On Tuesday 2 June 2021, the Crown Prosecution Service (CPS) updated guidance on prosecuting ‘failure to disclose’ cases under section 330 of the Proceeds of Crime Act 2002 (POCA). This legislation reform now makes it possible to prosecute a section 330 offence, even if suspected money laundering activities have not yet been determined. The intention of such an update is to encourage professionals to come forward and report any suspicious activity that could be linked to money laundering to the authorities.
The CPS also believes this will create better law enforcement for prosecutors. If money laundering is suspected based on reasonable grounds and is not reported, an offence is therefore committed in the failure to report it, even if it then transpires that the crime did not occur.
Why have the updates occurred - and what prompted them?
Previously, the CPS only prosecuted individuals for failure to disclose where evidence proved that money laundering had certainly taken place, and that the lack of disclosure of information helped in the success of the laundering activity. The updated guidance means that potentially far more prosecutions can be made for withholding important information on suspected money laundering activities.
Failure to disclose information on suspected or determined money laundering activity carries a five-year prison sentence, and the offence is committed when an individual:
- suspects or knows that another person is engaged in money laundering,
- comes to know this information in a regulated sector, and
- the person believes or reasonably believes that the information will assist in identifying another person who is engaged in money laundering or the whereabouts of the laundered money.
The legislation highlights that those in professional financial sectors in high profile positions must be held accountable, as they have a higher level of responsibility when engaging in financial transactions compared to others in non-regulated businesses. People working in regulated sectors must exercise a greater level of diligence by identifying and reporting any red flags that may cause suspicion.
The new guidance enables failure to disclose to be successfully charged where the offence has taken place on or after 2 June 2021.
What are the three stages of money laundering?
Money laundering generally occurs in three stages known as placement, layering and integration. Every stage has its own set of complexities because of its criminal nature. Often, the following three stages will overlap one another.
Placement
This is the first stage of the money laundering process where 'dirty' money is placed into financial institutions (banks). The cash obtained is usually illegally acquired through corruption, where it is then 'cleaned' or 'washed' by being placed into legitimate financial systems such as offshore banking accounts.
Layering
This is the more complex second step of money laundering, in which various transactions are used to move the money around, usually implementing offshore techniques. Criminals make it very difficult for authorities and banks to detect money laundering by keeping fraudulent accounts/books and moving money around in multiple transactions, known as 'layering', so that the original source of income is masked.
Integration
Once it has been 'layered', the money is placed back into the economy via transactions such as the purchase of a property. Once the money has been moved around and layered enough, it is placed back into the financial system and used to make 'legal' purchases.
This is done with great care so that there is a perceived plausible source for the money to come from. At this point, it is very difficult to determine whether a person has obtained their wealth through legal or illegal channels, and is even more challenging to obtain evidence of money laundering due to a lack of documentation or well-kept, fraudulent accounts.
Why is money laundering difficult to prove?
In many money laundering cases, the illegally obtained money has more than one illegal source that has been masked in a highly sophisticated manner, making it difficult to determine whether the funds were obtained illegally or legally. Prosecutors need to demonstrate that the accused knew the money they obtained consisted of illegal funds. Layering through financial transactions such as sales, loans, withdrawals and exchanges of currency to 'cleanse' the illegal money also needs to be proven.
The prosecution must prove beyond all reasonable doubt that the defendant had the intention of laundering funds to make transactions in financial institutions look like normal business activities, when in fact they were being placed and layered for illegal purposes.
Contact our Professional Financial Crime Solicitors in Central London Today
If you have been accused of money laundering or withholding information in relation to money laundering, it is essential that you instruct specialist financial crime solicitors who can assist you in building your case. Our expert lawyers use their legal knowledge and experience to advise clients on the best way to proceed and their defence options, giving peace of mind during difficult and stressful times.
At Lewis Nedas Law, our team of financial crime lawyers have award-winning experience in defending money laundering cases, and have advised clients with even the most highly complex and multi-faceted scenarios. To speak with a member of our team, please contact us on 020 7387 2032 or complete our online enquiry form.
