This blog covers the Proceeds of Crime Act 2002 and the responsibilities placed on companies like Debt Movement by this regulation. Our CEO and Insolvency Practitioner, Laura Prescott was invited to guest lecture at the School of Justice at the University of Central Lancashire (UCLan) on this important subject.
You may be surprised to know that the main offences under the Proceeds of Crime Act 2002 can affect all of us in our day to day lives and we must be vigilant if we feel that something isn’t quite right – it’s often a good thing to trust your instincts in situations that involve money.
By reading this blog, you will learn and understand aspects of money laundering, including the main money laundering offences, the removal of assets from criminals, cash seizure and restraint powers and the confiscation of assets following conviction.
What Is the Role of Financial Investigators?
Financial Investigators are trained and accredited by the National Crime Agency (NCA). This includes the following:
- Accredited Police Officers
- Accredited Police Staff
Financial Investigators must complete exams, courses then CPD to remain accredited.
Within financial organisations, like Debt Movement, a Money Laundering Reporting Officer must be nominated to act for the firm concerning Money Laundering matters. Any suspicions must be reported to the NCA.
What Is the National Crime Agency (NCA)?
The National Crime Agency (NCA) is responsible for protecting the public by disrupting and bringing to justice those serious and organised criminals who present the highest risk to the UK.
The NCA builds partnerships with the police, law enforcement agencies, the public sector, private industry and internationally to target these criminals and groups. It also leads its operations, develops and disseminates intelligence to its partners, supports and coordinates national and international crime prevention activity, recovers assets and offers specialist capabilities such as offender profiling and serious crime analysis.
At Debt Movement we are proud to partner with the NCA and provide intelligence to assist with their investigations.
What Is Money Laundering?
Money laundering is the process by which criminal proceeds are sanitised to disguise their questionable origins. It is a way of swapping “dirty” (criminally obtained) money or assets into “clean” (legal) money or assets.
The idea is to hide traces of where the money originated and who it’s owned by, without the owner losing control of it. This allows criminals to enjoy the profit from criminal acts without attracting attention to their underlying activity.
Money laundering provides organised criminals with a cash flow to carry out further crimes, making crime more attractive by making it profitable and threatens the financial system.
There are three stages to money laundering:
In the placement stage, dirty cash is transferred from an illegal source into the financial system. This provides relief to the criminal from holding and guarding large amounts of cash and enables the placement of money into the legitimate financial system.
Cash smuggling, debt repayment, gambling, and blending funds (using legitimate cash-focused businesses to co-mingle dirty funds with legitimate sales receipts) are common placement methods.
In the layering stage, money is moved around through a series of financial transactions to disguise its origin, making the trail difficult to follow.
This is the most complex stage and often involves the international movement of funds. Typical layering methods include moving funds electronically from one country to another, then dividing them into investments placed in financial options or overseas markets. It often also involves exploiting loopholes in legislation.
In the integration stage, the money becomes part of the legitimate economy. The funds can then be retained, invested or used to acquire goods or assets. The objective is to reunite the money with the criminal in a manner that doesn’t attract attention.
Common methods of integration include the purchase of property, artwork or jewellery. High-end cars are another common way for launderers to enjoy illegal profits without drawing attention to themselves.
What Is the Proceeds of Crime Act?
The Proceeds of Crime Act 2002 (POCA) is the primary anti-money laundering legislation in the UK.
It gives powers to law enforcement and places obligations on businesses within the “regulated sector” (banking, investments, money transmission, certain professions) to report suspicions of money laundering.
Interestingly, money laundering doesn’t have to involve money.
What Are the Main Money Laundering Offences?
There are three primary money laundering offences, as laid out below:
- Concealing, disguising, converting, transferring or removing criminal property from England and Wales.
- Entering or becoming concerned in an arrangement which they know or suspect facilitates the acquisition, use or control of criminal activity by or on behalf of another person.
- Using, acquiring or possessing criminal property.
