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

It may be unsurprising, but the regulated sector has additional responsibilities and, indeed, liabilities when it comes to potential offenses under the Proceeds of Crime Act 2002 (“POCA2002”).  Evidently, all of the offenses discussed in Part IV of these articles still apply with the following reserved solely for those authorised by a regulatory body.

The Failure to Disclose

If you work in the regulated sector, Section 330 POCA 2002 makes out a specific offense for a firm failing to disclose.  This offence could potentially be made out if the following conditions are satisfied:

• The individual knows or suspects, or has reasonable grounds for knowing of suspecting, that another is involved in money laundering;
• That knowledge or suspicion, or reasonable grounds for the same, is based on information that came through the course of business in the regulated sector;
• The individual can identify the person or the whereabouts of the laundered property or that they believe / it is reasonable to expect that person may be identifiable / the whereabouts of the laundered property be found, or that the information at point two may assist in identifying that individual or the whereabouts of the laundered property; and
• The individual does not make the required disclosure to either the nominated officer.

The ‘required disclosure’ has very specific conditions that need to be met.  The identity of the person suspected of laundering needs to be included, if known; the whereabouts of the laundered property, if known; and the information set out at point three, above.

S.330(6) provides for the following defence:

“(a) he has a reasonable excuse for not making the required disclosure,

(b) he is a professional legal advisor and

(i) if he knows either of the things mentioned (in the conditions of required disclosure), he knows the thing because of information or other matter that came to him in privileged circumstances, or

(ii) the information or other matter mentioned in subsection (3) (point three above) came to him in privileged circumstances…”

Additional defences are provided for under subsection (7), being:

“(a) he does not know or suspect that another person is engaged in money laundering, and

(b) he has not been provided by his employer with such training as is specified by the Secretary of State by order for the purposes of this section.

(7A) Nor does a person commit an offence under this section if

• he knows, or believes on reasonable grounds, that the money laundering is occurring in a particular country or territory outside the United kingdom, and
• the money laundering
• is not unlawful under the criminal law applying in that country or territory, and
• is not of a description prescribed in an order made by the secretary of state…”

Lastly, subsection 7B applies if:

• “he is employed by, or is in partnership with, a professional legal adviser or a relevant professional adviser to provide the adviser with assistance or support,
• the information or other matter mentioned in subsection (3) comes to the person in connection with the provision of such assistance or support, and
• the information of other matter came to the adviser in privileged circumstances…”

As will have been noted, a key defence available to an individual working in the regulated sector who comes across information that may disclose criminal wrongdoing is that they make a disclosure to the nominated officer.

Accordingly, the next sections, S.331 and 332 POCA 2002 provides for the offence of failure to disclose by the nominated officer(s), copying the same elements as that under S.330 but, of course, that that information had been disclosed to him under that section in the first place. 

Tipping Off – the Regulated Sector

It is likely you will have heard of the offence of tipping off and the clue is very much in its name.  Originally brought in under S.333 of POCA 2002, it was amended by the Terrorism Act 2000 and Proceeds of Crime Act 2002 (Amendment) Regulations 2007.  The offence is now provided for as follows:

“(1) A person commits an offence if—

(a)the person discloses any matter within subsection (2);

(b)the disclosure is likely to prejudice any investigation that might be conducted following the disclosure referred to in that subsection; and

(c)the information on which the disclosure is based came to the person in the course of a business in the regulated sector.

(2) The matters are that the person or another person has made a disclosure under this Part—

(a) to a constable,

(b) to an officer of Revenue and Customs,

(c) to a nominated officer, or

(d) to a member of staff of the Serious Organised Crime Agency authorised for the purposes of this Part by the Director General of that Agency,

of information that came to that person in the course of a business in the regulated sector.

(3) A person commits an offence if—

(a) the person discloses that an investigation into allegations that an offence under this Part has been committed is being contemplated or is being carried out;

(b) the disclosure is likely to prejudice that investigation; and

(c) the information on which the disclosure is based came to the person in the course of a business in the regulated sector.

(4) A person guilty of an offence under this section is liable—

(a) on summary conviction to imprisonment for a term not exceeding three months, or to a fine not exceeding level 5 on the standard scale, or to both;

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

In short, once an individual handling a transaction has made an authorised disclosure, they must ensure that information remains confidential.  Failure to do so could easily open them up to an allegation of tipping off and, as is evident, not only a conviction but also the possibility of a custodial sentence.