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BACKGROUND

Powers to confiscate from convicted defendants their benefit from crime were first introduced following the failure to recover funds in a drug trafficking case in 1978 known as Operation Julie. In this case, some £750,000 of drug trafficking proceeds were traced into the hands of the offenders and restrained. These funds had to be released after the House of Lords held that existing powers to forfeit items used in the commission of an offence could not be used "to strip the drug traffickers of the total profits of their unlawful enterprises." The confiscation regime was introduced in England & Wales by the Drug Trafficking Offences Act 1986. A similar regime was introduced in Scotland by the Criminal Justice (Scotland) Act 1987. Although confiscation was initially available only in drug trafficking cases, it was extended by the Criminal Justice Act 1988 and the Criminal Justice (Scotland) Act 1995 to cover non-drug indictable offences and specified summary offences. In Northern Ireland, powers to confiscate both the proceeds of drug trafficking and other crime were introduced in the Criminal Justice (Confiscation) (Northern Ireland) Order 1990. Most of this legislation has been amended since its introduction and, while some has been consolidated (in, for example, the Drug Trafficking Act 1994, the Proceeds of Crime (Scotland) Act 1995 and the Proceeds of Crime (Northern Ireland) Order 1996), much has not.

The 2002 act therefore expanded the existing law on money laundering to cover any crime rather than just drug-related offences. It applies a single set of guidance on money laundering offences and targets the proceeds of any criminal conduct that would be an offence in Britain. Its aim was "To establish the Assets Recovery Agency … to provide for confiscation orders in relation to persons who benefit from criminal activity and for restraint orders to prohibit dealing with property, to allow the recovery of property which is or represents property obtained through unlawful conduct or which is intended to be used in unlawful conduct, to make provision about money laundering."

MAIN POINTS:

1. Created the Assets Recovery Agency. The Serious Crime Act 2007 later transferred the civil recovery and taxation powers of the Assets Recovery Agency to the Serious Organised Crime Agency (SOCA).
2. Introduced the power of civil recovery to allow the government to recover – by a civil action in the High Court – the proceeds of criminal activity. This power has since been extended to the County Courts, facilitating the recovery of sometimes quite modest amounts of money. Very importantly, Civil rules of evidence and procedure apply, meaning that to establish that a crime ("unlawful conduct") has taken place the government needs only prove their case on the balance of probabilities, not on the usual criminal law standard of “beyond reasonable doubt”.
3. Introduced powers for the police and customs to seize cash they believe is crime related and to secure its forfeiture in magistrates court proceedings.
4. Enabled courts to freeze a suspect's assets at the start of a criminal investigation.
5. Allowed the courts to make statutory assumptions in non-drugs cases: assumptions, in certain cases, that all of a defendant's assets represent the proceeds of crime.
6. Simplified requirements for convictions for money laundering by removing the requirement to prove what the crime was: it simply has to be proven that the seized money is the proceeds of crime.
7. Allowed investigators to seek Court Orders requiring financial institutions and banks to identify all accounts of people under investigation and provide transactional information on suspect accounts for a specified period.
8. Placed greater obligation on the financial sector to disclose suspicious transactions.
9. Placed a responsibility on any professional person working in regulated industries to immediately report to the National Criminal Intelligence Service (now called the Serious Organised Crime Agency)_ any suspicion they have that anyone they talk to may have committed a criminal offence.
10. Allowed the  government to decide the form and manner in which such disclosures are made.
11. The Act introduced what amounts to a negligence test, meaning a professional working in a sector regulated by money laundering regulations (such as banks and other financial institutions) can commit a criminal offence for failing to report money laundering if there are "reasonable grounds for knowing or suspecting" that it is taking place.
12. Failure to report can result in a five-year prison term. The act created a defence to these offences in certain circumstances, primarily "authorised disclosure", which creates a "consent regime" where an individual or business reports any suspicious transaction and waits for specific consent before completing the transaction.

