The Proceeds of Crime Act 2002 (POCA) criminalises all forms of money laundering and creates offences concerning failure to report a suspicion of money laundering. It specifies what constitutes criminal property and enables the recovery of criminal assets through civil means. The Act sets out the legal requirement to make a disclosure or Suspicious Activity Report (SAR) and details the requirement to obtain a defence (previously known as consent) to carry out the ‘prohibited act’.
The three main money laundering offences (or prohibited acts) under Part 7 of POCA are:
- concealing, disguising, converting, transferring, or removing criminal property (s327)
- arranging or facilitating criminal property (s328)
- acquiring, using or possessing criminal property (s329)
A conviction for any of the three money laundering offences can incur a custodial sentence of up to fourteen years and an unlimited fine.
POCA requires any individual or company in the regulated sectorwho either:
- knows or suspects, or
- has reasonable grounds to know or suspect, that another person may be engaged in money laundering, or that any or all of the property they are dealing with may be criminal property,
to report their suspicion of money laundering to a constable, a customs officer or nominated officer (MLROor equivalent) and is made in the form and manner (if any) prescribed for the purposes. The nominated officer must report their suspicion to theNCA.
The UKFIU acts as the ‘constable’ (as defined in Section 2B of POCA) and is the central receiving point for SARs within the UK. The legislation protects firms and individuals from legal action resulting from their breach of customer confidentiality.
For those firms or individuals outside the regulated sector, the legislation only requires the nominated officer to make the disclosure if they know or suspect that another is engaged in money laundering or criminal property; the ‘reasonable grounds’ condition does not apply.
A conviction for failing to disclose suspicion of criminal property or money laundering can incur a custodial sentence of up to five years and an unlimited fine.
The Terrorism Act 2000 (TACT) criminalises fund-raising and other kinds of financial supportfor terrorism, and gives the courts the power to order forfeiture of any moneyor other property.
As with POCA,TACT places reporting obligations on individuals and institutions where theyknow or suspect terrorist acts may be planned or intended. There are provisionsfor financial institutions to seek a defence where they suspect transactionswill finance terrorism.
Under Part 3 of TACT, a reporter canseek a defence to the offences in ss. 15-18 where they make a disclosure to theNCA before becoming involved in a transaction or arrangement, and a defence hasbeen granted by the NCA.
The NCA is not a public authority asdefined in Schedule 1 of this Act. The NCA will not disclose any information inresponse to a FOIA request.
SEEKING A DEFENCE / DEADLINES
The Proceedsof Crime Act (POCA) and Terrorism Act (TACT) provide reporters with anopportunity to avail themselves of a defence to carry out a ‘prohibited act’,if a suspicion of money laundering or terrorist financing has been raised priorto the activity being carried out, and if there is criminal or terroristproperty in whole or in part involved in that activity.
A ‘prohibited act’ is a money laundering offence under s327-329 of POCA and a terroristfinancing offence under s15-18 of TACT.
Please note: the activity does not have to be the physical movement of money; it canbe any activity that involves criminal or terrorist property. A defenceunder POCA or TACT cannot be granted retrospectively and all requests submittedmust be for a specified future activity.
To assistreporters in obtaining a decision from the NCA in respect of the activity to beundertaken on behalf of the client/customer, POCA and TACT impose time limitsfor providing a decision called the ‘notice period’, POCA imposes further timelimits when a case is refused, called the ‘moratorium period’, during whichtime (in the majority of cases) law enforcement must take positive actionagainst the funds. TACT has no moratorium period attached to it, and anyrefusal is absolute until explicitly informed otherwise by the NCA.
POCA and TACTallow seven working days (‘the notice period’) from the day after receiptfor the NCA to respond to the reporter with a decision as to whether or not adefence will be refused. On the eighth day, if there has been no decisionprovided, the reporter can assume a defence.
Where adefence is granted within the notice period, the reporter may proceedwith the activity and will have a defence to any potential money laundering orterrorist financing offences relating to that specified activity only.
Where adefence is refused under POCA, the activity must not proceed for afurther 31 calendar days (‘the moratorium period’) which enablespositive action to be taken, such as an Account Freezing Order, a cash seizure,restraint or confiscation.
Under s336APOCA, the moratorium period can be extended on application to the Court afterthe initial 31-day period, for six further 31-day periods (in singleapplications) up to a maximum of 186 days. The Court may decide to extend forless than 31 days at a time, which means there may be more than sixapplications in total, but it cannot extend for longer on each application. Note:tipping off provisions are not applied during the extended moratorium periods.
All POCA andTACT defence requests are kept under review throughout their lifespan by theNCA, or on request by reporters, the subject, or their legal representatives.Although TACT refusals are absolute and require a reporter to cease theactivity from the day of refusal, the NCA do review these cases regularly toensure proportionality of the decision.
Information required
To enable law enforcement to make full use of your SAR and make aninformed decision as to whether or not consent should be granted, there must besome identifying information included in the report, as below. An exception isif suspicion has been aroused due to an aborted attempt by the client or customerto commence business, and full details have not been obtained.
| - enables consent requests to be identified quickly |
| - including Date of Birth |
| - including postcodes to enable geographical identification |
| - if appropriate |
| - if appropriate |
| - if appropriate |
| - if appropriate |
| - if appropriate |
| - this is extremely important and should include a basic outline of the relationship (including explanation of any technical terms) and full reasons for your suspicion, not just a list of actions taken by your company in respect of the client. |
Additional data, which is useful but not mandatory, can include:
- Details of identification documents (passport, driving licence)
- Details of previous transactions
- Company details
- Further information about a/c relationship
- Details of secondary individuals associated with the transaction
Please note: the more identification details included in your report, the better law enforcement will be able to match the subject to existing intelligence.
