Tipping off and prejudicing an investigation
After making a suspicious activity report (SAR), you’ll need to consider if and how you should change the way you interact with your client to avoid committing the offences of:
If you work in the regulated sector, it’s a criminal offence under section 333A of the Proceeds of Crime Act 2002 (POCA) to tell a person that:
- a report has been made (if you know or suspect that you’re likely to prejudice an investigation by disclosing this information)
- an investigation into money laundering is being considered or carried out (if that disclosure will prejudice the investigation)
These are known as the “tipping off” offences.
On summary conviction, you could face up to three months’ imprisonment or a fine not exceeding level five or both.
On conviction on indictment, you could face up to two years’ imprisonment or a fine or both.
Defences to tipping off
You do not commit the first tipping off offence if you do not know or suspect that a disclosure is likely to prejudice an investigation.
There are four defences to tipping off:
- disclosures within an undertaking or group
- disclosures between institutions
- disclosures to your supervisory authority
- disclosures made by professional legal advisers to their clients for the purpose of dissuading them from engaging in criminal conduct
You should make a note in the client’s file about the reasoning behind your decision if you think that any of these defences apply.
If you know or suspect that a money laundering investigation is being or is about to be concluded, it’s a criminal offence under section 342 POCA to make a disclosure that’s likely to prejudice the investigation.
You only commit this offence if you know or suspect that telling the client would, or is likely to, prejudice the investigation.
On conviction on indictment, you could face up to five years’ imprisonment or a fine or both.
Defences to prejudicing an investigation
You do not commit an offence if you make a disclosure to either:
- a client or their representative in connection with giving legal advice
- any person in connection with legal proceedings or contemplated legal proceedings
This defence will not apply if you make the disclosure with the intention of furthering a criminal purpose.
What should I do?
Making a report does not necessarily mean that all work on a client’s file must stop.
However, if you do not have a defence against money laundering (DAML) from the National Crime Agency (NCA), you’re prohibited from carrying out any act that would amount to a principal money laundering offence.
For example, if you’re working on a conveyancing transaction, you can make enquiries and carry out searches.
But you might commit a money laundering offence if you exchange contracts or complete the purchase without a DAML.
Continuing with basic work may help to stop the client from becoming concerned and asking awkward questions.
The scenarios below set out the issues facing Bloggs and Co as they navigate the hazards faced by the tipping off and prejudicing an investigation offences.
A client wants advice on a transaction involving a restaurant business. The transaction has corporate and property aspects.
Mr Bloggs makes enquiries of his client, Mr A, about the proposed transaction and the business. He is not completely comfortable with the answers he was given.
He makes further enquiries of the client – partly to assess whether he’s suspicious about possible proceeds of crime, but also to see exactly what advice the client needs.
No issue of tipping off arises. A solicitor can and should make enquiries of their client.
Mr A is cooperative and gives full answers without delay or objection. It emerges that the business may not have fully met its obligations to HM Revenue and Customs (HMRC).
Legal advice on potential money laundering offences
Mr Bloggs gives the client advice on the tax issues, and steps are taken to remedy the default with HMRC.
Mr Bloggs also points out that the client risks committing a money laundering offence unless he gets permission to proceed with the sale since it’ll involve the proceeds of crime, however small a part of the overall value they may be.
Because Mr Bloggs works in the regulated sector, he has his own anti-money laundering obligations. He needs a DAML from the NCA before he can act on the transaction.
Mr Bloggs can discuss his report with Mr A since section 333D(2) POCA allows disclosure to a client for the purpose of dissuading that client from criminal conduct.
He makes a careful note of the issues that he has considered and the reasons for his decisions.
Mr Bloggs is approached by Ms B, who runs a beauty franchise. She seeks his advice on a very similar transaction to that of Mr A.
There are a few issues that need a careful look but, having made enquiries of the client, Mr Bloggs is satisfied that there are no proceeds of crime issues.
However, the transaction is held up by odd delays on the other side. Mr Bloggs detects that the solicitor on the other side is stressed and, thinking about the transaction, concludes that the likely reason for the delay is that his counterpart has made a report and is waiting for consent to proceed.