The maximum imprisonment for Money Laundering is 14 years.
What Is MLR17?
The Money Laundering, Terrorist Financing & Transfer of Funds (Information on the Payer) Regulations 2017 (“MLR17”) were introduced in March 2017 and applicable to persons who carry on business in the ‘regulated sector’.
Debt Movement is one of the largest personal insolvency providers in the UK. We provide professional debt guidance and services that help people move out of debt.
As we receive and distribute money, we are required to complete Anti Money Laundering checks against all of our clients at the outset of our engagement and throughout our ongoing relationship. In addition, we work closely with the National Crime Agency (NCA) in cases where there is suspicion regarding the source of funds or an individual.
Insolvency Practitioners are regulated individuals. Debt Movement’s Insolvency Practitioners are licensed to act by the Insolvency Practitioners Association, which guides our responsibilities and obligations around Money Laundering.
MLR17 requires a Money Laundering Reporting Officer (MLRO) to be appointed in all businesses in the regulated sector. This person is responsible for creating and reviewing processes, monitoring compliance with the regulators, training and awareness.
The Proceeds of Crime Act 2002 requires employees in a business in the “regulated sector” to make reports where they know or suspect, or have reasonable grounds to know or suspect, that another person is engaged in money laundering. These reports are called Suspicious Activity Reports and mare made to the National Crime Agency (NCA)
The Act also creates an offence of failing to disclose information about money laundering, with a maximum prison sentence of five years and also an offence of making disclosure likely to prejudice a money-laundering investigation (also known as tipping off) with a maximum prison sentence of two years.
At Debt Movement we take our regulatory responsibilities very seriously and ensure that all of our staff are trained and updated regularly on anti-money laundering procedures.
What Powers Are Granted to Financial Investigators by POCA?
POCA gives powers to police, customs officers and accredited financial investigators. These powers include the following:
- Cash seizure
What Is Cash Seizure?
Cash is defined as:
- Notes or coins in any currency
- Bankers drafts, bearer bonds and bearer shares
- Postal Orders
- Any kind of cheques – including traveller’s cheques.
If police find £1,000 or more in any type of currency, cheques or bonds and suspect that it has come from or is intended to be used to commit a crime, they can seize and detain the funds.
Cash seizure, detention and forfeiture is a civil procedure and does not require the suspect to be charged or convicted of a crime, although it can run in parallel with a criminal investigation. Overall, it is a simple and straightforward process that should be used where appropriate. In effect, the police sue the owner.
Under the government incentivisation scheme, 50% of the forfeited money goes back to the force/agency.
What Is Confiscation?
Confiscation is a process where the benefit from criminality is calculated, and an equivalent amount (where recoverable) is returned to the State.
Confiscation occurs only after conviction.
Section 341 POCA 2002 defines a confiscation investigation as an investigation into whether a person has benefited from their criminal conduct or the extent or whereabouts of their benefit from their criminal conduct.
A Financial Investigator can conduct confiscation Investigations. The ultimate aim is to provide a confiscation statement to the Crown Court to specify the offender’s benefit from criminality and the available amount (amount to pay).
A confiscation investigation can determine whether the defendant has benefited from their crime, the amount of their benefit and the amount of realisable money, property or assets the person holds. Confiscation investigations are associated with the following criminal activities:
- Drug dealing/trafficking
- Terrorism offences
- Thefts – think professional shoplifters
- Human trafficking.
In a Confiscation Hearing, the court will determine the benefit amount and the available amount (what the defendant must pay).
What Is Restraint? (Asset Freezing Order)
Restraint is necessary to stop a person who has benefited from their crime from being able to dissipate or spend their money, or sell, transfer or hide their assets or property before it can be confiscated from them.
A confiscation order is ineffective if there are no assets left to confiscate, so action is required at the earliest possible moment. Assets can be restrained by an accredited financial Investigator applying (via) CPS to the Crown Court. The application is supported by a statement made by an accredited financial investigator detailing the case and the necessity for a restraint order.