The storm over Labour's 'proxy' donations raises concerns about compliance with money laundering rules, says David Campbell


The recent damaging revelations about the concealment of the identity of David Abrahams, a donor to the Labour Party, raise serious questions not only about whether it paid mere lip service to the party funding controls in the Political Parties Elections and Referendums Act 2000 but also about money laundering.



The money laundering legislation, which has placed an enormous burden on solicitors and other professionals (now increased by the new regulations), provides for offences in relation to persons dealing with criminal property and failing to report knowledge or suspicion of such conduct. Could there be a money laundering case against the Labour Party?



It is not in dispute that Mr Abrahams used proxies to make donations to the party with the intention of preserving his anonymity. If the party was aware of this when it accepted donations from Mr Abrahams, an offence may have been committed because the Electoral Commission should have been notified of his identity as a donor.



If the party retained donations knowing or even just suspecting them to have been donated in a disguised way, it would arguably have benefited from criminal conduct. This is because, by its failure to disclose the true position, the party was able to retain money which the donor was unwilling to give in his own name and which would have been liable to forfeiture under the Act if it had been declared as an anonymous gift.



Section 54 of the Act provides that donations of £200 or over must not be accepted if the donor is not a permissible person or the party is unable to ascertain the donor's identity. The Act creates criminal offences relating to donations from impermissible persons, including failure to return donations from anonymous donors.



The commission has the power (and it is likely to exercise it in this case) to forfeit any such donations that are not returned within a 30-day grace period. It is also an offence knowingly to facilitate the making of a donation by an impermissible person.



The problem for Labour comes with the declaration made to the commission in which Mr Abraham's identity as a donor was not revealed. On receiving a donation, the Act requires that all reasonable steps must be taken to verify or ascertain the identity and address of the donor.



The Act does not require any further investigation into the donor's identity, and arguably it would be impractical in most cases to go beyond these requirements. So the questions of who knew what and when are crucial.



If it turns out that party officials were aware that proxies were being used by a donor and they deliberately failed to disclose this fact to the treasurer of the party, the criminal offence of knowingly giving the treasurer false information or withholding information from the treasurer with intent to deceive may have been committed. Similarly, an offence will have been committed if the treasurer has knowingly made a donation report to the commission that contained incorrect information on the identity of donors where the donation is of £5,000 or more.



If knowledge or suspicion of criminal conduct can be proved, a money laundering offence may also have been committed by the party or its officials by retaining the money, and if any money is to be transferred from its accounts there is the intriguing prospect of the party having to ask for consent from the Serious Organised Crime Agency before making any transfer, even if the money is to be forfeited to the Crown.



After 'cash for honours' and now this episode, there is no excuse. All parties must know they have to check where their money is coming from or face serious consequences, just like everyone else who has been subject to the government's gold-plated money laundering regime for some years now.



David Campbell is a solicitor at Corker Binning in London, which acted for two individuals in the 'cash for honours' affair