing an opinion, when requested by the investigating agency that has instructed them, on whether material is or may be subject to LPP. This process was approved by the court in R v HMCE, ex parte Popely & Anr [ 1999] STC 1016.
The law enforcement agency bears the cost of instructing counsel.
Where there is a dispute about LPP that is not resolved during the search, the material will be placed in a blue plastic bag and sealed. This process may be useful where:
- independent counsel is in attendance during the search and you disagree with their view on LPP
- independent counsel is not in attendance and there is a dispute about whether a document is subject to LPP, or
- LPP material is inextricably linked to non-privileged material.
The material will be taken by the agency and will remain sealed until the dispute is resolved, or in the case of inextricably linked material, until it can be separated by independent counsel.
You have the right to be present at the review of the material and apply to a judge for the material to be returned.
If LPP material is inadvertently seized during a search, it must be returned as soon as reasonably practicable. If you believe this has occurred, you should raise this with the investigating officer initially, although if this is disputed, you may need to initiate court proceedings for its return.
Where an application to the court is made, the investigating officers in possession of the material have a duty pursuant to the Criminal Justice and Police Act 2001 to secure it pending the outcome of the application. This duty will arise whenever it is claimed that seized material contains material protected by LPP and means that the seized material can't be copied, examined or otherwise used without the applicant's consent or without directions from the court.
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2.4 Express undertakings of confidentiality to the court
If you have been involved in acting for clients in litigation, you may have received documents on disclosure in those proceedings, which are subject to an express undertaking to the court not to use those documents other than for those civil proceedings.
An order obtained by a law enforcement agency from a criminal court does not override your obligation to the civil court.
You should consider seeking legal advice on your obligations in such circumstances and on the appropriateness of making an application to the relevant civil court to discharge you from the undertaking for the purpose of complying with the criminal court order.
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3 Discussing law enforcement requests and orders
3.1 General comments
In addition to meeting your obligations of confidentiality, there may be a number of other restrictions on your ability to discuss the law enforcement investigation with others.
You should have clear processes in place for managing requests from law enforcement agencies, dealing with clients who are the subject of investigations and liaising with relevant third parties.
You should look at any court order or notice you are given to see whether there is a ‘non-disclosure' provision. You must comply with such a provision.
You should consider whether any discussion you are about to have regarding the order or notice is likely to prejudice a confiscation, civil recovery or money laundering investigation, contrary to section 342 of the Proceeds of Crime Act 2002.
You should document all such discussions in a file held separately to the main client file.
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3.2 Discussions with law enforcement agencies
You should ensure that all staff are aware of who in the office is responsible for receiving and responding to requests from law enforcement agencies. Staff should direct all queries to that person immediately, rather than engage in any discussions with the agencies themselves.
3.2.1 Pre-order enquiries
It is not unusual for a law enforcement agency to contact legal practices in order to discuss whether they hold files which are relevant to an investigation and the likely timeframes for complying with any notice or order.
This presents a challenge for legal practices, who will want to ensure that time frames included within initial notices or orders are realistic, but who must keep their client's details confidential.
Where the client is aware that they are the subject of an investigation and has specifically instructed you to interact with the law enforcement agency on their behalf, you should have discussions with the agency within the remit of your instructions.
In all other cases you should advise the investigator that:
- you are professionally prevented from confirming or denying that you act for the client (unless this is already a matter of public record) and that you cannot provide them with any details without a relevant notice or order;
- if an order is sought and there are relevant files held in your office, you should be able to comply with the order within the standard seven day period (or suggest a longer period if you think the files are likely to be extremely voluminous); and
- if relevant files are archived, it will take you an additional X working days to obtain such files.
You should provide the investigator with the name of the person to whom any notice or order is to be addressed.
You may ask the investigator whether, if the person under investigation is your client, they would object to you seeking consent from that person to provide the information. However, this discussion is likely to be more straightforward once you are actually in receipt of the order.
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3.2.2 Discussions after receiving an order
Even once an order is provided, confidentiality will still apply to information held outside of the scope of the order and you should be careful about volunteering your opinions about your client's conduct or the facts of the case, especially without specific instructions from the client.
For more information see section 8 Answering questions and making statements.
