Money laundering schemes can be very simple or highly sophisticated.
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Money Laundering is the process by which crime is made profitable by the cleaning of criminal proceeds to disguise where they came from. It is the attempt to distance a person from their crimes by finding safe havens for profits where they can avoid confiscation orders, and where those proceeds can be made to appear legitimate.
Money laundering schemes can be very simple or highly sophisticated. Most sophisticated money laundering schemes involve three stages:
Placement - the process of getting criminal money into the financial system;
Layering - the process of moving money in the financial system through complex webs of transactions, often via offshore companies;
Integration - the process by which criminal money ultimately becomes absorbed into the economy, such as through investment in real estate.
Prosecutions for money laundering can involve any of these stages in the money laundering process.
A mere allegation of money laundering can be enough to result in arrest or a voluntary interview. This can lead to restrictive bail conditions, a charge and a court case.
Police investigations and Court hearings can have a dramatic impact on day to day living. A caution or conviction can affect employment as it would remain on the police national computer and may be disclosed on a DBS check.
Loopholes to consider
Below I have outlined this area of law and defences.
Loopholes are legitimate lines of defence that take into account all the small areas of law.
Loophole defences that may be appropriate to money laundering may include:
Can you properly be linked to the money laundering process?
Can a conspiracy or attempt to commit such an offence be proven?
Can an element of counselling, aiding or abetting or procuring be proven?
Can it be proven that the money is from criminal property?
Can it be shown that you made an authorised disclosure or intended to do so?
Can you demonstrate that you acquired, used or had possession of the property for adequate consideration?
Can it be proven that you had knowledge or suspicion in regard to tipping off?
Do you have witnesses to help prove your account?
Do you have other financial or documentary evidence to help prove your account?
General principles of money laundering offences
Money laundering is defined as an act which constitutes an offence under S.327, 328 and 329 or a conspiracy or attempt to commit such an offence. Money laundering includes counselling, aiding or abetting or procuring.
Under the Proceeds of Crime Act, the Crown has to prove that the laundered proceeds are "criminal property", as defined in S.340 of the Proceeds of Crime Act: that is to say that the property constitutes a person's benefit from criminal conduct.
"Criminal conduct" is all conduct which constitutes an offence in any part of the United Kingdom (which means that an "all crimes" approach is adopted in respect of predicate crimes committed in the UK).
Offences which were committed abroad are relevant predicate crimes if laundering acts are committed within our jurisdiction where the predicate offence committed abroad (from which proceeds were generated) would also constitute an offence in any part of the United Kingdom if it occurred here.
It is immaterial whether the criminal conduct occurred prior to the Act becoming law so long as the laundering act takes place post commencement.
Proving that property is "criminal property"
To prove that property is "criminal property" (i.e. the proceeds of crime) the prosecutor must show the property:
Constitutes benefit from criminal conduct or that it represents such a benefit (in whole or part and whether directly or indirectly) and;
The alleged offender knows or suspects that it constitutes or represents such a benefit [section 340(3)].
The property which may comprise the benefit from criminal conduct is widely defined (see S.340  and ) to include:
All forms of property or real estate;
Things in action and other intangible or incorporeal property.
Property is obtained by a person if he obtains an interest in it.
Because of the definition of criminal property, there is no distinction between the proceeds of the defendant's own crimes and of crimes committed by others (see S.340 ). Thus laundering one's own proceeds is just as much money laundering, as similar activities performed by someone else, notably professional launderers on behalf of the authors of the predicate or underlying offences.
Own proceeds laundering applies to all 3 principal money laundering offences.
Proving that proceeds are the benefit of "criminal conduct" will usually be done by circumstantial evidence.
Where money laundering offences are proceeded with on the same indictment as the underlying crimes, the underlying criminal conduct will be proved as part of the proceedings to the requisite standard. Where the money laundering proceedings are "standalone", there are two ways of proving criminal property, firstly by proving the type of offending that gave rise to the criminal property and secondly by relying upon circumstantial evidence.
It is not necessary in "stand alone" money laundering prosecutions to wait for a conviction in relation to the "criminal conduct" (i.e. the underlying or predicate offences giving rise to the criminal property).
Prosecutors are not required to prove that the property in question is the benefit of a particular or a specific act of criminal conduct. The prosecution need to be in a position, as a minimum, to be able to produce sufficient circumstantial evidence or other evidence from which inferences can be drawn to the required criminal standard that the property in question has a criminal origin.
Typically evidence of the criminal origin of proceeds may be provided in money laundering proceedings by:
Circumstantial evidence and/or other evidence;
Forensic evidence (e.g. contamination of cash with drugs) from which inferences can be drawn that money came from drug trafficking;
Evidence of complex audit trails, from which an accountancy expert may be able to conclude that the complexity of the transactions indicate that the property was the proceeds of crime;
Evidence of the unlikelihood of the property being of legitimate origin. Where the prosecution proves the defendant has no legitimate explanation for possessing the property in question a jury may be willing to draw an inference that it is proceeds of crime;
Money laundering often involves attempts to launder proceeds through a cash intensive business. Where the cash flows appear too large or the profit margins too high this may be capable of giving rise to expert evidence that the business will usually give rise to a particular level of profit and the profits are clearly excessive which together with other available evidence can be sufficient to prove the underlying criminality.
Section 327 offence - Concealing criminal property etc.
The actus reus of the offence under S.327 is:
concealing criminal property;
disguising criminal property;
converting criminal property;
transferring criminal property;
removing criminal property from England and Wales.
