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LEGISLATION

Proceeds of Crime Act 2002

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 sector who either:

  1. knows or suspects, or
  2. 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 (MLRO or equivalent) and is made in the form and manner (if any) prescribed for the purposes. The nominated officer must report their suspicion to the NCA.

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.

Terrorism Act 2000

The Terrorism Act 2000 (TACT) criminalises fund-raising and other kinds of financial support for terrorism, and gives the courts the power to order forfeiture of any money or other property.

As with POCA, TACT places reporting obligations on individuals and institutions where they know or suspect terrorist acts may be planned or intended. There are provisions for financial institutions to seek a defence where they suspect transactions will finance terrorism.

Under Part 3 of TACT, a reporter can seek a defence to the offences in ss. 15-18 where they make a disclosure to the NCA before becoming involved in a transaction or arrangement, and a defence has been granted by the NCA.

Freedom of Information Act 2000 (FOIA)

The NCA is not a public authority as defined in Schedule 1 of this Act. The NCA will not disclose any information in response to a FOIA request.



SEEKING A DEFENCE / DEADLINES

Seeking a Defence

The Proceeds of Crime Act (POCA) and Terrorism Act (TACT) provide reporters with an opportunity to avail themselves of a defence to carry out a ‘prohibited act’, if a suspicion of money laundering or terrorist financing has been raised prior to the activity being carried out, and if there is criminal or terrorist property in whole or in part involved in that activity.

A ‘prohibited act’ is a money laundering offence under s327-329 of POCA and a terrorist financing offence under s15-18 of TACT.

Please note: the activity does not have to be the physical movement of money; it can be any activity that involves criminal or terrorist property. A defence under POCA or TACT cannot be granted retrospectively and all requests submitted must be for a specified future activity.

To assist reporters in obtaining a decision from the NCA in respect of the activity to be undertaken on behalf of the client/customer, POCA and TACT impose time limits for providing a decision called the ‘notice period’, POCA imposes further time limits when a case is refused, called the ‘moratorium period’, during which time (in the majority of cases) law enforcement must take positive action against the funds. TACT has no moratorium period attached to it, and any refusal is absolute until explicitly informed otherwise by the NCA.

Deadlines

POCA and TACT allow seven working days (‘the notice period’) from the day after receipt for the NCA to respond to the reporter with a decision as to whether or not a defence will be refused. On the eighth day, if there has been no decision provided, the reporter can assume a defence.

Where a defence is granted within the notice period, the reporter may proceed with the activity and will have a defence to any potential money laundering or terrorist financing offences relating to that specified activity only.

Where a defence is refused under POCA, the activity must not proceed for a further 31 calendar days (‘the moratorium period’) which enables positive action to be taken, such as an Account Freezing Order, a cash seizure, restraint or confiscation.

Under s336A POCA, the moratorium period can be extended on application to the Court after the initial 31-day period, for six further 31-day periods (in single applications) up to a maximum of 186 days. The Court may decide to extend for less than 31 days at a time, which means there may be more than six applications 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 and TACT defence requests are kept under review throughout their lifespan by the NCA, or on request by reporters, the subject, or their legal representatives. Although TACT refusals are absolute and require a reporter to cease the activity from the day of refusal, the NCA do review these cases regularly to ensure proportionality of the decision.

Information required

To enable law enforcement to make full use of your SAR and make an informed decision as to whether or not consent should be granted, there must be some identifying information included in the report, as below. An exception is if suspicion has been aroused due to an aborted attempt by the client or customer to commence business, and full details have not been obtained.

  • A Defence Against Money Laundering / A Defence Against Terrorist Financing required?
- enables consent requests to be identified quickly
  • Subject name
- including Date of Birth
  • Subject address and/or purchasing address
- including postcodes to enable geographical identification
  • Subject account number / policy reference number
- if appropriate
  • Recipient name & address
- if appropriate
  • Recipient a/c number/reference number
- if appropriate
  • Transaction amount & date
- if appropriate
  • Transaction type
- if appropriate
  • Reason for suspicion
- 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.


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