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|Judgments - Regina v. Montila and others (Appellants)
(On Appeal from the Court of Appeal (Criminal Division))
Regina v. Montila and others (Appellants)
(On Appeal from the Court of Appeal (Criminal Division))
Ordered to be printed 25 November 2004
(HL Paper 3)
from the Appellate Committee
25 NOVEMBER 2004
Regina v. Montila and others (Appellants)
(On Appeal from the Court of Appeal (Criminal Division))ORDERED TO REPORT
The Committee (Lord Bingham of Cornhill, Lord Steyn, Lord Hope of Craighead, Baroness Hale of Richmond and Lord Carswell) have met and considered the cause Regina v. Montila and others (Appellants) (On Appeal from the Court of Appeal (Criminal Division)). We have heard counsel on behalf of the appellants and respondents.
1. This is the considered opinion of the Committee.
2. This appeal concerns the meaning of words in legislation which was introduced to combat that aspect of criminal conduct which is popularly known as money laundering.
3. In its typical form money laundering occurs when criminals who profit from their criminal enterprises seek to bring their profits within the legitimate financial sector with a view to disguising their true origin. Their aim is to avoid prosecution for the offences that they committed and confiscation of the proceeds of their offences. Various measures have been taken both internationally and in domestic law aimed at detecting and deterring this activity. They include much closer regulation of the financial sector and the introduction of measures requiring known or suspected money laundering to be reported to the authorities. They also include the enactment of a series of offences to bring the activities of third parties within the reach of the criminal law.
4. The appellants, who are nine in number, are awaiting trial in the Crown Court at Canterbury. They were arraigned on 18 December 2002 on three indictments. Each of the three indictments has been laid against three of the appellants. Each of them contains counts laid in pairs against those named in the indictment. Each pair comprises one count of converting the proceeds of drug trafficking, contrary to section 49(2)(b) of the Drug Trafficking Act 1994, and one count of converting the proceeds of criminal conduct, contrary to section 93C(2) of the Criminal Justice Act 1988. The particulars of dates, places and sums of money are identical within each pair of counts. It is alleged that between 17 March 2000 and 20 September 2001 in 34 separate transactions the appellants used the services of one or another of two bureaux de change in London to convert a total of over £3m in sterling banknotes into Dutch guilders.
5. A preparatory hearing took place before Judge van der Bijl at Canterbury under section 29 of the Criminal Procedure and Investigations Act 1996. It was held to resolve a point of law which had been raised about the elements within each of the twin offences that the prosecution must prove to establish guilt. The question is whether it is necessary for the Crown to prove that the property being converted was in fact the proceeds, in the case of the 1994 Act, of drug trafficking and, in the case of the 1988 Act, of crime. The argument for the Crown was that, while it had to prove that the defendants knew or had reasonable grounds to suspect that the property being converted was the proceeds of drug trafficking or of criminal conduct, it did not have to prove that the property was in fact those proceeds.
6. On 19 December 2002 Judge van der Bijl held that the clear and unambiguous implication of the words used by the relevant subsections was that the foundation stone of the offences which they created was that the alleged offenders were dealing with the proceeds of drug trafficking or of criminal conduct. So it was for the Crown to prove that the property being converted was in fact the proceeds of that activity. The prosecutor appealed to the Court of Appeal by way of an interlocutory appeal under section 35(1) of the 1996 Act. On 3 November 2003 the Court of Appeal (Scott Baker LJ, Jackson and Hunt JJ)  EWCA Crim 3082,  1 WLR 624, allowed the appeal by the Crown. It held that it was not necessary, to prove an offence under subsection (2) of either section 49 of the 1994 Act or section 93C of the 1988 Act, that the property was in the case of the former the proceeds of drug trafficking or in the case of the latter the proceeds of crime:  1 WLR 624, 633, para 35.
7. The Court of Appeal certified under section 33(2) of the Criminal Appeal Act 1968 that a point of law of general public importance was involved in its decision, namely:
The statutory background
8. The offences with which the appellants have been charged found their way into domestic law in response to international initiatives. This forms an important part of the background. A brief review of the history will help to put the offences into their context. An understanding of the context in which the draftsman was working when describing the offences sets the scene for the words that were used to describe them.
9. On 19 December 1988 the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (Cm 804) was adopted in Vienna. It was noted in the preamble that the parties to the Convention were deeply concerned by the magnitude of a rising trend in the illicit production of and demand for and traffic in narcotic drugs and psychotropic substances, and that they were aware that illicit traffic generates large financial profits and wealth enabling transnational criminal organisations to penetrate, contaminate and corrupt the structure of government, legitimate commercial and financial business and society at all its levels. The purpose of the Convention was to promote co-operation among the parties so that they might address more effectively the various aspects of illicit traffic having an international dimension.
