Legal Basis for Reporting
Money laundering legislation
Proceeds of Crime Act 2002 (POCA)
The Proceeds of Crime Act (POCA) (48.82 kB PDF) came into force on 24th February 2003 and is split into a number of different parts. Part VII deals with money laundering. The Act expanded, reformed and consolidated the UK’s criminal money laundering offences.
Most of these offences apply to all individuals and businesses in the UK. However, some apply only to those doing business in the “regulated sector”, as defined in Schedule 9 of the Act and amended by Statutory Instrument No. 3287, POCA 2002 ‘Business in the Regulated Sector and supervisory authorities order 2007’ (64.58 kB PDF)
Part 1 of this Schedule sets out the types of activity that would bring a business within the regulated sector.
Money laundering offences under POCA
The three principal money laundering offences are contained in sections 327, 328 and 329 of the Act.
These offences, which are triable either in a Magistrates Court or in the Crown Court, are punishable on conviction or indictment in the Crown Court by a maximum of 14 years imprisonment and/or a fine:
Section 327
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.
Section 328
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.
Section 329
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 SOCA. Failure to report is a criminal offence.
If your business is not within the regulated sector then the provisions of Sections 330 and 331 of the Act will not apply to you. All other criminal offences contained within Part VII of the Act apply to those inside and outside the regulated sector
Defences/Obtaining consent
All three of the principal money laundering offences contain certain defences. For example, it is a defence to have made an authorised disclosure to, and obtain appropriate consent from, the authorities before undertaking the act which would constitute the offence (see Sections 335 and 338 of the Act).
Money Laundering Regulations 2003
The Money Laundering Regulations 2003 (105.51 kB PDF) came into force on 1 March 2004, and in general terms, imposed requirements on those conducting “relevant business” to have systems in place to obtain evidence of the identity of their clients, keep records, train staff, and make internal reports.
A definition of “relevant business” is provided in Regulation 2(2) of these Regulations.
Money Laundering Regulations 2007
The Money Laundering Regulations 2007 (205.86 kB PDF) came into force on 15th December 2007 and replaced the 2003 Regulations.
They extend the number of specific business sectors to which the Money Laundering Regulations apply, which are identified in Regulation 3(1).
All of these business sectors must be supervised. Regulation 23 provides details of the relevant supervisory authorities.
The extent to which “relevant business” has been captured by anti-money laundering legislation has thereby been greatly expanded.
These Regulations again require those conducting “relevant business” to have systems in place to obtain evidence of the identity of their clients, keep records, train staff, and make internal reports.
Terrorist Finance
It is a criminal offence in the UK to finance or to facilitate the financing of terrorism.
The key pieces of legislation for terrorist finance are:
- The Terrorism Act 2002 (TACT)
- The Anti-Terrorism Crime and Security Act 2002 (ATCS)
- The Prevention of Terrorism Act 2005
- The Terrorism Act 2006
- The Counter Terrorism Act 2008
- Various orders giving effect to United Nations measures
Full details of the legislation are available at Her Majesty’s Treasury website. Just follow the link to Financial Sanctions.
Section 18 of TACT also creates an offence of money laundering in relation to terrorist financing. TACT defines “terrorist property” as “money or other property” (Section13 [1]). “Property” is defined as “property wherever situated and whether real or personal, heritable or moveable, and things in action and other intangible property” (Section 121). These offences apply to all individuals and businesses in the UK, although some apply only to those doing business in the regulated sector.
The obligations placed on the Regulated Sector by the Money Laundering Regulations 2007 apply to terrorist financing and TACT contains a mandatory reporting regime and consent provisions, together with tipping off offences, all similar to the provisions in the Proceeds of Crime Act 2002.
TACT SARs are often filed after a transaction has occurred, but where a financial institution has particular concerns about a transaction or arrangement, they should seek prior consent before becoming involved in the transaction or an arrangement. Under section 21ZA of TACT, they may only proceed with that transaction or arrangement provided either (a) SOCA gives consent; or (b) notifies the financial institution within seven working days that consent is refused. Should a financial institution continue with the transaction or arrangement following a refusal by SOCA, they may face criminal liability.
The ATCS is designed to cut off terrorist funding and to ensure government departments and agencies can collect and share information for countering the threat of terrorism. The freezing powers in the Act are available wherever funds could be used to finance terrorism. There is a power to seize terrorist cash anywhere in the UK, and the power to freeze assets at the start of an investigation (rather than when the person is about to be charged), reducing the risk that funds will be used or moved before they can be frozen.
ATCS allows the Treasury to freeze the assets of overseas governments or residents who have taken, or are likely to take, action to the detriment of the UK’s economy, or action constituting a threat to the life or property of a national or resident of the UK. The Act contains information sharing gateways to ensure public authorities can disclose information for the purposes of a criminal investigation or proceedings.
Financial Sanctions
Financial Sanctions are used by the international community to prevent and suppress the financing of terrorists and terrorist acts. HM Treasury is responsible for the implementation and administration of international financial sanctions in the UK, for domestic designation, principally under the Terrorism Order, and for licensing exemptions to financial sanctions.
Full details are available at www.hm-treasury.gov.uk. Follow the link to Financial Sanctions.
Guidelines for Counter Proliferation Financing (CPF) Reporting
This pertains to United Nations Security Council Resolution 1803, which was adopted on 3rd March 2008 due to serious international concerns surrounding the Nuclear Development Programme in Iran.
The Reporting Community is directed via European Council Regulation 1110/2008 to exercise vigilance over the activities of all banks, credit and financial institutions domiciled in Iran and those of their branches and subsidiaries located abroad.
A list of all Iranian credit and financial institutions to which this Regulation applies can be found on Her Majesty’s Treasury website where guidance on the implementation of the Regulation is also available.
Note: SOCA strongly recommends reporters access this information and refer to the material for detailed instructions on how Counter Proliferation Financing (CPF) reports should be submitted.
For further details, please refer to SOCA Guidelines for Counter Proliferation Financing (CPF) Reporting (113.56 kB PDF).