An Introduction to Money Laundering
Malcolm Simmons served at an international judge from 2004 to 2017 hearing war crime and serious organised crime cases.
Introduction to Money Laundering
Criminal confiscation and money laundering offences are inter-linked. In investigating what has happened to the proceeds of crime, money laundering offences are likely to be disclosed.
Money Laundering is the process by which criminal proceeds are sanitised to disguise their illicit origins. Acquisitive criminals will attempt to distance themselves from their crimes by finding safe havens for their profits where they can avoid confiscation orders, and where those proceeds can be made to appear legitimate.
Money laundering schemes can be very simple or highly sophisticated. Most sophisticated money laundering schemes involve three stages:
· Placement - the process of getting criminal money into the financial system;
· Layering - the process of moving money in the financial system through complex webs of transactions, often via offshore companies;
· Integration - the process by which criminal money ultimately becomes absorbed into the economy, such as through investment in real estate.
Prosecutions for money laundering can involve any of these stages in the money laundering process.
Code for Crown Prosecutors - considerations
Money laundering offences are invariably serious. In summary, money laundering
· Incentivises crime by rendering it profitable;
· Provides domestic and transnational organised crime with a cash flow to perpetrate further crimes; and
· Threatens the financial system and its institutions, both domestic and international.
Therefore, where there is sufficient evidence to meet the evidential test under the Code for Crown Prosecutors, the following Public Interest factors in favour of prosecution for offences of money laundering should be very carefully considered:
· The importance of making it more difficult for criminals to legitimise their ill-gotten gains;
· The importance of deterring professional launderers;
· The importance of protecting the integrity of financial institutions domestically and internationally.
Main types of Money Laundering prosecutions
There are 4 types of money laundering prosecution. There are, firstly, those "mixed" cases in which money laundering can be charged or included on an indictment in which the underlying proceeds -generating predicate offence is included.
The subsets of this are:
· "Own proceeds" or "self laundering", where the defendant in a money laundering case may also be the author of the predicate crime;
· Laundering by a person or persons other than the author of the predicate offence.
Secondly, there are those cases where money laundering is the sole charge capable of proof or the easiest charge to prove. Again, there are two subsets:
· "Own proceeds" laundering;
· Laundering by a person other than the author of the predicate offence.
Money laundering offences under the pre- POCA law
Under the pre-POCA law, there were separate offences for drug money laundering under the Criminal Justice Act 1988 and the Drug Trafficking Act 1994.
The relevant law is set out at (Archbold 2003 25-520).
As the 2002 Act has substantially changed all principal money laundering offences and related definitions it will matter whether the conduct alleged to be the physical element of the offence was committed before or after the commencement of the Act. The provisions of the old legislation (DTA and CJA) will apply to conduct before the Act comes into force.
Part 7 of POCA came into force on 24 February 2003 and acts of money laundering begun on or after that date are offences under the new Act. When the predicate offence that generated the proceeds took place is immaterial in determining whether the Act applies.
S.340 (4) makes it clear that the new offences bite on the proceeds of criminal conduct that took place before commencement.
The new principle money laundering offences
The new principal money laundering offences are now found in sections 327, 328 and 329 of the Proceeds of Crime Act 2002. The legislation is set out in (Archbold 2006 33-8).
These offences come into force on 24 February 2003.
Money laundering is defined as an act which constitutes an offence under S.327, 328 and 329 or a conspiracy or attempt to commit such an offence. Money laundering includes counselling, aiding or abetting or procuring.
It should be noted that convictions for money laundering under sections 327 and 328 attract the use of the lifestyle assumptionsunder S.75 and schedule 2 Proceeds of Crime Act 2002.
Under the pre-existing law was that there were separate offences for drug money laundering under the Drug Trafficking Act 1994 and non-drug offences under the Criminal Justice Act 1988. The Crown sometimes had difficulties in pinpointing for the purposes of charging under the appropriate Act the source of the criminal proceeds, see R v Ali & Others  EWCA Crim 87).
Offences under S.327, 328 and 329 replace the parallel drug and non-drug money laundering offences with single offences that do not distinguish between the proceeds of drug trafficking and other crime.
Under the Proceeds of Crime Act, the Crown has to prove that the laundered proceeds are "criminal property", as defined in S.340 of the Proceeds of Crime Act: that is to say that the property constitutes a person's benefit from criminal conduct.
"Criminal conduct" is all conduct which constitutes an offence in any part of the United Kingdom (which means that an "all crimes" approach is adopted in respect of predicate crimes committed in the UK).
Offences which were committed abroad are relevant predicate crimes if laundering acts are committed within our jurisdiction where the predicate offence committed abroad (from which proceeds were generated) would also constitute an offence in any part of the United Kingdom if it occurred here (S.340 (2) b) (Archbold 2006 33-29).
