Money
Laundering
The Legal Position
Andrew Campbell
University of Leeds
a.campbell@leeds.ac.uk
Introduction
• Why is this important?
• Most of us will now be covered to
some extent by the anti money
laundering regime
• There have been a number of
successful prosecutions for money
laundering offences
• “He clearly closed his eyes to the
obvious”
• Solicitor jailed after home fraud July
2006
• Sale of house at massive undervalue
• Some of the UK’s leading banks have
been fined for AML failures
The Legal Framework
• The Substantive Law
• The Money Laundering Regulations
2003
• It is important that you are aware of
the legal framework
The Proceeds of Crime Act
• The substantive criminal law is to be
found in Part 7 of POCA and the
relevant anti-terrorism provisions
• Prior to POCA the relevant offences
were scattered in a number of
separate pieces of legislation
Concealing etc.
• Section 327 is the first principal
offence and it makes it an offence to
conceal, disguise, convert, transfer
or remove criminal property from
England and Wales, Scotland or
Northern Ireland.
• Section 327(3) provides that this
includes concealing or disguising the
nature, source, location, disposition,
movement or ownership or any
rights with respect to it.
Arrangements
• The second principal money laundering
offence is contained in section 328 which
provides:
• 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 can be committed in any
or more of the five ways referred to.
Where a person handles money
which is derived from the proceeds
of a criminal offence there is
potential liability.
“..which he knows or
suspects…”
• Knowledge is a straightforward
concept which should not cause any
problems but suspicion raises many
more issues. What will amount to
suspicion for the purposes of this
offence?
• The Joint Money Laundering Steering
Group gives the following guidance:
“Suspicion is personal and subjective
and falls far short of proof based on
firm evidence.
• Suspicion has been defined by the
courts as being beyond mere
speculation and based on some
foundations i.e. ‘a degree of
satisfaction and not necessarily
amounting to belief but at least
extending beyond speculation as to
whether an event has occurred or
not”.
Acquisition etc.
• The third principal offence is in
section 329(1) which makes it an
offence to acquire, use or have
possession of criminal property.
Disclosure and Tipping Off
• The other two offences are
concerned with either failing to make
a disclosure or to “tip off” that a
disclosure has been made.
• Sections 330-332 are concerned with
failures to disclose. Section 330
applies where a person has failed to
make a disclosure where a person
knows or suspects money laundering
and also where there are reasonable
grounds for such knowledge or
suspicion.
• The offence only applies where the
information is gained in the course of
a regulated business. Regulated
business now goes beyond the
financial services sector and
includes, for example, solicitors and
accountants.
• Once a disclosure report has been
made it is an offence to tip off
another person that a report has
been made. This carries a penalty of
up to five years imprisonment and is
clearly considered a serious offence.
Defences
• Section 328(2) provides a defence
where the accused makes a
disclosure in the proper manner. It
is also a defence where the accused
can show that he or she had a
reasonable excuse for not making
the disclosure – section 328(2)(b).
There is no judicial authority as yet
to clarify what would be required to
satisfy this defence
• There is also the defence of
‘adequate consideration’ see section
329(2)( c).
• But will not apply if you know or
suspect that the goods or services
have been or will be used in criminal
conduct.
The Regulations
• The Money laundering Regulations
2003 (came into effect on 1st March
2004)
• They are the implementation of the
Second European Money laundering
Directive
• Failure to comply with the
Regulations is a criminal offence
• The Regulations apply to businesses
and persons within the regulated
sector. Universities?
• The Regulations require that the
following are complied with:
• (a) training of staff
• (b) customer/client identification
• (c ) record keeping
• (d) reporting procedures
• The Regulations will only apply to
‘relevant business’
• What is relevant business?
• Reg 2(2) (n) – “the activity of
dealing in goods of any description
by way of business….whenever a
transaction involves accepting a total
cash payment of 15,000 Euro or
more”
Regulation 3
• All persons carrying on relevant
business are to establish such
procedures of internal control and
communication as may be
appropriate for the purpose of
forestalling and preventing money
laundering.
• Procedures have to be established to
cover:
• Training - Reg 3
• Client identification – Reg 4
• Record keeping – Reg 6
• Reporting – Reg 7
Scenarios
• An overseas student turns up and
wants to pay tuition fees in cash
• She opens her bag and produces
£10,000 in cash
• What should you do?
• An overseas student has paid tuition
fees by way of a bank transfer and
has arrived in Leeds
• He now wants to pay for his hall of
residence in cash
• Any problems with this?
• What if he is a home student?
• A student from a high risk country
has paid tuition fees
• Then decides to withdraw and wants
a refund payable by cheque to
another person
• What should you do?
• The Department of Computing has a
significant amount of slightly out of
date equipment it wants to sell
• Advertises in local media
• Buyer wants to buy for cash
• Makes an offer of £10,000
A supplier, who you have not used
before, pays you a cheque for
£8,000 which you bank right away
When checking the invoice it is noticed
that the payment should have been
for £3,000
The supplier asks you to write a
cheque for the difference payable to
a third party
Some observations
• Keep a sense of proportion
• Use common sense
• Don’t try to be Sherlock Holmes or
Hercule Poirot!