10. Article 3 of the Vienna Convention provided that each party was to adopt such measures as might be necessary to establish as criminal offences under its domestic law, when committed intentionally, a variety of activities in connection with narcotic drugs and psychotropic substances. The activities listed in paragraph (a) include their production, offering for sale, transportation and importation. The following activities were listed in paragraph (b):
Paragraph (c) contains a further list of activities, subject to each party's constitutional principles and the basic concepts of its legal system, among which are the following:
11. The Criminal Justice (International Co-operation) Act 1990 was enacted to enable the United Kingdom to join with other countries in implementing the Convention. Part II of the Act was headed "The Vienna Convention". The first group of sections in this Part, comprising sections 12 and 13, was headed "Substances useful for manufacture of controlled drugs". The second group, comprising sections 14 to 17, was headed "Proceeds of drug trafficking". Section 14 was accompanied by the side note "Concealing or transferring proceeds of drug trafficking."
12. The first three subsections of section 14 of the 1990 Act were in these terms:
13. Section 14 of the 1990 Act was repealed in its application to England and Wales, but not to Scotland, by section 67(1) of and Schedule 3 to the Drug Trafficking Act 1994. The offences which had been created by section 14(1) and (2) of the 1990 were re-enacted in identical terms as sections 49(1) and (2) of the 1994 Act.
14. Section 14(3) of the 1990 Act was replaced for England and Wales by section 23A of the Drug Trafficking Act 1986, inserted by section 16 (1) of the Criminal Justice Act 1993. That section was in its turn replaced by section 51(1) of the 1994 Act. It provides:
An equivalent provision was inserted into the Criminal Justice (Scotland) Act 1987 by section 17(1) of the 1993 Act.
15. It is to be noted that the offence under section 51(1) of the 1994 Act is narrower than that under section 14(3) of the 1990 Act. It requires actual knowledge, as does the offence under what was section 14(1) of the 1990 Act and is now section 49(1) of the 1994 Act. Proof of reasonable grounds for suspicion is not enough. It is also to be noted that sections 49 and 51 of the 1994 Act appear together in Part III of the Act which is headed "Offences in connection with proceeds of drug trafficking". The side note to section 49 is "Concealing or transferring proceeds of drug trafficking". The side note to section 51 is "Acquisition, possession or use of proceeds of drug trafficking".
16. The example of the Vienna Convention in the field of illicit traffic in narcotic drugs and psychotropic substances was soon followed by European measures designed to combat the laundering of the proceeds of crime generally. The Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime ("the Strasbourg Convention") was signed by the United Kingdom on 8 November 1990. It was noted in the preamble to this Convention that the member states of the Council of Europe considered that the fight against serious crime called for the use of modern and effective methods on an international scale, and that they believed that one of those methods consisted of depriving criminals of the proceeds from crime. Chapter II set out a series of measures to be taken at national level to establish a system of international co-operation for the attainment of this aim. The term "proceeds" was defined in article 1 as meaning any economic advantage from criminal offences.
17. Article 6, headed "Laundering Offences", includes the following:
18. The Strasbourg Convention was followed by an EEC Council Directive of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering (91/308/EEC). The expression "money laundering" was defined for the purpose of the Directive as meaning the following conduct when committed intentionally:
19. The opportunity was taken in the Criminal Justice Act 1993 to implement provisions of Council Directive 91/308/EEC. Among the provisions in Part III of that Act, under the heading "Proceeds of Criminal Conduct", is section 31. The side note to this section is "Concealing or transferring proceeds of criminal conduct." It inserted the following section in the Criminal Justice Act 1988:
20. These two subsections, which extend to Scotland subject to the modifications set out in section 93E of the 1988 Act as inserted by section 33 of the 1993 Act, appear to have been modelled on sections 14(1) and (2) of the 1990 Act. There is no equivalent in this legislation of the offence which was created by section 14(3) of the 1990 Act, which was repealed by section 79(14) of and Schedule 6 to the 1993 Act.
21. The offences which are currently to be found in the 1988 and 1994 Acts in relation to money laundering have been replaced by a new set of money laundering offences set out in Part 7 of the Proceeds of Crime Act 2002. The relevant sections of that Act were not in force at the time of the judge's decision, but the approach which has been taken to the actus reus of these offences is instructive. Section 327(1) of the 2002 Act provides that a person commits an offence if he conceals, disguises, converts or transfers criminal property or removes criminal property from England and Wales or from Scotland or from Northern Ireland.
22. The meaning of the expression "criminal property" in section 327(1) of the 2002 Act is to be found in section 340 of that Act, which provides:
The description of the offences created by section 327(1) requires the prosecutor to prove that the property is criminal property within the meaning of section 340(3).
The decision of the Court of Appeal
23. The Court of Appeal noted that the judge had given six reasons for saying that he was fortified in the conclusion that he had reached as to what was implied by the words used in the subsection, namely that it was necessary for the Crown to prove that the property was the proceeds of drug trafficking or of criminal activity:  1 WLR 624, 629, para 18. These were (i) the decision in R v El-Kurd  Crim L R 234, in which the Crown accepted that it had to establish that the money had come from drug trafficking or other criminal conduct, (ii) the terms of the Proceeds of Crime Act 2002, (iii) the fact that almost invariably third party money laundering cases include directly or indirectly evidence as to the provenance of the money, (iv) the reference in the subsection to assisting a person to avoid a prosecution, (v) relative unfairness between a principal subject to subsection (1) and a third party subject to subsection (2), and (vi) analysis of international treaties and conventions leading to the passing of the two Acts.