3.2.3 Making a suspicious activity report
A law enforcement agency cannot transfer to you their suspicion that a client is involved in money laundering.
However, once they have advised you that they are investigating a client for a criminal offence where there is a benefit accruing to the client, you have a warning sign that a client may be involved in money laundering.
The money laundering reporting officer (MLRO) at your practice should review the files you hold on the client to assess whether they now have a suspicion of money laundering.
Once an order is served, you should bear in mind that the threshold required by law enforcement agencies to obtain a court order or warrant is higher than that required for a report on money laundering.
However, there may be reasons why your MLRO would still not submit a suspicious activity report at this stage, such as information on the file which demonstrates that the client's funds are from a legitimate source.
Even if you decide you now have a relevant suspicion, you should carefully consider the issue of privilege and what information is able to be provided within any suspicious activity report.
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3.3 Discussions in house and with third parties
3.3.1 Discussions within the legal practice
You should restrict access to information regarding law enforcement investigations to those staff who need to be involved.
You should ensure that the compliance officer for legal practice (COLP) is aware of the investigation.
You may seek advice from others in the legal practice who specialise in criminal law, legal professional privilege or other relevant areas, to assist in complying with any notices, orders or warrants.
Depending on the facts of the situation you may discuss the matter with senior management, marketing and/or HR to ensure the legal practice is able to appropriately deal with any reputational or internal disciplinary matters that arise.
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3.3.2 Discussions with the Law Society or the SRA
You may contact the Law Society's Practice Advice Service to seek advice on this or other related practice notes.
You may contact the SRA Ethics Helpline to seek advice on your ethical obligations.
In both cases, you should not provide details which identify the client or send a copy of the relevant notice or order.
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3.3.3 Discussions with lawyers
You may seek legal advice from a specialist criminal law solicitor on how to:
- comply with any notices or orders,
- respond to the investigation, and
- manage your relationship with your client.
The Law Society's Find A Solicitor Service can assist you in locating an appropriate specialist.
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3.3.4 Discussions with insurers
You should consider whether the police investigation is a notifiable incident for the purposes of your professional indemnity insurance coverage. If it is, you should consider carefully how to provide the relevant information to your insurer so that it is treated with appropriate confidentiality.
3.4 Discussions with clients
3.4.1 Deciding whether to discuss orders with clients
You should consider who in the firm will engage with the client in relation to their ongoing retainer and, if appropriate, the investigation.
Under Outcome 4.2 of the Code of Conduct you must:
- make the client aware of all information material to that retainer of which the individual has personal knowledge.
When a law enforcement agency is engaged in the covert part of an investigation, they will generally not want the client to be aware of the investigation.
However, a simple request from an investigator or a letter marked confidential is not, of itself, enough to override your duty of disclosure to the client.
As outlined at 3.1 above, you will be precluded from having discussions with your client if:
- the order, notice or warrant specifically prohibits disclosure, or
- there is a specific provision in the legislation which creates an offence, such as s342 of the Proceeds of Crime Act.
You should carefully consider the wording of any specific provisions.
Generally to commit such an offence you would have to know or suspect that your disclosure is likely to prejudice an investigation of the relevant type. While there may be an exemption for providing legal advice, that exemption will not apply if your advice is furthering a fraud or criminal purpose.
The views of the investigator will be relevant as to whether you are likely to prejudice the investigation, but they are not determinative. You should consider obtaining specialist legal advice before having discussions with the client.
If you decide that you are precluded from discussing the police investigation with the client, you should consider whether this now puts you in a position of conflict and whether you should terminate your retainer with the client. You should still make assertions of privilege where necessary over information held in relation to the client and continue to respect their confidentiality.
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3.4.2 Providing legal advice
Where it is appropriate to have discussions with the client, you should explain
- the law enforcement request or order to them and your obligations to comply and
- that it is a criminal offence for them to destroy evidence or seek to intimidate witnesses.
You should consider whether the serving of the order on you and the possibility that you may be a witness against your client now means that a conflict exists such that you cannot continue to represent the client.
You should consider encouraging them to seek independent legal advice on the investigation, including on issues around waiving privilege and providing information in the absence of an order.
