In June, the Crown Prosecution Service (CPS) published its revised Money Laundering Offences Legal Guidance for prosecutors.

The most notable change in the Guidance relates to section 330 of the Proceeds of Crime Act 2002 (POCA) which created the offence of failure to disclose when a person knows or suspects, or has reasonable grounds to knowing or suspecting, that another person is engaged in money laundering. The Guidance makes it clear that prosecutions can be brought under section 330 even when it cannot be proved that any underlying money laundering was “planned or undertaken“.

As this Guidance came into effect on the date of its publication, this change will not be enforced retrospectively. But firms within the regulated sector need to be aware of the change and see it as further proof of the importance of having procedures for reporting under section 330 that are fit for purpose.

Section 330 of POCA

The section 330 offence of failure to report is, as with other money laundering offences, in Part 7 of POCA. As well as the substantive money laundering offences (ss.327 to 329 of POCA) which can be committed by anyone dealing in various ways with the proceeds of crime, the Act requires persons in the regulated sector to report any knowledge, suspicion or reasonable grounds to suspect money laundering in certain circumstances. Employees should report such concerns to their firm’s nominated officer, who is then obliged to report it under ss331 and 336.

There are two reasons why regulated firms are obliged to file a suspicious activity report (SAR) with the National Crime Agency (NCA):

  • To obtain a defence if the firm itself could otherwise be committing a substantive offence of money laundering under ss.327 to 329 of POCA, and/or
  • Under s.330 POCA, a SAR must be filed if the firm “knows or suspects or has reasonable grounds for knowing or suspecting” that a person (such as a customer) is involved in money laundering, and that knowledge or suspicion comes to the firm in the course of carrying on a regulated business.

The changes to the Guidance detailed above relate to the reporting obligation under s.330 POCA. A s.330 offence can carry a maximum penalty of five years’ imprisonment and/or a fine.

Whereas the previous position was that a failure report conviction under s.330 was only possible if the money laundering was planned or undertaken, the new Guidance states that prosecutors may bring charges “even though there is insufficient evidence to establish that money laundering was planned or has taken place”. It adds by way of explanation that “there is nothing in the language of s.330(2) that required money laundering to be taking place” and refers to the High Court of Justiciary in Scotland in Ahmad v HM Advocate [2009] HCJAC 60, which provides that the obligation to disclose arises regardless of having proof that money laundering actually took place.

Knowledge and suspicion

The Guidance, however, makes it clear that the removal of the requirement for sufficient evidence of money laundering only applies to the subjective suspicion of (or objectively reasonable grounds to suspect) money laundering, and not actual knowledge of it.

Regarding such knowledge, the Guidance says that evidence of planning or undertaking can support the prosecution in establishing that someone had knowledge that another was engaged in money laundering. It adds that without such evidence of money laundering or planning, the prosecution must “establish the suspect suspected or had reasonable grounds for suspecting money laundering”. Where money laundering cannot be proven, the prosecution will be brought under the “suspicion limb” of s. 330 POCA.

Conclusion

The CPS has indicated that the new approach may remove “historical barriers’’ to bringing s.330 prosecutions. Yet while there may be a rise in such prosecutions, the CPS does not expect a significant increase, although the Serious Fraud Office and the National Economic Crime Centre have welcomed the changes to the Guidance.

The change brings a heightened risk associated with failing to report and is yet another reason for firms to ensure their reporting procedures are appropriate.