Confiscation orders are available following a conviction. The purpose of confiscation proceedings is to recover the financial benefit that the offender has obtained from his criminal conduct. The court calculates the value of that benefit and orders the offender to pay an equivalent sum (or less where a lower sum is available for confiscation). Proceedings are conducted according to the civil standard of proof, i.e. on the balance of probabilities. In certain circumstances the court is empowered to assume that the defendant's assets, and his income and expenditure during the period of six years before proceedings were brought, have been derived from criminal conduct and to calculate the confiscation order accordingly. In England, Wales and Northern Ireland the court is required to make this assumption following a conviction for drug trafficking, unless to do so would give rise to a serious risk of injustice.

These new offences caused outrage in the professional community, with solicitors in particular arguing that the Act would force them to breach confidentiality and act against the interests of their own clients. They suggested that the act was so broadly drafted that professionals, fearful of prosecution, would send law enforcement agencies a flow of useless reports relating to very minor breaches of the law.

Reference and text of the Act at: http://www.opsi.gov.uk/acts/acts2002/ukpga_20020029_en_1

1. Laundering
   
   Under Section 327, it is an offence to conceal, disguise, convert, transfer, or remove criminal property from England, Wales, Scotland or Northern Ireland. Concealing or disguising criminal property is widely defined to include concealing or disguising its nature, source, location, disposition, movement or ownership, or any rights connected with it. 'Criminal property' is defined in Section 340(3) as property which the alleged offender knows (or suspects) constitutes or represents benefit from any criminal conduct. Criminal conduct, in turn, is defined in Section 340(2) as conduct that constitutes an offence in any part of the United Kingdom and/or would constitute an offence in any part of the United Kingdom if it occurred there.
   
   These offences are punishable on conviction by a maximum of 14-years' imprisonment and/or a fine. The section contains defences against committing the offence. For example, the offence is not committed if:
   
   
   1. an authorised disclosure is made under Section 338 as soon as possible after the transaction has taken place
   2. the disclosure is made before the act has taken place and the discloser has obtained the appropriate consent
   3. there was a reasonable excuse for not making such a disclosure.
   
   The Section 327 offence would be committed where a person concealed, disguised, converted, transferred or removed criminal property from the United Kingdom. However, it is not uncommon for the police or other enforcement authorities to take possession of criminal property in the course of their official duties, and to convert or transfer it (for example, into an interest bearing account), pending further investigation. Therefore subsection (2)(c) gives them the necessary exemption from the offence. The maximum penalty for the Section 337 offence, and for the other two principal money laundering offences at Sections 328 and 329, is 14-years' imprisonment, as set out at Section 334.
   
2. Failure to report
   
   The second category of offence related to failing to report knowledge or suspicion of money laundering, and is set out in Sections 330-332 of the Proceeds of Crime Act.
   
   Under Section 330 it is an offence for a person who knows or suspects that another person is engaged in money laundering not to report the fact to the appropriate authority. However, the offence only relates to individuals, such as accountants who are acting in the course of business in the regulated sector. What constitutes the regulated sector is set out in Part 1 of Schedule 9 of the Act.
   
   Any individual who is covered by the section is required to make disclosure to a nominated money laundering reporting officer within their organisation, or directly to SOCA.  These alternative reporting procedures allow those in the regulated sector either to disclose information directly to SOCA, as might be appropriate for a sole practitioner, or to disclose the information to the nominated officer within a larger business. The nominated money laundering reporting officer within the organisation acts as a filter, and subsequently passes on required information to SOCA.
   
   Section 332 states that a nominated officer who receives either a disclosure in relation to one of the principal money laundering offences, or a voluntary disclosure, which causes him to know or suspect that money laundering is taking place, will have committed an offence if that information is not disclosed and reported to SOCA as soon as practicable after the information is received. The offences set out in Sections 330-332 are punishable on conviction by a maximum of five-years' imprisonment and/or a fine.
   
3. Tipping off
   
   The third category of offence concerns 'tipping off' and is contained in Section 333. Specifically, Section 333 outlines how it becomes an offence to make a disclosure likely to prejudice a money laundering investigation already being undertaken, or which may be undertaken by law enforcement authorities. It therefore covers the situation where an accountant informs a client that a report has been submitted to SOCA. This offence is subject to the general defence that the individual concerned did not know or suspect that the disclosure would prejudice an investigation into a money laundering activity. On conviction, the offence is punishable by a maximum of 5 years imprisonment and/or a fine.