It is an either way offence. A person convicted of an offence under this section is liable to imprisonment for up to 14 years or a fine or both.
Concealing or disguising criminal property is defined as concealing or disguising its nature, source, location, disposition, movement or ownership or any rights with respect to it [POCA section 327(3)].
As noted above the offender has to "know or suspect" that the criminal property represents a benefit from criminal conduct (by virtue of section 340 POCA). The prosecution can also rely on circumstantial evidence from which a jury can draw inferences that the defendant had the necessary knowledge or suspicion.
It is necessary therefore to prove:
the act of concealing, disguising etc;
in relation to property;
which was a benefit from criminal conduct; and
that the defendant knew or suspected that the property represented a benefit from criminal conduct.
Defences to section 327 offence
It should be noted that an offence is not committed if a person makes an "authorised disclosure" under S.338 to a constable, a customs officer, or a nominated officer. This will absolve disclosures, such as suspicious transaction reports to the police and to designated compliance officers within companies made within the requisite timescales in S.338. The defence also applies to those who intended to make such a disclosure but had a reasonable excuse for not doing so.
Section 328 offence - Arrangements
This offence potentially catches a large range of involvement in money laundering offences usually at the layering and integration stages.
This is the offence which will often be used against those who launder on behalf of others. It can catch persons who work in financial or credit institutions, accountants etc, who in the course of their work facilitate money laundering by or on behalf of other persons.
The language of the physical acts is deliberately wide.
Thus the prosecution has to prove that:
the defendant enters into or becomes concerned in an arrangement;
which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control;
of criminal property;
by or on behalf of another person.
The offence is either way and carries the same maximum penalty as offences under S.327.
The criminal origin of proceeds can be proved in the same ways as set out at Proving that proceeds are the benefit from criminal conduct (the predicate offence) above.
Defences to section 328 offence
The same defences against committing the offence as are included in S.327 are included in S.328.
Section 329 offence - Acquisition, use and possession
A S.329 offence can be committed if a defendant:
uses criminal property;
or (passively) possesses criminal property.
Similarly, it is an either way offence attracting the same maximum penalties as offences under sections 327 and 328.
The prosecution has to prove:
acquisition use or possession;
which was the benefit of criminal conduct;
and that the defendant had the necessary knowledge or suspicion that the property represented a benefit from criminal conduct.
Possession means having physical custody of criminal property.
Defences to section 329 offence
These are set out in section 329(2).
The same defences as applying to offences under section 327 and 328 are provided for by section 329 (2) (a) and (b).
However, additionally a person does not commit an offence under this section if he acquired, used or had possession of the property for "adequate consideration." It is available to cover those cases where the funds or property have been acquired by a purchase for a proper market price or similar exchange and to cater for any injustice which might otherwise arise: for example, in the case of tradesmen who are paid for ordinary consumable goods and services in money that comes from crime.
This defence will also apply where professional advisors (such as solicitors or accountants) receive money for or on account of costs (whether from the client or from another person on the client's behalf). This defence would not be available to a professional where the value of the work carried out or intended to be carried out on behalf of the client was significantly less than the money received for or on account of costs.
If a person pays proper consideration but it can be shown that he knows or suspects that such payment may help another to carry out criminal conduct he is not treated as having paid proper consideration (Section 328 (3)(c).
Failing to disclose, tipping off etc.
Some countries underpin their preventive anti-money laundering regimes with administrative sanctions only. The UK has chosen to underpin the preventive regime with criminal sanctions to emphasise the importance of proper systems of reporting and control. The FSA now has strong powers to prosecute criminally breaches of the money laundering regulations, though the general criminal prosecuting authorities (CPS, SFO, Customs and Excise etc) are responsible for offences under Sections 330-333.
Section 331 Failure to disclose offence: nominated officers in the regulated sector
Section 331 creates a separate offence of failure to disclose in respect of nominated officers (i.e. compliance officers) who receive disclosures based under S.330 and who do not pass the information to the National Criminal Intelligence Service (NCIS) as the disclosure receiving agency when they:
know or suspect; or
have reasonable grounds for knowing or suspecting that another person is engaged in money laundering.
The offence is triable either way with the same maximum penalty on indictment as an offence under section 330 (up to 5 years imprisonment).
Section 332 Failure to disclose offence: other nominated officers
Section 332 creates a further offence of failure to disclose by nominated officers outside the regulated sector.
The offence is also either way and carries the same maximum penalty on indictment as an offence under section 330.
It cannot be committed by negligence. The mental element of this offence is knowledge or suspicion.
Section 333 Tipping off offence
Section 333 creates the offence of making a disclosure likely to prejudice a money laundering investigation being undertaken by law enforcement authorities.
This is an either way offence with a maximum penalty on indictment of 5 years imprisonment or a fine or both.
It is a defence to a charge under S.333 that a person;
did not know or suspect that the disclosure was likely to prejudice an investigation;
that the disclosure was made in connection with a function relating to enforcement;
if the information is passed on in circumstances that amount to legal privilege, but not if the information is passed on to further a criminal enterprise.
Handling stolen goods
It is important to note that money laundering offences are not confined to cases involving money. Under the Proceeds of Crime Act, the prosecution must prove that the laundered proceeds are "criminal property", as defined in section 340: that is to say that the property constitutes a person's benefit from criminal conduct.
Therefore, there are cases where the prosecution could charge money laundering based on possession or an offence of handling stolen goods.
Prosecutors may consider charging a money laundering offence where either a defendant has possessed criminal proceeds:
in large amounts; or
in lesser amounts, but repeatedly and where assets are laundered for profit.