It is immaterial whether the criminal conduct occurred prior to the Act becoming law so long as the laundering act takes place post commencement.
Proving that property is "criminal property"
To prove that property is "criminal property" (i.e. the proceeds of crime) the prosecutor must show the property:
· Constitutes benefit from criminal conduct or that it represents such a benefit (in whole or part and whether directly or indirectly) and;
· The alleged offender knows or suspects that it constitutes or represents such a benefit [section 340(3)].
The property which may comprise the benefit from criminal conduct is widely defined (see S.340  and ) to include:
· All forms of property or real estate;
· Things in action and other intangible or incorporeal property.
Property is obtained by a person if he obtains an interest in it.
Because of the definition of criminal property, there is no distinction between the proceeds of the defendant's own crimes and of crimes committed by others (see S.340 ). Thus laundering one's own proceeds is just as much money laundering, as similar activities performed by someone else, notably professional launderers on behalf of the authors of the predicate or underlying offences.
Own proceeds laundering applies to all 3 principal money laundering offences.
Proving that proceeds are the benefit from criminal conduct in money laundering prosecutions (proving the predicate offence).
Proving that proceeds are the benefit of "criminal conduct" will usually be done by circumstantial evidence.
Where money laundering offences are proceeded with on the same indictment as the underlying crimes, the underlying criminal conduct will be proved as part of the proceedings to the requisite standard. Where the money laundering proceedings are "standalone", there are two ways of proving criminal property, firstly by proving the type of offending that gave rise to the criminal property and secondly by relying upon circumstantial evidence (R v Anwoir  EWCA Crim 1354).
It is not necessary in "stand alone" money laundering prosecutions to wait for a conviction in relation to the "criminal conduct" (i.e. the underlying or predicate offences giving rise to the criminal property).
Prosecutors are not required to prove that the property in question is the benefit of a particular or a specific act of criminal conduct, as such an interpretation would restrict the operation of the legislation. The prosecution need to be in a position, as a minimum, to be able to produce sufficient circumstantial evidence or other evidence from which inferences can be drawn to the required criminal standard that the property in question has a criminal origin.
Typically evidence of the criminal origin of proceeds may be provided in money laundering proceedings by:
· Accomplice evidence;
· Circumstantial evidence and/or other evidence;
· Forensic evidence (e.g. contamination of cash with drugs) from which inferences can be drawn that money came from drug trafficking;
· Evidence of complex audit trails, from which an accountancy expert may be able to conclude that the complexity of the transactions indicate that the property was the proceeds of crime. (Archbold 2006 10-66). While this was not a money laundering prosecution, by analogy, it would seem permissible for a witness to give expert evidence that the facts lead him to the conclusion that the property was the proceeds of crime);
· Evidence of the unlikelihood of the property being of legitimate origin - Where the prosecution proves D has no legitimate explanation for possessing the property in question a jury may be willing to draw an inference that it is proceeds of crime;
· Criminals often attempt to launder proceeds through a cash intensive business. Where the cash flows appear too large or the profit margins too high this may be capable of giving rise to expert evidence that the business will usually give rise to a particular level of profit and the profits are clearly excessive which together with other available evidence can be sufficient to prove the underlying criminality. See R. v. Boam 1998 Cr. Law Bulletin.
Section 327 offence - Concealing criminal property etc.
Section 327 simplifies and replaces S.49 of the Drug Trafficking Act 1994 and S.93C of the Criminal Justice Act 1988. See (Archbold 2006 33-11)
The actus reus of the offence under S.327 is:
· concealing criminal property;
· disguising criminal property;
· converting criminal property;
· transferring criminal property;
· removing criminal property from England and Wales.
It is an either way offence. A person convicted of an offence under this section is liable to imprisonment for 14 years or a fine or both.
Concealing or disguising criminal property is defined as concealing or disguising its nature, source, location, disposition, movement or ownership or any rights with respect to it [POCA section 327(3)].
As noted above the offender has to "know or suspect" that the criminal property represents a benefit from criminal conduct (by virtue of section 340 POCA). The prosecution can also rely on circumstantial evidence from which a jury can draw inferences that the defendant had the necessary knowledge or suspicion.
It is necessary therefore to prove:
· the act of concealing, disguising etc;
· in relation to property;
· which was a benefit from criminal conduct; and
· that the defendant knew or suspected that the property represented a benefit from criminal conduct.
Defences to section 327 offence
It should be noted that an offence is not committed if a person makes an "authorised disclosure" under S.338 to a constable, a customs officer, or a nominated officer. This will absolve disclosures, such as suspicious transaction reports to the police and to designated compliance officers within companies made within the requisite timescales in S.338. The defence also applies to those who intended to make such a disclosure but had a reasonable excuse for not doing so.
