The UK’s anti money laundering and counter terrorist financing framework consists of primary and secondary legislation and industry guidance, designed to support Her Majesty’s Treasury, in accordance with Financial Action Task Force (FATF) international standards and European Union (EU) Directives.
Primary legislation consists of the Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000 (TACT). Secondary legislation is the Money Laundering Regulations (MLRs) which supports the primary legislative objectives.
Proceeds of Crime Act 2002
POCA consolidated, updated and reformed previous UK legislation relating to money laundering and criminal property. POCA criminalises all forms of money laundering and creates offences concerning failure to report suspicion of money laundering.
The legislation covers all criminal property, where the alleged offender knows or suspects the property constitutes or represents benefit from any criminal conduct. Property is all property situated anywhere in the world e.g.
- all real, personal, heritable or 'moveable property'
- intangible and incorporeal property
- property obtained by a person who has an interest in it
- things in action and other intangible or incorporeal property
Money laundering offences under POCA
The three principal money laundering offences are contained in sections 327, 328 and 329 of the Act. These offences are punishable by a maximum of 14 years imprisonment and/or a fine.
An offence is committed if a person conceals, disguises, converts, transfers or removes from the jurisdiction property which is, or represents, the proceeds of crime which the person knows or suspects represents the proceeds of crime.
An offence is committed when a person enters into or becomes concerned in an arrangement which he knows or suspects will facilitate another person to acquire, retain, use or control criminal property and the person knows or suspects that the property is criminal property.
An offence is committed when a person acquires, uses or has possession of property which he knows or suspects represents the proceeds of crime.
In addition, Sections 330 and 331 create an obligation on those persons in the regulated sector to report their suspicion or knowledge of another person’s money laundering to the NCA. Failure to report is a criminal offence.
Reporting obligations under POCA
The reporting obligations in POCA are applicable to anyone in the UK that may interact with an individual or business, whereby they may commit a money laundering offence.
Those working in the ‘regulated sector’ commit an offence if they do not submit a SAR to the NCA if they know or suspect, or have reasonable grounds to know or suspect, that another individual or person is engaged in money laundering; and the information came to them in the course of their business in the regulated sector.
It is an offence for an individual working in the regulated sector not to report to their ‘Nominated Officer’ or the NCA if the conditions for reporting have been met. POCA also makes it an offence for a nominated officer not to disclose to the NCA if the conditions for reporting have been met.
Those reporting to the NCA need to be aware of the “tipping off provisions” (Section 333A-E) which make it an offence, having submitted a Suspicious Activity Report (SAR), to reveal information which is likely to prejudice any resulting law enforcement investigation.
Defence against money laundering under POCA
POCA allows reporters a defence against a money laundering offence by seeking the consent of the NCA to undertake an activity which the reporter believes may constitute one of the three money laundering offences (i.e. a “prohibited act”). See ‘Seeking consent for financial transactions’ for further information.
Money Laundering Regulations
The Proceeds of Crime Act 2002 (POCA) and Terrorism Act 2000 (TACT) are supplemented by secondary legislation in the form of Money Laundering Regulations (MLRs) which implement European Union (EU) Money Laundering Directives into UK law. The MLRs which came into force in December 2007 implement the Third EU Money Laundering Directive.
The five key obligations on the regulated sector include:
- Providing staff training
- Customer due diligence, which involves knowing the customer/business (including client
- Record keeping
- Having systems and controls in place to prevent money laundering/terrorist financing,
which include the internal reporting of suspicions or knowledge of money laundering
- Identifying a ‘Nominated Officer’,, to oversee the submitting of SARs to the NCA and the
implementation of the MLRs and appropriate guidance
Terrorism Act 2000 (TACT)
It is a criminal offence in the UK to finance or facilitate the financing of terrorism, and there are legal obligations to submit SARs as set out in Part III of TACT.
There is no minimum limit for the value of activity being reported, nor is there a requirement for the report to contain only transaction data – thus enabling the widest possible scope for reporting; however the report should contain details of the suspicious activity. Although there are differences, the regime operates in parallel to that of POCA, including consent and ‘Tipping Off’ provisions.
There are offences for failing to make a disclosure under Sections 19(2) and 21 of TACT.
Financial sanctions are used by the international community to prevent and suppress the financing of terrorists and terrorist acts. Her Majesty’s Treasury is responsible for the implementation and administration of international financial sanctions in the UK, for domestic designation, under the Terrorism Order, and for licensing exemptions to financial sanctions.
When deciding whether an offence has been committed, the court must consider whether the defendant followed any relevant guidance issued by an appropriate body and approved by Her Majesty’s Treasury.
The most significant contribution to guidance is the Joint Money Laundering Steering Group (JMLSG) Guidance Notes for the UK Financial Sector which has been approved by HM Treasury and the Money Laundering Advisory Committee (MLAC) for the regulated sector.