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3.4.3 Charging for compliance with an order
Compliance with a notice, order or search warrant may in some cases take a significant amount of time and resources.
Who bears that cost may depend on the terms of your engagement letter, especially where you cannot discuss the existence of the notice or order with the client.
Firms should consider including within their terms of engagement a provision which states that the firm will charge the client for responding to all lawful notices and orders from law enforcement agencies relating to this retainer. The provision should also note that the firm may not be able to discuss their compliance with the notice or order with the client.
If you have not included such a term in your terms of engagement and you are unable to discuss the order with the client to seek their instructions to comply with the order, you will not be able to pass the costs of compliance on to them.
Where there is a risk of prejudicing an investigation, careful consideration should be given to how the charge on the bill is worded so as not to alert the client to the existence of the order.
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4 Powers to obtain material without entry
4.1 General comments
There are a number of powers allowing investigating officers to request documents and other information in relation to an investigation.
Generally these powers allow investigating officers to issue notices or apply for court orders which require you to:
- produce documents and/or
- disclose information, including answering questions.
In most cases, the notice or order will:
- be applied for without notice, although investigating officers may make some pre-order enquiries
- not cover LPP material
- need to be complied with in seven days.
The main notices and orders used in financial crime investigations are:
- Notice to disclose – s61 Serious and Organise Crime and Police Act 2005
- Notice to disclose – s2 Criminal Justice Act 1987
- Production order – s345 Proceeds of Crime Act 2002
- Disclosure order – s357 Proceeds of Crime Act 2002
- Notice to produce – s20 Taxes Management Act 1970
- Production order – s20BA Taxes Management Act 1970
- Production order – Schedule 1 Police and Criminal Evidence Act 1984
Each is discussed in more detail below.
When you receive a notice or order to provide information to law enforcement you should check the following:
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4.2 Notice to disclose – s61 Serious and Organised Crime and Police Act 2005 (SOCPA)
4.2.1 Key features
A notice to disclose under s61 of SOCPA may be issued where the investigating authority:
- has reasonable grounds for suspecting that a relevant offence is being committed,
- knows the person to whom it is directed has information, and
- has reasonable grounds for suspecting that information is likely to be of substantial value to the investigation.
The relevant offences include: bribery, POCA lifestyle offences, terrorism offences and certain tax offences.
The notice will require a person to answer questions, provide information or produce documents to a constable, Serious Organised Crime Agency (SOCA) officer or HM Revenue & Customs (HMRC) officer.
Once those documents are produced, the investigating authority may:
- take copies or extracts from those documents
- require you to provide an explanation of them
If you cannot produce the documents, the investigating authority may require you to state, to the best of your knowledge and belief, where they are.
LPP material is not able to be requested by the notice to disclose, however as a solicitor you may specifically be required to give the name and address of your client.
4.2.2 Who can use this power?
A notice to disclose may be issued by the:
- director of public prosecutions (or delegated staff)
- Lord Advocate (or delegated staff from the Procurator Fiscal)
- director of public prosecutions for Northern Ireland (or delegated staff)
4.2.3 Notice
As this is not a court order, the decision to issue the notice to disclose is made without notice to the person required to disclose the information.
4.2.4 Time frames
The notice to disclose will contain information on how to provide the information requested and by when.
4.2.5 What happens if I don't comply?
If you fail to comply, the investigator can obtain a warrant to enter and seize the relevant material.
4.2.6 Can I challenge the notice?
The process for challenging the notice is judicial review.
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4.3 Notice to disclose – s2 Criminal Justice Act 1987 (CJA)
4.3.1 Key features
A notice to disclose under s2 of the CJA may be issued if the Serious Fraud Office (SFO) has reasonable grounds for suspecting that an offence involving serious or complex fraud has been committed.
The notice to disclose will require you to produce specified documents that appear to be relevant to an investigation.
Once those documents are produced, the SFO may:
- take copies or extracts from those documents
- require you provide an explanation of them
If you cannot produce the documents, the SFO may require you to state, to the best of your knowledge and belief, where they are.
LPP material is not able to be requested by the notice to disclose, however as a solicitor you may specifically be required to give the name and address of your client.