S.327 also exonerates acts done in carrying out a function relating to enforcement of any provision of the Act, or of any other enactment relating to criminal conduct or benefit from criminal conduct. It is not uncommon for the police or other enforcement authorities to take possession of criminal property in the course of their official duties and to convert or transfer it, e.g. into an interest bearing account pending further investigation.
Section 328 offence - Arrangements
Section 328 simplifies and replaces S.50 of the Drug Trafficking Act 1994 and S.93A of the Criminal Justice Act 1988. This offence potentially catches a large range of involvement in money laundering offences usually at the layering and integration stages. See (Archbold 2006 33-12).
This is the offence which will often be apt for the prosecution of those who launder on behalf of others. It can catch persons who work in financial or credit institutions, accountants etc, who in the course of their work facilitate money laundering by or on behalf of other persons. For legal advisers, please see the case of Bowman & Fels  EWCA Civ 226, in which it was held that steps taken in court proceedings are not 'acts' for the purposes of s328.
The language of the physical acts is deliberately wide.
Thus the prosecution has to prove that:
· the defendant enters into or becomes concerned in an arrangement;
· which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control;
· of criminal property;
· by or on behalf of another person.
The offence is either way and carries the same maximum penalty as offences under S.327.
The criminal origin of proceeds can be proved in the same ways as set out at Proving that proceeds are the benefit from criminal conduct (the predicate offence) above.
Defences to section 328 offence
The same defences against committing the offence as are included in S.327 are included in S.328. See Defences to section 327 offence above.
Section 329 offence - Acquisition, use and possession
S.329 unifies and replaces S.51 Drug Trafficking Act and S.93B of Criminal Justice Act 1988.
Section 329 appears at (Archbold 2006 33-13). This offence can be committed if a defendant:
· uses criminal property;
· or (passively) possesses criminal property.
Similarly, it is an either way offence attracting the same maximum penalties as offences under sections 327 and 328.
It does not attract the lifestyle assumptions on conviction.
The prosecution has to prove:
· acquisition use or possession;
· of property;
· which was the benefit of criminal conduct;
· and that the defendant had the necessary knowledge or suspicion that the property represented a benefit from criminal conduct.
Possession means having physical custody of criminal property.
The Section 333 "Tipping off" offence (see below) may be available to the prosecution where the evidence is insufficient to prove the predicate offence against the defendant.
Defences to section 329 offence
These are set out in section 329(2).
The same defences as applying to offences under section 327 and 328 are provided for by section 329 (2) (a) and (b).
However, additionally a person does not commit an offence under this section if he acquired, used or had possession of the property for "adequate consideration." The defence replicates that available under the offences in S.93 B of the Criminal Justice Act 1988. It is available to cover those cases where the funds or property have been acquired by a purchase for a proper market price or similar exchange and to cater for any injustice which might otherwise arise: for example, in the case of tradesmen who are paid for ordinary consumable goods and services in money that comes from crime.
This defence will also apply where professional advisors (such as solicitors or accountants) receive money for or on account of costs (whether from the client or from another person on the client's behalf). This defence would not be available to a professional where the value of the work carried out or intended to be carried out on behalf of the client was significantly less than the money received for or on account of costs.
If a person pays proper consideration but it can be shown that he knows or suspects that such payment may help another to carry out criminal conduct he is not treated as having paid proper consideration (Section 328 (3)(c). There is a definition of inadequate consideration in sub-section (3).
Failing to disclose, tipping off etc.
Some countries underpin their preventive anti-money laundering regimes with administrative sanctions only. The UK has chosen to underpin the preventive regime with criminal sanctions to emphasise the importance of proper systems of reporting and control. The FSA now has strong powers to prosecute criminally breaches of the money laundering regulations, though the general criminal prosecuting authorities (CPS, SFO, Customs and Excise etc) are responsible for offences under Sections 330-333.
S.330 Failure to disclose: regulated sector
Cases where this offence is being considered should be referred to the Director’s Strategic Policy Advisor at CPS Headquarters.
Section 331 Failure to disclose offence: nominated officers in the regulated sector
See (Archbold 2006 33-19)
Section 331 creates a separate offence of failure to disclose in respect of nominated officers (i.e. compliance officers) who receive disclosures based under S.330 and who do not pass the information to the National Criminal Intelligence Service (NCIS) as the disclosure receiving agency when they:
· know or suspect; or
· have reasonable grounds for knowing or suspecting that another person is engaged in money laundering.
The offence is triable either way with the same maximum penalty on indictment as an offence under section 330 (up to 5 years imprisonment).
Section 332 Failure to disclose offence: other nominated officers
Section 332 creates a further offence of failure to disclose by nominated officers outside the regulated sector.