24. Having examined each of these points, the court said that it was not persuaded that any of them required the implication into subsection (2) of words which would have the effect of extending the actus reus of the offence. Turning to the question of construction, the contrast between subsections (1) and (2) was noted. It was beyond argument that the Crown had to prove the source of the laundered money in subsection (1), as the property had to be the proceeds of the defendant's own drug trafficking or criminal activity. But subsection (2) was phrased in an entirely different way. There was no such requirement, and compelling reasons would be required to imply an additional element into the offence.
25. The court said that the Crown's construction was supported by fact that subsection (2) envisaged commission of the offence where the defendant's state of mind fell short of actual knowledge, as reasonable suspicion was enough. The Crown's construction also made practical sense, in view of the difficulty of proving the source of cash where a person was discovered dealing with it. And, on the judge's construction, the Crown would have to prove in every case a coincidence between the defendant's view of the origin and the origin itself. On this view, if the Crown had to prove the origin of the cash, counts under the 1994 Act and the 1988 Act would be mutually destructive in relation to the same cash.
26. Their Lordships prefer to start by examining the words of the subsection, and they propose to do so in the context of the legislation as a whole. There are then a number of other factors which the appellants say can properly be taken into account in reaching a conclusion about the meaning of those words.
The meaning of the words used
27. Subsection (2) states that a person is guilty of an offence "if knowing or having reasonable grounds to suspect that any property is another person's proceeds of drug trafficking [s 49(2) of the 1994 Act] / of criminal conduct [s 93C(2) of the 1988 Act]" he does one or other of the things described to "that property" for the purpose which the subsection identifies. A person may have reasonable grounds to suspect that property is one thing (A) when in fact it is something different (B). But that is not so when the question is what a person knows. A person cannot know that something is A when in fact it is B. The proposition that a person knows that something is A is based on the premise that it is true that it is A. The fact that the property is A provides the starting point. Then there is the question whether the person knows that the property is A.
28. The opening words of the subsection thus provide a strong indication that it is directed to activities in relation to property which is in fact "another person's proceeds of drug trafficking" or "another person's proceeds of criminal conduct", as the case may be. A further indication is to be found in the absence of any defence if the property which the defendant is alleged to have known or had reasonable grounds to suspect was another person's proceeds turns out to be something different. Subsequent events may show that the property that he was dealing with had nothing whatever to do with any criminal activity at all, but was the product of a windfall such as a win on the National Lottery. On the Crown's argument it is enough for it to be proved that he had the mens rea at the time when he was dealing with the property and that he was doing what he did for the purpose that the subsection identifies.
29. Further indications that when the subsection refers to "another person's proceeds " it proceeds on the basis that the property in question is in fact proceeds of the kind described are to be found in the surrounding context. Subsection (1), in the case of both section 49 of the 1994 Act and section 93C of the 1988 Act, states that a person is guilty if he does the things described in relation to "his proceeds" of drug trafficking or of criminal conduct. The reader is left in no doubt that the Crown must prove that the property in question was of the kind the subsection describes, as the Crown for its part accepts without qualification. Then there is the offence created by section 14(3) of the 1990 Act. It was moved to another section in the 1994 Act, and it was not included in what became section 93C of the 1988 Act. But there is no reason to think that the words used in section 14(2) of the 1990 Act changed their meaning when they appeared in the same form in subsequent statutes.
30. It is in regard to section 14(3) that the weakness in the Crown's argument is revealed. There is no defence if the property turns out to not to have been another person's proceeds of drug trafficking or his criminal conduct. What this subsection says is that an offence is committed by a person who, having the state of mind that it describes, acquires the property for no, or for inadequate, consideration. This makes sense if the Crown has to prove that the origin of the property was of the kind described. But it makes no sense to say that the defendant was guilty of an offence of money laundering simply because he acquired the property for no or inadequate consideration, having reasonable grounds to suspect that this was its origin (his purpose being irrelevant in this case), if he is in a position to prove that it was not property of that kind at all.
Headings and Side notes
31. Then there are the headings to each group of sections and the side notes, or marginal notes, to each section. The legislation which is in issue in this case was considered and published with sides notes in the old form. In fact the side notes are side notes no longer. In 2001, due to a change in practice brought about by the Parliamentary Counsel Office, they were moved so that they now appear in bold type as headings to each section in the version of the statute which is published by The Stationery Office: see Bennion, Statutory Interpretation, 4th ed (2002), p 636. They appear in that form in the Bills that are presented to Parliament, and they also appear in that form in amendments which propose the insertion of new clauses into the Bill. But it remains true that, as Lord Reid said in Chandler v Director of Public Prosecutions  AC 763, 789, these components of a Bill, even in their current form, are not debated during the progress of a Bill through Parliament. They are part of the Act when it has been enacted and they are descriptive of its contents. But they are unamendable: Bennion, pp 608, 635-636.