In this chapter of our legal guides series, BCL partner John Binns explains why the main recipients of the investigative orders in money laundering cases are people other than the suspects themselves.
POCA orders and notices
Apart from search and seizure warrants, the main recipients of the investigative orders under Part 8 of the Proceeds of Crime Act 2002 (‘POCA’) in money laundering cases are people other than the suspects themselves. Production and disclosure orders are often sought against institutions that have provided financial or professional services to a suspect, who may well be entirely ignorant of any laundering activity, but who may possess documents or information that would assist in the investigation. Customer information and account monitoring orders are specifically designed for financial institutions, the larger of which are accustomed to receiving and complying with them on a regular basis.
The starting point in advising the recipients of such orders (and notices made under them) is of course to comply with them: assuming they are validly made, to do otherwise would risk being in contempt of court or, in some cases, committing an offence. However, it will also be appropriate for any responsible bank, law firm, tax adviser and so on to take steps to ensure that it also respects the confidentiality of its client or customer, and where relevant, protects any material that is subject to Legal Professional Privilege (‘LPP’).
Businesses should also be alert to any liability of their own, for instance if the material they provide discloses some defect in their compliance with money laundering regulations (though, it should be stressed, the risk of self-incrimination cannot be a reasonable excuse for not complying with such an order or notice).
Asset freezing measures
Third parties can also be the recipients of restraint orders under Part 2 of POCA, and of various orders under the civil recovery provisions of Part 5 (and related provisions of Part 8). The former can be made against those who hold or have an interest in property that belongs to a suspect, or that is a ‘tainted gift’ from them (which in most cases can include anything transferred at an undervalue in the six years prior to the start of proceedings). The latter are aimed primarily at property that represents the proceeds of unlawful conduct, and comprise several distinct types, all of which can affect third parties.
The complex issues involved in advising third parties affected by such orders can be illustrated by the example of a money laundering suspect’s spouse, to whom the suspect has transferred a sum of money (now held in the spouse’s bank account) and the matrimonial home.
In that example, the unfortunate spouse may personally be made subject to a restraint order, preventing them from dealing with those assets. The assets themselves may be made subject to a Property Freezing Order (PFO) or (in the case of the funds) an Account Freezing Order (AFO), pending applications for civil recovery in each case.
The spouse may also be the subject of an Unexplained Wealth Order (UWO), requiring them to explain their interest in the property (and the funds, assuming each is worth at least £50,000) and how they acquired it, as a precursor to the civil recovery process (with, again, the assets very likely to be frozen in the meantime).
Knowledge or suspicion?
In practice of course, a key question for this particular client would be whether they knew or suspected that the house and the funds represented the proceeds of crime, but notably, none of the orders mentioned above require even a suspicion that this is the case. (The client may ultimately be able to resist civil recovery if they can show that they received the assets for value, and without notice of their criminal origin.)
Instead, there are various issues that may be immediately relevant, depending on the order concerned. An adviser will need to consider the prospects not only of challenging the order (if the criteria are not fulfilled), but also of having it varied (if needed to access legal or living expenses).