The offence is also either way and carries the same maximum penalty on indictment as an offence under section 330.
It cannot be committed by negligence. The mental element of this offence is knowledge or suspicion.
Section 333 Tipping off offence
(Archbold 2006 33-20)
Section 333 creates the offence of making a disclosure likely to prejudice a money laundering investigation being undertaken by law enforcement authorities. It replaces S.53 Drug trafficking Offences Act 1994 and S.93D of the Criminal Justice Act 1988.
This is an either way offence with a maximum penalty on indictment of 5 years imprisonment or a fine or both.
It is a defence to a charge under S.333 that a person;
· did not know or suspect that the disclosure was likely to prejudice an investigation;
· that the disclosure was made in connection with a function relating to enforcement;
· if the information is passed on in circumstances that amount to legal privilege, but not if the information is passed on to further a criminal enterprise.
Charging practice, plea acceptance and other issues
'Mixed cases' (where the author of the predicate offence can also be charged with laundering)
This is an area where careful exercise of prosecutorial discretion is required, particularly with regard to the possession offence under S.329.
It is suggested that in considering whether to add money laundering charges generally the following factors should be borne in mind:
· Parliament has decided money laundering offences are very serious carrying a maximum of 14 years. All the 3 principal money laundering offences potentially carry heavier penalties than most predicate offences. Theft, for instance, carries 7 years. Money laundering will therefore often be the most serious offence available.
· The underlying offence ought normally to be proceeded with, as it represents the conduct which gives rise to the criminal proceedings.
· Money laundering and the underlying criminality are separate offences. Money laundering activities should not be seen simply as "part and parcel" of the underlying criminality. As the courts have often said in connection with theft and receiving - receiving is the more serious offence because, without handlers and receivers there would be no thieves. However prosecutors should recall that the practice of charging theft and handling in the alternative is followed where the evidence is unclear as to whether the defendant is a thief or a handler. In these types of case both offences (the underlying crime and the money laundering offence) will be capable of proof.
· A money laundering charge ought to be considered where the proceeds are more than de minimis in any circumstances where the defendant who is charged with the underlying offence has done more than simply consume his proceeds of crime.
· A charge under section 329 of possession of laundered proceeds, however, may not be necessary, for instance where proceeds were simply "kept under the bed". An application for confiscation of the actual benefit of the offence may be sufficient in those circumstances.
· Where, however, there is any significant attempt to transfer or conceal ill-gotten gains money laundering should normally be considered as an additional charge, in part because the purpose of the concealment will be to defeat or avoid prosecution and confiscation.
· A careful judgement will need to be made as to whether it is in the public interest to proceed with the money laundering offence in the event of a plea to the underlying criminality by a defendant who is also indicted for laundering his own proceeds. The prosecutor should take into account whether the laundering activity involves such a significant attempt to conceal ill-gotten gains that a court may consider a consecutive sentence. Prosecutors should not simply proceed with a money laundering charge in this situation to trigger the lifestyle assumptions in respect of convictions for money laundering under S.327 or S.328. To do so, for no other reason, could attract abuse of process arguments.
· In a "mixed" case, where the laundering is done by X on behalf of Y (the author of the predicate offence), it may be appropriate to proceed against Y for the underlying crime and X in relation to the laundering offence in the same indictment. This mirrors the position where a thief and handler are prosecuted in the same indictment in relation to the same stolen goods. Where the investigation has followed the money trail and there is sufficient nexus between the underlying offences and the money laundering then the case may benefit from being run together in one indictment, if it enables the prosecution to be presented in a clear and simple way. The jury will be able to take a global view of the evidence and the inclusion of the launderer on the indictment may strengthen the prosecution case. Care should be taken not to overload the indictment, which could lead to a successful application to sever.
Handling stolen goods
It is important to note that money laundering offences are not confined to cases involving money. Under the Proceeds of Crime Act, the prosecution must prove that the laundered proceeds are "criminal property", as defined in section 340: that is to say that the property constitutes a person's benefit from criminal conduct.
Therefore, there will need to be a careful judgement in those cases where the prosecution could charge money laundering based on possession or an offence of handling stolen goods.
Prosecutors may consider charging a money laundering offence where either a defendant has possessed criminal proceeds:
· in large amounts; or
· in lesser amounts, but repeatedly and where assets are laundered for profit.
Prosecutors should take into account that charging money laundering will trigger the lifestyle provisions of POCA.
Reference should be made to the section on Handling Stolen Goods in Theft Act Offences elsewhere in the Legal Guidance manual.
It is permissible to draw compendious indictments that allege acquisition, possession or use Indictment Precedent Manual.
Prosecutors are advised to particularise alternative counts or charges where the evidence supports each of the relevant mental elements of the offence, so the court understands the basis of a jury's decision.