Suspicious Activity Report guidance updated in light of anticipated COVID-19 related crime
Chambers and Partners, 2020
The Suspicious Activity Report (SAR) regime obliges both those working inside and outside the regulated financial sector – so all financial institutions, as well as solicitors, accountants and estate agents, for example – to report any suspicion of money laundering activity to the National Crime Agency (NCA).
If the NCA refuses consent for a transaction to proceed, a moratorium period of 31 days is triggered during which the transaction is prohibited and any property involved, including bank accounts, is frozen. The initial 31-day period may be extended on application by up to six months while the issues disclosed in the SAR are investigated.
We advise individuals and businesses subject to moratorium periods, which often cause significant financial difficulties and reputational risk and which, if left unchallenged, may potentially pave the way for further investigations, restraint or asset freezing orders.
A Crown Court may permit the extension of a moratorium period, by 31 days at a time, up to a maximum of six months, if it is satisfied that:
Obtaining an extension of the moratorium period is a relatively straightforward process for the applicant law enforcement agency, as the threshold is low.
We can assist with:
While some moratorium periods can be procedurally straightforward to challenge, others can lead to complex litigation which takes years to resolve.
We have a proven track record of challenging applications for moratorium periods and advising on the legal and practical ramifications of doing so.
We understand the stakes can be high, be it the need for urgent access to business or living expenses, the destiny of family assets, or the protection of individual or corporate reputations.
However, a considered strategy is imperative. It is important to be aware of the risks involved when moratorium applications affect your funds or property. There may also be civil law options open to you.
If you find yourself or your firm affected by a moratorium period and need criminal defence, regulatory defence or liability advice, please contact one of our specialist SARs and proceeds of crime lawyers.
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In September 2020 the FCA published a statement regarding the listing of cannabis-related businesses (CRBs) in the UK. Since then several CRBs have been admitted to the London Stock Exchange (LSE) and appetite for investments in the medicinal cannabis industry continues to grow.
Recent guidance issued by the CPS on the offence of ‘failure to disclose’ under section 330 of the Proceeds of Crime Act 2002 (‘POCA 2002’) states that it is now “possible to charge an individual under section 330 even though there is insufficient evidence to establish that money laundering was planned or has taken place.”
To date, there have seldom been prosecutions for this offence but this guidance – effectively removing a significant element of the offence - suggests that the CPS may be looking to bring more charges in the future.
Money launderers will look for any opportunity to take advantage of organisations with weak financial controls in order to launder their ill-gotten gains. Charities, trustees, employees and volunteers who knowingly or unwittingly assist money launderers, or who fail to report suspicions, may commit a criminal offence and find themselves liable to prosecution.
HMRC monitors over 30,000 businesses to ensure their compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the regulations). Businesses which are found to have breached their regulatory obligations are at risk of civil and even criminal penalties.
On 12 November the SFO announced that it had secured an agreement from Julio Faerman to pay a total of £1,198,424.78, following a civil recovery investigation into his UK assets. These assets included a £4.25m luxury apartment in West London which the SFO suspected to have been partly purchased with funds derived from its owner’s corruption.
The Government has published a circular on extensions to the moratorium period for Suspicious Activity Reports (SARs), which acts as a restatement of the law and aims to ensure consistency in practice by law enforcement agencies in relation to the Defence Against Money Laundering (DAML) regime under section 335 of the Proceeds of Crime Act 2002 (POCA). The circular, published September 2020, sets out the responsibilities for the agencies involved in the process, and gives some indication of ways in which affected parties can play a part in the process.
North Yorkshire Police announced in October 2020 the recovery of over £300,000 by means of Account Freezing and Forfeiture Orders (AFrOs and AFoOs). The news serves as a reminder of the popularity and increasingly widespread use of this law enforcement power that was created under the Criminal Finances Act 2017.
The NCA will be pleased as punch with the highly publicised outcome of their investigation into the businessman Mansoor Hussain; using several of the tools at its disposal, the agency has agreed a settlement with Mr Hussain that will see him relinquish ownership of numerous properties, assets and cash to the amount of £9,802,828. All on the basis of his alleged links to serious organised crime in the UK but without the need for any criminal proceedings.
