Nearly a year old, this legislation has even made it on to our TV screens. Amy Bell gives us a brief reminder and looks at what happens when a firm submits a Suspicious Activity Report (SAR)
The recent TV Show McMafia has raised the awareness of money laundering in the UK.
The show depicts some of the ways in which money is laundered through foreign jurisdictions, and how the UK financial market can become involved.
Whilst it may not be immediately obvious from the show how Solicitors can be used to launder money, it is worth noting that the characters had expensive properties in the UK, and companies were used as “fronts”. According to the UK's National Risk Assessment, Solicitors are targeted by criminals to launder money by using their services to purchase property and to create trusts and companies to obscure ownership.
The UK government is very focused on disrupting money laundering and making the UK a hostile environment for money launderers. We have seen a number of pieces of legislation recently designed to make it more difficult for criminals to get away with laundering money, including in particular providing enhanced powers for law enforcement when they are investigating suspected money laundering.
The Criminal Finances Act was enacted in 2017 as part of the UK's Action Plan to tackle money laundering. The new corporate offence of failing to prevent the criminal facilitation of tax evasion has been in force since the 30th September 2017.
The Act also made some changes to part 7 of the Proceeds of Crime Act which covers money laundering. Sections 10, 11 and 12 came into force on the 31st October 2017.
Section 10 of the Act extends the moratorium period which can be applied before consent is granted. When a firm submits a SAR to the NCA, they have 7 working days in which to provide or withhold consent (it can be deemed if no reply is received by the expiry of that period). If the NCA withhold consent, they enter the moratorium period which gives then a further 31 calendar days to investigate the matter before providing consent. Law enforcement find it difficult to fully investigate within that time, in particular when an investigation goes overseas.
Section 10 enables law enforcement to ask the NCA to make an application to the court to extend the moratorium period of 6 further periods of 31 calendar days, making the maximum moratorium period 186 days.
The extension is not automatic. The Court may only give the extension where:
- There is an investigation;
- That investigation is being conducted diligently and expeditiously;
- Additional time is needed to investigate;
- And the extension is reasonable in the circumstances.
It is expected that these applications will be made on notice which will mean that the suspect (the person you will be mindful not to tip off (s333 POCA) about the investigation) will find out about it. However, there is also provision for the application to be made without notice, where there are reasonable grounds to believe that
- evidence of an offence would be interfered with or harmed,
- the gathering of information about the possible commission of an offence would be interfered with,
- a person would be interfered with or physically injured,
- the recovery of property under this Act would be hindered, or
- national security would be put at risk.
Accordingly, whilst it is hoped in the majority of cases, where there is application to extend the moratorium period, the suspect will know about it, that is not guaranteed, and so you should proceed carefully so not to fall foul of the tipping off offences. If you find yourself in this position you may want to seek legal advice from a POCA specialist.
Section 11 is an attempt to improve information sharing. As alluded to above, reporters are very reluctant to share information about suspicions and SARs for fear of committing a tipping off offence. However, there has been some frustration between, in particular, financial institutions who have not been able to share easily information about suspicious individuals and companies. A successful pilot of the Joint Money Laundering Intelligence Task Force demonstrated the value of allowing information to be shared more freely, which led to section 11. The Act allows for sharing of information on the firm's own initiative or following a request from the NCA. The Act defined how information can be shared and provides for joint SARs. In reality because of our professional obligations of confidentiality, it is unlikely that solicitors will be willing or able to share information. However, it is possible that other regulated people may share information with a solicitor, and that is likely to put the firm in a reporting situation under s330.
Finally, Section 12 gives the NCA to power to apply to the Court for a disclosure order, requiring the subject of the order, a solicitors firm for example, to provide information. Failure to comply can lead to a fine of up to £5000. However, you should note that “A further information order does not confer the right to require a person to provide privileged information” so this power cannot be used by law enforcement in place of a production order.
As ever with new legislation, it is not yet certain how often these new powers will be exercised, and we are waiting to see the impact on firms. Should you need any assistance, you can contact the LSS who maybe able to provide details of lawyers who can help.