The notice to disclose may also allow the SFO to ask you to answer questions or provide information on any matter relevant to an investigation.
4.3.2 Who can use this power?
A notice to disclose may be issued by the Director of the SFO and any investigator authorised by him to exercise these powers on his behalf.
4.3.3 Notice
As this is not a court order, the decision to issue the notice to disclose is made without notice to the person required to disclose the information.
4.3.4 Time frames
The notice to disclose will contain information on how to provide the information requested and by when.
4.3.5 What happens if I don't comply?
If you do not comply with a section 2 notice the SFO may apply for a search and seizure warrant using section 2(5) of the Criminal Justice Act 1987.
- You may be prosecuted if you:
- fail to comply with a section 2 notice,
- give false or misleading information (either knowingly or recklessly), or,
- falsify, conceal, destroy or dispose of documents that would be relevant to an investigation.
If convicted you may be fined or sentenced to a term of imprisonment.
4.3.6 Can I challenge the notice?
The process for challenging this notice is judicial review.
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4.4 Production order – s.345 Proceeds of Crime Act 2002
4.4.1 Key features
A production order may be granted as part of a confiscation, money laundering or civil recovery investigation.
A production order requires you to give specified material to an investigating officer to take away, or to give an investigating officer access to that material.
If the information specified in the order is stored on a computer, you must produce the information or give access to it so that it is visible and legible (eg print the information). Costs cannot be claimed for doing this.
Once the information has been produced, it may be retained as long as is necessary, or (if the material is needed for legal proceedings and would otherwise be unavailable) until those proceedings are concluded.
A production order cannot require you to produce, or grant access to, LPP or excluded material.
A production order may be used in conjunction with an order to grant entry under s347 of the Proceeds of Crime Act 2002.
4.4.2 Who can use this power?
Section 378 of POCA sets out who is an appropriate officer for each type of investigation.
In relation to a confiscation investigation, any of the following may apply for a production order:
- an accredited financial investigator
- a police constable
- an officer of HMRC
- SOCA
In relation to a money laundering investigation, the following may apply for a production order:
- an accredited financial investigator
- a police constable
- an officer of HMRC
In relation to a civil recovery investigation, the following many apply for a production order:
- SOCA
- the director of public prosecutions
- the director of the Serious Fraud Office, his staff, and
- accredited financial i nvestigators employed by the SFO.
4.4.3 Notice
Production orders will normally be applied for without notice, although pre-order enquiries may be made.
4.4.4 Time frames
The time limit for complying with production orders is usually seven days, unless the judge granting the order specifies a longer or shorter period for compliance.
4.4.5 What happens if I don't comply?
Failure to comply with a production order may result in proceedings against you for contempt of court and could lead to a fine, prison sentence or sequestration of assets.
If you do not comply with a production order, an appropriate officer may also apply for a search and seizure warrant under section 352(6) of POCA.
4.4.6 Can I challenge the notice?
You may apply to the court to have the order varied or discharged if it relates to either aconfiscation ormoney laundering investigation.
You cannot apply if it relates to a civil recovery investigation.
The order can be varied on several grounds, such as inadequate description of the material sought, seeking access to unauthorised material (such as LPP material) or not identifying the correct client.
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4.5 Disclosure order – s357 Proceeds of Crime Act 2002
4.5.1 Key features
A disclosure order may be made during confiscation, civil recovery and exploitation or proceeds investigations.
A disclosure order may require you to do any of the following:
- answer questions at a specified time and place
- provide specified information in a time and manner specified
- produce documents in a specified manner and within a specified time.
A disclosure order can only be made if there are reasonable grounds for believing that the information provided will be of substantial value to an investigation and that it is in the public interest for the information to be given.
A disclosure order cannot require you to provide any answers, information or documents that would be subject to LPP. However, you may be required to provide confidential information, such as the name and address of your client.
4.5.2 Who can use this power?
The following people may apply for a disclosure order:
- the director of SOCA
- the director of public prosecutions
- the director of public prosecutions for Northern Ireland
- the director of the Serious Fraud Office
- the director of Revenue & Customs
- the director of Revenue & Customs prosecutions for Northern Ireland
4.5.3 Notice
A disclosure order may be applied for without notice or on notice.