The SFO has followed in the footsteps of the NCA and HMRC by using, for the first time, a listed asset order (‘LAO’) to recover £500,000 worth of jewellery which they were satisfied represented the proceeds of crime.
The Government announced its intention to introduce an Economic Crime Levy in the Budget 2020. This is designed to fund government action to tackle money laundering and help deliver the reforms committed to in the Economic Crime plan 2019-2020. It has since followed up on this - on 21 July - with the launch of a consultation as to how such a levy would operate.
In the Home Secretary’s foreword to the National Crime Agency’s Annual Report 2019-20, she details the “NCA’s relentless mission to end the very worst criminality” and the report cites the categories of Serious and Organised Crime (SOC) that “destroy lives” including: child sexual abuse; modern slavery and human trafficking; organised immigration crime; cybercrime; fraud; money laundering; bribery and corruption; and, sanctions evasion.
Media reports from 24 July 2020 inform us that the City of London Police (COLP) has seized more than £2 million held in British bank accounts as a result “of profits made by an Italian mafia gang”. We are told that Westminster Magistrates’ Court ordered the forfeiture of the cash after detectives submitted evidence that it was being channelled through London in a money-laundering operation.
The rights of third parties in confiscation proceedings have been the subject of scrutiny over recent years by the courts and legislature, as detailed in our blog, ‘The rights of third parties in confiscation matters: an inhospitable landscape’. The issue was considered most recently in the case of R v Hilton  UKSC 29 in which the Supreme Court restated the law regarding when third parties may make representations to the court.
In our previous blog, ‘Unexplained Wealth Orders: An overview of the regime to date’ we considered the challenges faced by the NCA in their efforts to use the relatively new statutory tool of Unexplained Wealth Orders (UWOs). Unfortunately for the NCA, one of the four cases they have focused their efforts on since its introduction has now been unequivocally lost.
Unexplained Wealth Orders (UWOs) were introduced pursuant to the Criminal Finances Act (CFA) 2017 in order to bolster the UK’s proceeds of crime regime and they have been the subject of much media attention because of the vast sums of money and high value property involved. The NCA and other law enforcement agencies have now had over two years to avail themselves of this investigatory tool and in this blog we consider the challenges that have arisen and what lessons have been learnt to date.
In our recent blog ‘The (quiet) extension of the AML regime: an overview’ we looked at the key changes for the regulated sector, pursuant to the new Money Laundering and Terrorist Financing (Amendment) Regulations 2019 which came into force on 10 January 2020. This new legislation also extended the reach of the UK’s anti-money laundering regime to individuals or businesses who deal in the sales, purchases and storage of works of art with a value of 10,000 euros or more, regardless of the means of payment.
The Metropolitan police announced on 23 April that it had obtained a Forfeiture Order in the sum of €1.9m following a cross-border money laundering investigation. The order was obtained under provisions created by the Criminal Finances Act 2017, which allow accounts to frozen by means of Account Freezing Orders (AFOs), and ultimately to be forfeit by means of a Forfeiture Order, if a Magistrates’ Court is satisfied that the funds in the account represent the proceeds of crime or are intended for use in crime.
In a significant decision, on 8 April 2020, the High Court discharged three Unexplained Wealth Orders (UWOs) following applications by the respondents to those orders. This is the first time the High Court has acted to discharge such orders. The National Crime Agency (NCA) has already indicated its intention to appeal.
On 27 February 2020, the Gambling Commission announced that it had fined Mr Green (now owned by William Hill plc) £3 million for what it described as “systemic failings” in respect of Mr Green’s social responsibility and anti-money laundering (“AML”) controls which affected a significant number of customers across its online casinos. The fine represents the ninth gambling business to face regulatory enforcement action relating to social responsibility and AML failures since 2018.
The NCA announced on 13 February that it had obtained a freezing order preventing the sale of 17 addresses as part of an on-going investigation into a Leeds businessman with suspected links to serious organised criminals. It confirmed that the Property Freezing Order (PFO) covers properties in Leeds, Cheshire and London worth approximately £10.5 million, which are under the control of 39-year-old Mansoor Mahmood Hussain.
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