Anti-money laundering

Scope of the 'reasonable excuse' defence

The principal money laundering offences in sections 327-329 of the Proceeds of Crime Act (POCA) are not committed where a person has made an authorised disclosure and obtained the appropriate consent to carry out the prohibited act.

Alternatively, you will have a defence if you intended to make an authorised disclosure but had a reasonable excuse for not doing so. ‘Reasonable excuse’ also operates as a defence to the ‘failure to disclose’ money laundering offences contained in POCA. The scope of the reasonable excuse defence, however, has not been defined in POCA or by the courts.

The finalised version of the Anti-Money Laundering (AML) Guidance, approved by the Treasury, offers additional information on when the defence may apply.

Firstly, it covers situations where you are prevented from making a disclosure because your knowledge and suspicion is based on privileged information and the crime/fraud exception to legal professional privilege does not apply. However, there may also be other circumstances which would provide a reasonable excuse including, for example, where:

  • a regulator or enforcement authority (in the UK or elsewhere) is already aware of the suspected criminal conduct or money laundering, and the reporter does not have additional information to assist the regulator or enforcement authority;
  • the only information that a reporter would be providing for the purposes of an authorised disclosure or a report under section 330 is information entirely in the public domain;
  • all the suspected predicate offending occurs outside the UK and all the suspected money laundering occurs outside the UK, and there is otherwise no UK nexus to the suspected criminality.

While the AML Guidance provides a useful starting point, you should carefully consider all the circumstances when determining whether you may have a reasonable excuse for failing to make an authorised disclosure and you may want to seek independent legal advice.

If you think that you do have a reasonable excuse you should clearly document the reasons for your conclusion. Lastly, you should remain aware that it is ultimately up to the court to decide whether your reason for not making an authorised disclosure was a reasonable excuse or not.

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