Criminal law

Money laundering

Sections 327-333 of the Proceeds of Crime Act 2002 enact a series of serious criminal offences relating to money laundering.

These are more wide ranging than has been the case in the past.

This is because money laundering refers to any 'criminal property' that is the product of any criminal behaviour (and not just drug trafficking, terrorism or serious fraud), knowing or suspecting that that is the case.

Therefore, the product of any crime is caught by the law and this will extend not only to theft and burglaries but also to fraud and tax evasion.

Section 327 creates an offence of concealing, disguising, transferring, or removing from England and Wales such 'criminal property'.

This will include transferring money in or out of a solicitors office, or client account.

This raises particular issues for firms with criminal law teams, as their knowledge of their clients is always bound to raise questions as to what they suspected was the source of the money.

The only defence is to make a disclosure to the National Criminal Intelligence Service (NCIS).

Under section 328, it is an offence to enter into or become concerned in any arrangement which the defendant knows or suspects facilitates the acquisition, retention, use or control of 'criminal property' by or on behalf of another.

This could include drafting a family settlement or a conveyance.

Once more the only defence is disclosure to NCIS.

Under section 329, it is an offence to acquire, use or have possession of 'criminal property'.

In this case not only does disclosure to NCIS amount to a defence but there will also be a defence if adequate consideration is given; thus where solicitors agree an appropriate fixed fee with a client there would appear to be no difficulty under this provision.

However, the receipt of monies on account of costs raises greater difficulty.

Matters will become more complex when the Second European Money Laundering Directive comes into force for all businesses and thus for all solicitors businesses.

At present, only those offering financial advice are caught.

In due course (probably in September 2003), it will be an offence if a person knows or suspects, or has reasonable grounds for knowing or suspecting, that another is engaged in money laundering, and does not then disclose that information as soon as practicable to NCIS.

However, a professional legal adviser must discount information which comes to him or her in privileged circumstances.

Nonetheless, it is important to remember the very limited nature of professional privilege.

It only applies to information received so that advice may be given about it and the advice itself.

In R (Miller Gardner) v Minshull Street Crown Court (Administrative court, 20 December 2002), it was confirmed that a client's mobile telephone number was not covered by privilege, and nor were the firm's diaries.

In order to comply with the directive, firms will be required to set up a reporting structure and all staff must be trained in its use.

Again, this all has a particular significance for criminal lawyers who may have reason to know that a client has no lawful source for a sum of money - however small.

The criminality would exist even if there was reason to believe that another, such as a bank, had already made disclosure.

To avoid difficulties under these provisions, solicitors will need to discuss with clients the source of the relevant monies - but they should act early, as otherwise they must have regard to the final offence in section 333 which makes it an offence, knowing or suspecting that a disclosure has already been made to NCIS, to make a disclosure likely to prejudice any investigation that might be conducted as a result.

Again, in this connection, privileged information should be ignored.

Disclosure is made to NCIS on forms available at its Web site: www.ncis.co.uk/disclosure.asp, and sent by post to PO Box 28000, London SE1 5EB, or by fax to: 020 7238 8286.

Such disclosures, based on knowledge or suspicion, are protected from action for breach of contract by the client but many firms have already amended their terms of business to reserve the right to give such notices as they deem appropriate and, thereafter, not to discuss such matters further with the client.

Cash seizure

Chapter 3 of part 5 of the Proceeds of Crime Act 2002 came into force on 30 December 2002, and significantly extended the provisions allowing authorities to seize and thereafter seek the forfeiture of cash.

No longer are such seizures limited to the ports but they can now take place nationwide.

They are governed by a new code of practice for constables and customs officers under the Proceeds of Crime Act 2002 in relation to powers of search under section 289.

Cash is widely defined to include postal orders, bankers' drafts, bearer bonds, bearer shares and any monetary instrument.

Furthermore, cash is now subject to this jurisdiction, not only when it comes from drugs, but where it arises through any unlawful conduct (without the Crown having to specify which) or is intended to be used by any person in any unlawful conduct.

If cash is seized, the investigators have only 48 hours (including weekends and bank holidays) to take one of three steps.

They must either:

- Return the money;

- Issue forfeiture proceedings; or

- Seek an extension of the time for which they may seize the money.

The jurisdiction of the courts to hear such applications is governed by the Magistrates' Court (Detention and Forfeiture of Cash) Rules 2002 (as amended on 31 March 2003), to give all magistrates' courts jurisdiction over cash, wherever in the country it was seized.

The cash must be at least 10,000 in value although, provided the connection can be proved, different sums may be added to reach that amount.

The initial extension (which may be granted by a single justice) may be for up to three months.

The time may be extended if there are reasonable grounds for suspecting the cash is 'recoverable property' (the product of any unlawful conduct), or is intended to be used in unlawful conduct, and either further detention is justified for further investigations or for consideration of the bringing of proceedings, or because criminal proceedings have been begun and not concluded.

Further extensions of time of three months at any one stage may be sought (before a full court) up to a maximum of two years.

Applications for forfeiture are made under section 298 of the Proceeds of Crime Act 2002.

Under section 298(2), the court may order forfeiture if it is satisfied that the cash is 'recoverable property' or intended by any person for use in unlawful conduct.

A number of persons have the right to be heard in such proceedings.

Joint tenants are given particular rights as is anyone claiming an honest interest in the cash.

All parties may require representation.

Appeals lie to the Crown Court.

Funding is provided by the Community Legal Service (CLS) and application forms should be sent to the London Regional Office of the Legal Services Commission.

All solicitors holding a criminal contract may undertake such work as associated CLS work without requiring a civil contract.

There are delegated powers (subject to careful observation of the guidance) to grant emergency certificates to deal with urgent hearings.

The civil merits test has been adjusted to apply a general 'interests of justice' provision but the means test which is appropriate to civil work will require greater attention.

All other assets will be considered in this connection; third party interests may give rise to difficulty (as anyone with an interest in the cash may be called upon to contribute); and warnings should be given of the application, if costs are not recovered in full, of the statutory charge.

By Anthony Edwards, TV Edwards, London