BCL partner, John Binns explores the general climate and recent developments of how money laundering, terrorism financing and fraud are defined and regulated in the UK.
Writing for Lexology, his article looks at not only domestic legislation but also the international agreements, enforcement authorities, offences and penalties being used to counter money laundering, fraud and terrorism financing in the UK.
Below is a short excerpt from his article*
In general terms, how developed are the laws on money laundering, terrorism financing and fraud in your jurisdiction?
The United Kingdom has one of the strictest and most highly developed set of laws on money laundering, terrorist financing and fraud in the world. It has broadly defined money laundering offences which adopt an all-crimes approach and may be committed by merely the possession of property and the suspicion that it represents the proceeds of crime. In terms of enforcement, the United Kingdom has a notably strict regime affecting the regulated sector (which includes financial institutions, accountants and most lawyers) with extensive reporting requirements and criminal sanctions for any breach. Its investigators and prosecutors have extensive powers – albeit with often limited resources – and they benefit from numerous international cooperation agreements.
Have there been any notable recent developments in relation to anti-money laundering, terrorism financing or fraud law and enforcement, including any regulatory changes, case law and convictions?
Notable recent developments include:
- the availability of Deferred Prosecution Agreements (a handful of which have been reached and publicly announced);
- significant amendments to money laundering provisions in the Criminal Finances Act 2017;
- the adoption of the new Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017;
- the creation of the Office for Professional Body Anti-money Laundering Supervision, a new body to oversee the supervision of professional bodies’ compliance with those regulations; and
- the creation of a new body to coordinate the UK authorities’ response to economic crime, the National Economic Crime Centre.
Legal and enforcement framework
What primary and secondary legislation applies to money laundering, terrorism financing and fraud in your jurisdiction?
The principal primary legislation now comprises:
- the Proceeds of Crime Act 2002;
- the Terrorism Act 2000; and
- the Fraud Act 2006.
The principal secondary legislation is the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
To whom does the legislation apply? May both individuals and organisations be held liable under the legislation? Does the legislation have extraterritorial effect?
These laws apply to individuals and organisations, although generally corporates are not liable unless guilt can be ascribed to an individual source. Though the principal offences in the Proceeds of Crime Act, the Terrorism Act and the Fraud Act apply to everyone, the secondary offences in the Proceeds of Crime Act and the requirements in the regulations apply to those in the regulated sector (including financial institutions, accountants and most lawyers).
Traditionally the basis for jurisdiction in the United Kingdom (including for fraud offences) is territorial. However, a recent judicial authority (R v Rogers  EWCA Crim 1680) held that the money laundering offences in the Proceeds of Crime Act have extraterritorial effect. Although this has been doubted by commentators, it has been applied in at least two extradition cases.
It is undeniable that a person can be guilty of laundering the proceeds of a predicate offence committed overseas. The obligations of those in the regulated sector under the Proceeds of Crime Act and the regulations apply in the course of business carried out in the United Kingdom. The principal terrorist financing offences also have extraterritorial effect, including conspiring to commit an offence (ie, conduct that would amount to an offence if conducted in the United Kingdom) overseas, under Section 1A of the Criminal Law Act 1977.
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*This article was first published on the Lexology website (Published: 28th January 2019). For further information please visit www.lexology.com.
John Binns is a partner at BCL specialising in all aspects of business crime, with a particular interest in confiscation, civil recovery and money laundering under the Proceeds of Crime Act 2002 (“POCA”). He has particular expertise in the myriad legal provisions on anti-money laundering (“AML”) requirements in the regulated sector under the Money Laundering Regulations (“MLR”), civil recovery and confiscation of the proceeds of crime, and criminal offences of money laundering under POCA, as well as related areas such as financial sanctions. He advises businesses (inside and outside the regulated sector) on AML policies and procedures generally, as well as particular risks that may arise under the MLR, POCA, and sanctions laws, including advice on the submission of Suspicious Activity Reports and consent requests. He regularly represents individuals and businesses in connection with confiscation, property freezing and restraint orders, including in relation to applications to defend, discharge or vary such orders.