Anti-money laundering

Prosecution of ‘failure to disclose’ offences

On 2 June 2021, the Crown Prosecution Service (CPS) published updated guidance on prosecuting standalone ‘failure to disclose’ cases under section 330 of the Proceeds of Crime Act 2002 (POCA).

Read our summary of the updated guidance

At the Anti-Money Laundering Supervisors’ Forum in July, the CPS gave a further briefing on its position, which we have summarised below.

Background

Section 330 has been the subject of debate since POCA passed through parliament in 2002.

At the time, the former attorney general (AG) Lord Goldsmith commented that the measure would only be used where actual money laundering was planned or undertaken.

The original CPS guidance therefore stated that there was no basis for prosecuting individuals who allowed what law enforcement identified as ‘suspicious transactions’ to take place where there was no proof of actual money laundering.

Debate was further prompted by the finding in the Scottish case Ahmad v HM Advocate [2009] HCJAC 60 that:

“There is nothing in the language of section 330(2) which states or requires that money laundering is in fact taking place. It is plain that the obligation thereunder can arise if a person suspects or has reasonable cause for suspecting that it is.”

Having sought advice on the implications of Ahmad, the CPS has now taken the view that the former AG’s comments were not binding, having sought advice on the implications of Ahmad and consulted with the director of public prosecutions and the current AG.

The updated guidance

The guidance now indicates that the CPS can prosecute individuals for standalone section 330 offences from 2 June 2021.

The CPS could bring a prosecution where a transaction takes place that is suspicious because of the whole circumstances but it cannot be proved that actual money laundering was planned or undertaken, assuming that:

  • the code test was met
  • there was an evidential basis, and
  • it was in the public interest

The CPS shared examples of the types of cases where it’s likely to bring section 330 charges:

  • a solicitor acting in a conveyancing transaction who receives funds in the form of a large bag of cash, or money from a third party or a suspicious business, and does not ask any questions or carry out due diligence
  • a money service bureau operator who does not follow the ‘know your customer’ guidance and exercise due diligence

Similarly, the CPS would likely bring a standalone section 330 charge where:

  • there is an individual from an overseas jurisdiction who is known to be a politically exposed person (PEP)
  • their status ought to be known by the financial institutions or professional services dealing with the transaction, which do not exercise due diligence, and
  • the CPS is not likely to be in a position to gather evidence of predicate criminality or the background laundering because of the source of the funds

The CPS view

The CPS does not envisage that the updated guidance will lead to a sudden increase in criminal prosecutions of individuals in the regulated sector.

For context, the CPS only prosecuted seven section 330 cases in 2019 to 2020, not all of which led to convictions.

Most cases where the CPS might consider a section 330 prosecution will be cases where criminality and money laundering have been established.

In many circumstances, there will be an existing background of criminality to raise questions around professionals and why they have not conducted their due diligence.

In some cases where the accused is convicted of a substantive money laundering offence and they plead guilty, the CPS would not necessarily proceed with a failure to disclose charge because it becomes a less significant offence.

We’ve also been assured that any standalone section 330 case would have to be brought to the specialist fraud division to be considered for prosecution. The CPS will also be reporting to the director of public prosecutions when it brings such a case.

The CPS has stated that it does not believe there’s a strong public interest consideration in prosecuting individuals who are poorly trained and have not been given guidance.

It hopes that the change will capture ‘professional enablers’ who turn a blind eye and deliberately do not ask questions in circumstances where they clearly should be conducting due diligence.

The Home Office view

The Home Office clarified that whilst section 330 provisions will be included in its legislation review and that it will monitor the use of the powers, there are no immediate plans to review the provisions because it’s always been the Home Office’s intention to allow section 330 to be charged as a standalone offence.

The Home Office strongly supports the CPS’ clarification and recognises that the offence will only be charged where the code test can be met.

What this means for solicitors

The new guidance should not make a significant difference to your day-to-day work.

However, you should still be training staff on key red-flag indicators, promoting internal suspicions and clearly documenting where they want to convert an internal suspicion to an external one.

Maximise your Law Society membership with My LS