Where it is applied for on notice, you may attend the court and make representations about the appropriateness of issuing the order or about the content of the order.
4.5.4 Time frames
The investigating officer will set the time limit for compliance with a disclosure order. You may request more time to comply with a requirement in a disclosure order.
The circumstances in which an extension will be granted will vary from case to case, but may include:
- the need to obtain professional advice
- difficulty in obtaining the required information or documents
- an interviewee's availability
For further information on when an extension will be granted see the Attorney General's guidance (PDF)
4.5.5 What happens if I don't comply?
If you do not comply with a disclosure order, an appropriate officer may also apply for a search and seizure warrant under s352 of the Proceeds of Crime Act 2002.
If you do not comply with a disclosure order or knowingly or recklessly make a misleading statement in response to such an order, then you commit an offence under section 359 of POCA.
Non-compliance with a disclosure order can lead to up to six months' imprisonment or a £5000 fine.
Knowingly or recklessly making a false or misleading statement can lead to two years' imprisonment and an unlimited fine.
4.5.6 Can I challenge the notice?
You may apply to the court to have the order varied or discharged if it relates to either a:
- confiscation or
- money laundering investigation
You cannot apply if it relates to a civil recovery investigation.
The order can be varied on several grounds, such as inadequate description of the material sought, seeking access to unauthorised material (such as LPP material) or not identifying the correct client.
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4.6 Notice to produce– s20 Taxes Management Act 1970 (TMA)
4.6.1 Key features
A notice to produce issued under s20 of TMA (as amended by the Finance Act 2008) will require you to provide information or produce documents in order to investigate the tax position of another person. 'Documents' includes electronic records.
You may produce a copy of the document requested unless you are asked to produce the original document. HMRC officers may copy or make extracts from the documents. They may also remove and retain the document for a reasonable period where necessary.
HMRC cannot require you to produce any information that is subject to LPP.
HMRC has issued guidance on the use of these powers in its compliance handbook.
4.6.2 Who can use this power?
Inspectors and officers of HMRC.
4.6.3 Notice
As this is not a court order, the decision to issue the notice to produce is made without notice to the person required to produce the information.
4.6.4 Time frames
The time frame for complying will be specified in the notice.
4.6.5 What happens if I don't comply?
If you fail to comply with an information notice without a reasonable excuse, you may be liable to a £300 penalty plus daily penalties of up to £60 a day if the failure continues.
Failure to comply includes concealing, destroying, disposing of a document after an information notice has been received or after being given informal notification that a document is required. Concealing, destroying or disposing of a document following an information notice is an offence and may lead to a fine or imprisonment.
If you are given a penalty, you may appeal to the First Tier Tribunal against the decision to impose a penalty or the amount of the penalty. If you appeal, you must give written notice of your intention to do so to HMRC within 30 days of the penalty being imposed and state your grounds for appeal.
4.6.6 Can I challenge the notice?
If you are given an information notice, you may appeal against the notice itself or any requirement in the notice if it would be unduly onerous to comply with it. Appeals must be made to the First Tier Tribunal.
However, you may not appeal if the notice relates to statutory records or if the notice was approved by the First Tier Tribunal.
You must give written notice of your appeal to the HMRC officer who gave you the information notice within 30 days of the date on which it was given to you, stating your grounds for appeal. The First Tier Tribunal may confirm, vary or set aside the information notice or a requirement within it.
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4.7 Production order – s20BA Taxes Management Act 1970
4.7.1 Key features
A circuit judge may issue an order under s20BA of TMA requiring you to deliver documents to HMRC if there are reasonable grounds for suspecting serious tax fraud has occurred. The documents are limited to those which may provide evidence of the fraud.
4.7.2 Who can use this power?
Authorised officers of HMRC.
4.7.3 Notice
You must be given written notice of HMRC's intention to apply for such an order. This notice must be given to you no less than five working days before the hearing of the application.
You are entitled to appear and be heard at the hearing of the application unless the judge is satisfied that this would prejudice the investigation.
The notice must specify:
- the date, time and place for hearing the application
- the documents which are the subject of the application
- a description of the suspected offence to which the application relates
- the name of the person suspected of the offence.
