The FCA Handbook and Money Laundering – an introduction.  Part IV.

In Part III we looked at Firms’ responsibilities regarding implementing Government and FATF’s findings to ensure they are kept up to date.  We also briefly touched on the potential ramifications for individuals who are handling transactions / those managing individuals handling transactions and, specifically, the possible criminal offences.  Here, in part IV, we look at those possible offences, albeit those of general application and not limited to the regulated sector, which will be reviewed in Part V.

The Legislation

There are multiple pieces of legislation that relate to money laundering and terrorist financing.  It is not intended that we review every single possible offence in this document.  Instead, this is to provide an overview of certain offences and, particularly, to emphasise the elements required in order to prove them as well as the caution with which those working in the sector should proceed with should they have any concern about a transaction.

The Proceeds of Crime Act 2002 (“POCA 2002”)

Part 7 of the POCA 2002 deals with the offences relating to money laundering.  Sections 327 – 329 provide for the main offences (not specific to the regulated sector but of much more, general application).  In short, a person commits an offence if they do any of the following regarding criminal property (S.327): (a) conceal; (b) disguise; (c) convert; (d) transfer; (e) remove it from the jurisdiction.  Alternatively, under S.328, they may also commit an offence if they enter into or become:

“concerned in an arrangement which he knows or suspects facilities (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person…”

S.329 states:

“(1)A person commits an offence if he—

(a)acquires criminal property;

(b)uses criminal property;

(c)has possession of criminal property…”

This means not only must Firms ensure their Risk Assessments, Policies and Procedures and systems are up to date and capable of preventing such transactions from taking place, the individuals who are handling them must also take great care to ensure they are abiding by the legislation and they do not put themselves at risk. 

There are some circumstances in which a person does not commit a criminal offence, even if they do fall under one of the sections above.  These are limited and are as follows:

• They make an ‘authorised disclosure’[1] and, if disclosure is made before doing so, they have received consent;
• They intended to make a disclosure but have a reasonable excuse for failing to do so;
• In committing the offence, they were doing so relating to the enforcement of POCA 2002 or any other relevant enactment;
• They knew or had reasonable ground to believe the conduct occurred outside the UK and the conduct was not unlawful in that jurisdiction.

What is an authorised disclosure?

An authorised disclosure is where an individual discloses information to a constable, customs officer or nominated officer that the property is criminal property, and one of the following conditions are satisfied:

• The disclosure was made before the act was done;
• The disclosure was made in the process of doing the act; when begun they did not know / suspect the act was prohibited; and the disclosure was made on their own initiative and as soon as reasonably practicable; or
• The disclosure was made after the event; they have reasonable excuse for failing to make the disclosure earlier; and done as soon as practicable.

Electronic Money and Payment Institutions are provided with a specific defence regarding Ss.328 and 329, as follows:

“A deposit-taking body, electronic money institution or payment institution that does an act mentioned in subsection (1) does not commit an offence under that subsection if—

(a)it does the act in operating an account maintained with it, and

(b)the arrangement facilitates the acquisition, retention, use or control of criminal property of a value that is less than the threshold amount determined under section 339A for the act…”[2]

The situations in which i-iv and 1-3 are, in reality, very narrow and put the emphasis on the individual handling the transaction to take responsibility for analysing it and, if there is anything suspicious at all, ensuring they take the right measures.  Individuals, especially those working in the financial sector, would do well to tread cautiously when it comes to dealing with transactions they consider to have even a remote possibility of falling under any of the categories of the outlined offences.  Taking a safety-first approach, if there are any characteristics they find unusual, they should place the transaction on hold and notify their line manager / MLRO (depending on thee size and infrastructure of the organisation).  Only when they receive the green light should they allow it to proceed.

Sentences under Ss 327-329 POCA 2002

The penalties under Sections 327-329 are draconian, S.334 providing as follows:

“(1)A person guilty of an offence under section 327, 328 or 329 is liable—

(a)on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or to both, or

(b)on conviction on indictment, to imprisonment for a term not exceeding 14 years or to a fine or to both…”

Conclusion

It is clear that Firms must put in place stringent Policies and Procedures, based on detailed Risk Assessments, as well as ensuring their systems deliver hard stops that cannot be circumvented, in order to protect themselves from being used as a conduit for money laundering and / or terrorist financing.  But just as important is the role of the individuals who are working for it.  Any system is only as strong as its weakest link and for many firms that may be the staff working with / for it.  It is imperative therefore that any individual who works in processing transactions receives full training and is made fully aware of the possible professional and personal ramifications should they be involved in a transaction with even a suspicion of money laundering. 

Get Regulated is a preeminent advisor in these requirements and provides access to the highest quality guidance and training on the appropriate regulatory infrastructure to help protect your business.  If you have any questions at all or need advice, we would be delighted to hear from you.

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[1] S.338 POCA 2002.

[2] The threshold under S.339A POCA 2002 for deposit taking bodies is £250.