CPS' updated money laundering guidance - it appears there can be smoke without fire

The CPS recently issued updated guidance on the prosecution of 'failure to disclose' offences under section 330 of the Proceeds of Crime Act 2002 (POCA).

From 2 June 2021 onwards a person in the regulated sector could be charged with the offence of failure to disclose regardless of whether money laundering or plans to launder money can be proven or whether money laundering has even taken place. The legislation does not explicitly state that evidence of money laundering is required for an offence under section 330 to be committed and prior to this update, the CPS did not charge under section 330 where there was insufficient evidence to establish that money laundering was planned or undertaken.

A failure to disclose under section 330 of POCA is committed where a person in the regulated sector:

1. Knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in money laundering;
2. The information which this knowledge or suspicion is based or gives reasonable grounds for such knowledge or suspicion came to him in the course of business in the regulated sector;
3. He can identify the person suspected of money laundering or the whereabouts of any laundered property or he believes or it is reasonable to believe that the information he has will or may assist in identifying the person suspected of money laundering or the whereabout of any laundered property; and
4. Fails to disclose the information to a nominated officer or the NCA as soon as is practicable.

Previously during a parliamentary debate in 2002, the former Attorney-General Lord Goldsmith QC had stated that “the offence in Clause 330 of failing to report to the authorities is permitted only if the prosecution proves that money laundering was planned or undertaken”. It would appear as though the CPS have disregarded these comments.

The offence places an obligation on those in the regulated sector to file a suspicious activity report (SAR) with the NCA should they know or suspect that money laundering is taking place or where there are reasonable grounds for such knowledge or suspicion. The CPS' change of stance reiterates how vigilance by those in the sector and the making of such reports is vital and highlights the view that the regulated sector can make a significant difference in the battle against money laundering in the UK.

In removing the evidential requirement to show that money laundering was planned or had been undertaken, the CPS has provided in its guidance that "the prosecution will have to establish the suspect suspected or had reasonable grounds for suspecting money laundering". There have been many attempts to define suspicion and in a leading case (R v Da Silva [2006] EWCA Crim 1654) it was held that suspicion must be more than “a vague feeling of unease” and “a possibility, which is more than fanciful, that the relevant facts exist". Despite this there remains some confusion within the regulated sectors about what constitutes suspicion in a practical sense, and there are concerns about the lack of clarity around this.  The Law Commission, in its 2019 Anti- Money Laundering Report made a recommendation that statutory guidance should be produced to explain what might constitute 'suspicion' but as it stands such guidance does not exist.

In March 2020 the CPS stated that there were only 58 prosecution case files relating to section 330 POCA between April 2005 and September 2019 – only 14 cases resulted in convictions. The updated guidance suggests that the CPS are planning a much more aggressive stance against those who fail to report any signs which incite knowledge or suspicion that money laundering is taking place or which give reasonable grounds for such knowledge or suspicion.

The NCA's most recent reports indicated that a record number of SARs had been submitted during 2019/2020 totalling in excess of 570,000 together with an 81% increase in requests for a defence. With the CPS removing a major hurdle in prosecuting under section 330, there is potential for an already inundated NCA to be hit with a major increase in reports, many of which are likely to be of a poor standard following defensive reporting.

This article was co-written by Kyle Phillips, Partner and Layla Dribble, Trainee Solicitor.