If you are given notice of HMRC's intention to apply for an order, you must not conceal, destroy, alter or dispose of any document to which the application relates without permission from the judge or written permission from HMRC.
You are permitted to discuss the fact of the application with your client, for the purpose of providing legal advice.
4.7.4 Time frames
You will generally have 10 working days from the date the order is served on you to comply, unless the order specifies a longer or shorter period.
4.7.5 What happens if I don't comply?
If you do not comply with an order to deliver documents, you may be prosecuted for contempt of court.
4.7.6 Can I challenge the notice?
The process for challenging the order is judicial review.
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4.8 Production Order - Schedule 1 Police and Criminal Evidence Act 1984 (PACE)
4.8.1 Key Features
A judge may issue an order under Schedule 1 of PACE 1984 requiring you to produce special procedure material if he is satisfied that the documents are likely to be relevant evidence or of substantial value to an investigation into an offence.
Special procedure material is defined by section 14 of PACE 1984. It includes:
- material acquired or created in the course of any trade, business, profession or other occupation for the purpose of any paid or unpaid office which is held:
- subject an express or implied undertaking to hold it in confidence, or
- subject to a restriction or obligation such as those mentioned in section 11 (2)(b) for example a legislative obligation of secrecy.
- journalistic material that is not excluded material under section 11.
Special procedure does not include material that is subject to legal professional privilege or excluded material.
4.8.2 Who can use this power?
- Police constables
- SOCA staff that are authorised under section 43 of SOCPA 2005
4.8.3 Notice
You will be given notice of an application for a Schedule 1 order and the application will be inter partes.
Once you have received notice of an application, you must not destroy, conceal, alter or dispose of the material that the application relates to without a leave from a judge or written permission from a constable.
4.8.4 Time frames
The time frame for complying with a Schedule 1 order is usually seven days from the date of the order, unless the order specifies otherwise.
4.8.5 What happens if I don't comply?
If you do not comply with a Schedule 1 order, a judge may issue a search warrant authorising a police constable to find and seize the material. You may be prosecuted for contempt of court.
4.8.6 Can I challenge the notice?
The process for challenging the order is judicial review.
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5 Powers to enter and obtain material
5.1 General comments
There are a number of powers allowing investigating officers to obtain orders or warrants to enter premises in order to search for and/or seize material that is relevant to an investigation or evidence of an offence.
The main orders and warrants used in financial crime investigations are:
- Entry order – s347 Proceeds of Crime Act 2002
- Magistrates' Warrant – s8 Police and Criminal Evidence Act 1984
- Search and Seizure Warrant – s66 Serious and Organised Crime and Police Act 2005
- Search and Seizure Warrant – s352 Proceeds of Crime Act 2002
- Search and Seizure Warrant – s2 Criminal Justice Act 1987
- Search and Seizure Warrant – schedule 5 Terrorism Act 2000
- Search and Seizure Warrant - schedule 1 PACE 1984
Where one of these powers is used, it will either be because you have failed to comply with an earlier notice or order, or the law enforcement agency concerned has reasonable grounds to suspect that you are complicit in the criminal activity.
In such circumstances you need independent specialist legal advice.
For this reason the practice note does not discuss the different powers in detail, but outlines your general rights and responsibilities should an entry order or warrant be executed against your office or home.
There is detailed advice for law enforcement on conducting searches in the PACE Code of Practice B which can be obtained from the Home Office website.
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5.2 Your rights and responsibilities
The legal practice should identify senior staff who will be responsible for liaising with law enforcement officers in the event of a search.
Reception staff should be aware of who those staff members are and upon being shown an order by the investigating officers, should contact the relevant staff members.
The following advice in 5.2.1 – 5.2.3 is directed at the staff members who are responsible for liaising with law enforcement during the search.
Initial entry
When a law enforcement officer seeks entry to your office you should be polite and cooperate within the parameters of the requirements. Anything you say or do not say to the officers may be used in later court proceedings.
You should check the order or warrant for the following:
- the statutory power that the order or warrant is issued under
- the date of issue
- the premises to be searched
- who may enter the premises, for example if the SRA is to accompany law enforcement during the search, the relevant SRA staff should be named on the order or warrant
- what material is covered by the warrant
- whether material subject to LPP is covered.