Mr Bloggs is still comfortable with the transaction and does not believe that he should make a report. Being a prudent person, he records his consideration of the issues and his decision.
Ms B become agitated and demands to know why there’s a delay. Mr Bloggs thinks he knows the reason, but can he tell Ms B?
Dissuading or explaining delay
Mr Bloggs is in the regulated sector. He suspects there has been a report and he cannot be sure that telling the client will not prejudice an investigation relating to it.
Section 333A(1) POCA applies: he must not tip off the client.
The exceptions to this are not helpful here. The section 333D(2) reason will not apply because there is no issue of “dissuading” the client.
Ultimately, there are only so many ways of saying nothing, even for an experienced solicitor.
If the delay extends beyond Ms B’s patience, Mr Bloggs is left to find a nice way to say: “I cannot help you, I cannot tell you why I cannot help you, so you must seek advice elsewhere on this issue”.
Mr Bloggs may suggest another suitable firm, like Litigation and Co, but he should not explain why.
Ms B walks down the road to Litigation and Co and the question of what to say passes to Ms Litigation, who quickly works out what the likelihood is that the delay is because of a report to the NCA.
Giving legal advice
Ms Litigation is not in the regulated sector: she is being consulted on why this transaction has been halted and how to make it start again.
Ms B would like to sue someone for messing up her transaction and, by this stage, she does not care who.
Ms Litigation is not concerned with section 333, as she does not work in the regulated sector. Her focus is on section 342.
Although section 342 makes it an offence to “prejudice an investigation”, there is a defence where a disclosure is made in the course of giving legal advice or in relation to legal proceedings or contemplated legal proceedings.
Ms Litigation can advise Ms B what has probably stopped her transaction. Following the decision in Shah v HSBC  EWHC 1283 (QB), she will have to tell Ms B that there is nearly nothing Ms B can do about it other than wait patiently.
No possibility of prejudicing an investigation
One possible alternative in this scenario is if Mr Bloggs believes explaining the situation to Ms B could not possibly prejudice an investigation.
If this were the case, there’s no section 333 offence because this requires a knowledge or suspicion that disclosure would be likely to prejudice any investigation relating to that SAR.
Mr Bloggs either needs to be extremely confident of his client or very brave. Either way, if he feels this is the correct analysis, he would be well advised to record the reasons for his decision to explain the position to the client.
A new client, Mr C, the owner of a small grocery store, seeks Mr Bloggs’ advice.
Mr Bloggs takes instructions and is seriously concerned. The high level of funds flowing through the business are inconsistent with the low price at which Mr C proposes to sell it to an offshore trust domiciled on an island Mr Bloggs has never heard of.
Mr Bloggs is concerned and asks questions about the proposed transaction and the grocery business.
This is a sensible approach and not a tipping off offence (unless Mr Bloggs prefaces his queries with “I’m thinking of making a suspicious activity report to the NCA”).
Making a report to the NCA
The responses Mr Bloggs gets do not ease his concerns, so he is satisfied that he must make a report to the NCA.
He does so, seeking permission to proceed with the sale of the business and giving sufficient details so that the NCA can see precisely what is proposed.
While Mr Bloggs waits for a response from the NCA, Mr C becomes agitated and demands to know why there’s a delay.
Mr Bloggs cannot tell him: he’s in the regulated sector (a corporate transaction), there’s been a report, and telling the client might prejudice an investigation relating to it.
What does Mr Bloggs do? He cannot advise Mr C on the problem because the only permissible disclosure to a client in these circumstances is under section 333D(2).
Explaining a delay is not dissuading a client and there’s no wider purpose permitted. Mr Bloggs must not tip off Mr C.
Mr Bloggs is straight back where he was with Ms B, so Ms Litigation has another client. She still does not have very cheering advice for Mr C, but that’s a different problem.
Call our anti-money laundering helpline
If you need guidance or support on communicating with your client after you’ve made a SAR, contact our anti-money laundering helpline.
Call: 020 7320 9544
Opening hours: 9am to 5pm, Monday to Friday