If you are satisfied that the warrant gives the investigating officer the power to enter and search the premises, you should not obstruct the investigating officers in their search or prevent access to material.
If the above is not satisfactory (for example if the warrant schedule of documents to be searched for has been detached from the copy of the warrant provided to occupier), the search is unlawful and there is no right for the officers to retain anything seized.
You should then make representations to that effect and make sure that they are recorded pending any later court application. If you have any concerns about the warrant, raise it with the officers and document it.
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Legal representation
You should ask the officers whether they will wait for your lawyers to arrive.
The officers are not legally obliged to wait, but may do so, if you can provide a timeframe and waiting will not unreasonably delay the search.
If the investigating officers want to ask questions of staff, you should establish the basis on which they propose to ask questions. During the search this should be restricted to questions to assist in complying with the terms of the warrant or order, such as identifying where relevant material is kept.
Any other questioning of staff should be done in the presence of the legal practice's lawyers. See section 8 for more details.
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During the search
You should ask the investigating officers what they are looking for and, where possible, decide together the processes by which the search will take place.
You should consider taking steps to have clients leave the office and to cancel other appointments during the expected duration of the search.
You should email all staff to inform them of the search and advise them of the need to cooperate with the investigation and to not destroy any documentation.
You should allocate a number of senior staff members to shadow the investigating officers, to ensure that the investigation is carried out lawfully and to take a record of documents / articles seized.
A lawful investigation requires that the premises be searched only to the extent required for the purpose for which the warrant was issued.
This means that a search cannot be made in places where the documents/articles specified in the warrant could not possibly be found or for longer than necessary to find them.
A senior member of staff can direct officers to where documents/articles listed in the warrant are kept and direct them away from irrelevant rooms or privileged material.
Senior members of staff can ensure that the search is being carried out with minimal disturbance to the premises and only reasonable force is used if necessary, for example, to open locked filing cabinets.
You should keep a written record of:
- all the officers' requests and questions
- any answers provided and
- any documents/articles seized or copied.
If you believe a document is privileged, you should make the investigation officer aware of this and, in case of a dispute, use the blue bag process detailed in section 2.3.5.
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6 Maintaining a complete record
6.1 Copying files
Seizure and retention of documents and other material by investigating officers can pose significant problems for solicitors.
It may prevent you from maintaining a complete client file, or in the case of computers being seized, from running your office in the intervening period.
It also could lead to difficulties if you are required to account for your actions to your regulator or others in the future and you no longer have the information you need to defend yourself.
You should make copies and keep records of any files or documents that have been disclosed following receipt of a notice or order to produce.
When documents are seized following a search, the investigating officers must make a detailed record of the search, including a list of documents/articles seized, upon return to the police station. The officers must provide the firm this list upon request.
Should the documents/articles be retained, you have the right to request a record of those seized which must then be provided within a reasonable time frame.
You also have a right to access the documents/articles seized and/or to photographs or photocopies of those documents/articles.
Additionally, the officers must only retain an original document/article when a photograph or copy is not sufficient.
After the investigation, you should collate copies of all documents/articles seized and provide this to the legal practice's lawyers for review who will begin to assess the strength of the allegations.
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6.2 Forwarding files to another solicitor
If your client changes their solicitor and requests that their file be sent to their new firm, you should send them a copy of the file.
You should not ordinarily include a copy of a warrant, order or notice served on you unless you could be sure that in doing so you were not doing an act likely to prejudice the investigations contrary to s342 POCA or other similar legislative provision.
Where the client is unaware of the warrant, order or notice, you should not include it in the file, and you should keep all correspondence and attendances relating to the order separate from the client file. See section 3.4 Discussions with clients.
You should retain copies of anything disclosed under a notice to produce or seized during a search / or the whole file in case you need to account for your actions in future.
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6.3 Voluntary return
Depending on the circumstances, the seized material may be returned to you at the end of the investigation by investigating officers.
6.4 Application to the court
Anyone with a relevant interest in seized property may apply to the Crown Court (or in some instances, the High Court) for the property to be returned.
Among other things, the court can order that the material be returned or examined by an independent third party. You can also apply to the magistrates court for the return of the property under section 1 of the Police (Property) Act 1897.
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7 Powers of arrest
7.1 Arrest without a warrant
Under s 24 of the Police and Criminal Evidence Act 1984 a police constable may arrest you without a warrant if he reasonably suspects you of being guilty of an offence, or if he reasonably believes you are committing an offence or about to commit one.
The constable must reasonably believe that it is necessary to arrest you for any of the following reasons:
- to ascertain your name and address
- to prevent you causing or suffering physical injury, loss or damage to property or committing an offence against public decency
- to allow prompt and effective investigation of an offence
- to prevent you disappearing and thus avoiding prosecution.
If you are arrested, a police constable may enter and search any premises occupied and controlled by you if he suspects that there is evidence on the premises relating to the offence for which you have been arrested.
The constable may seize and retain any evidence he finds as a result of that search.
Unless your presence at the search is necessary for the effective investigation of the offence, such a search must be authorised in writing by a police inspector.
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7.2 Arrest with a warrant
Under section 1 of the Magistrates Court Act 1980 a magistrate may issue an arrest warrant for any person who has, or is suspected to have, committed an offence.
If you are arrested, a police constable may enter and search without a warrant any premises occupied and controlled by you if he suspects that there is evidence on the premises relating to the offence for which you have been arrested.
The constable may seize and retain any evidence he finds as a result of that search.
Unless your presence at the search is necessary for the effective investigation of the offence, such a search must be authorised in writing by a police inspector.
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7.3 Your rights and responsibilities
Upon arrest, a police constable must inform you of your arrest and also of the ground which exist for your arrest.
You must be told in simple language that you are being deprived of your liberty and the reasons for it, including the nature of the suspected offence and where and when it was allegedly committed.
If there are reasonable grounds to suspect you have committed an offence, the officer must caution you before asking any questions about the offence if your answers or silence may be given in evidence to a court in a prosecution.
There is no right to a lawyer at the time of arrest, but if you are held in police custody or any other premises, you have the right to independent legal advice and to consult a solicitor privately at any time.
Further advice for law enforcement on using their powers of arrest are contained in PACE Code of Practice G which is available from the Home Office website.
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8 Answering questions and providing statements
8.1 Questions and statements about the client
The requirement to maintain confidentiality and protect legal professional privilege extends to voluntarily answering questions from law enforcement officers and providing witness statements to them about your client's involvement.
You may answer questions about a person who is not a client of your firm, as this will not breach the confidentiality rule, but only to the extent that such answers do not reveal confidential information about a client.
A client may give you instructions to engage with law enforcement agencies on their behalf. You should seek clear instructions on how you are to engage with law enforcement and whether the client is agreeing to a waiver of legal professional privilege.
Alternatively, a notice, order or warrant may require you to answer questions put by investigators. This will extend to information which is confidential, but not to information which privileged. You may only discuss information which was subject to LPP if the client consents or you have prima facie evidence that the crime/fraud exception applies and the information is no longer subject to LPP.
If you are asked to provide a witness statement, you should request that you be summonsed as a witness.
Where you are required to provide answers to questions or witness statements and either:
- you are not permitted to discuss this with the client, or
- you have prima facie evidence that the crime/fraud exception applies
- you must consider whether you are in a conflict position and whether you can continue to act for the client.
Where you no longer act for the client you must consider the questions subject to your obligations of privilege and confidentiality as set out below.
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8.2 Questions and statements about your involvement
The requirement to maintain confidentiality and protect legal professional privilege extends to voluntarily answering questions from law enforcement and providing witness statements to them about your own involvement.
You should seek specialist legal advice where law enforcement is asking questions about your involvement with a client or in relation to a specific retainer, as there may be potential criminal, regulatory, and civil consequences.
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9 More information
9.1 Law Society products and services
For advice on how to comply with an investigation by the SRA read our practice note on Investigatory powers.
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9.2 Other
Most notices, orders and warrants are covered by provisions of Schedule 1 of the Police and Evidence Act 1984. The Home Office has issued guidance to law enforcement agencies on how to apply for and use these powers.
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