R v. Saik (Appellant) (On Appeal from the Court of Appeal (Criminal Division))
26. I do not think the latter approach can be accepted. The phrase under consideration ('intend or know') in section 1(2) is a provision of general application to all conspiracies. In this context the word 'know' should be interpreted strictly and not watered down. In this context knowledge means true belief. Whether it covers wilful blindness is not an issue arising on this appeal. As applied to section 93C(2) it means that, in the case of identified property, a conspirator must be aware the property was in fact the proceeds of crime. The prosecution must prove the conspirator knew the property was the proceeds of criminal conduct.
The appellant's plea
27. The offence with which this appellant was charged was 'conspiracy to convert the proceeds of drug trafficking and/or criminal conduct contrary to section 1(1) of the Criminal Law Act 1977'. The essence of the particulars of the offence was that the appellant and others 'conspired together ... to convert ... banknotes, for the purpose of assisting another to avoid prosecution for ... a criminal offence ..., knowing or having reasonable grounds to suspect that such property represented another person's proceeds of ... criminal conduct.'
28. These particulars were drafted before the decision of the House in the Montila case. Post-Montila, these particulars are not happily framed. They are misleading in two respects. They ignore the effect of section 1(2) of the 1977 Act. And by reproducing all the ingredients of the offence created by section 93C(2), in particular by incorporating the phrase 'knowing or having reasonable grounds to suspect', these particulars might be taken to suggest that for the purpose of the conspiracy charge 'having reasonable grounds to suspect' was an alternative to proving knowledge. This is not so. The effect of section 1(2) was that the prosecution had to prove intention or knowledge.
29. This formulation of the particulars may well have contributed to the qualified form in which the appellant entered his plea of guilty. He pleaded guilty 'on the basis of laundering money which he suspected was the proceeds of crime'. One surmises this plea was intended to be a plea in mitigation, not a denial of having committed any offence. Be that as it may, this plea was accepted by the prosecution, and on this basis the appellant was convicted.
30. From what has been said above, it is evident that this conviction for conspiracy cannot stand. Suspicion is not sufficient in respect of a fact to which section 1(2) applies. Knowledge or intention regarding the provenance of the property must be proved or admitted. I agree with the conclusion expressed by Hooper LJ in R v Ali  2 WLR 316, 351, para 148.
31. Mr Peters QC struggled valiantly but vainly to overcome this difficulty. Suspicion, he said, means that the appellant was aware the banknotes might be the proceeds of crime. The appellant intended to convert the banknotes even if they were the proceeds of crime. Thus his intention was akin to a conditional intention: he would convert banknotes representing criminal proceeds if they were presented to him. That was a sufficient intention to satisfy both section 1(1) and section 1(2) of the 1977 Act.
32. I am unable to accept this submission. Suspicion, as a state of mind, is not properly to be analysed and dissected as counsel sought to do. In ordinary usage, and time and again in statutes, a distinction is drawn between suspicion and knowledge. The former is not to be equated with the latter. Section 1(2) explicitly requires a conspirator to 'intend or know' that the relevant fact 'shall or will' exist. That is not the state of mind of a conspirator who agrees to launder money he only suspects may be criminal proceeds. He does not 'intend' the money will be the proceeds of crime, conditionally or otherwise. He simply suspects this may be so, and goes ahead regardless. A decision to deal with money suspected to be the proceeds of crime is not the same as a conscious decision to deal with the proceeds of crime.
33. The distinction thus drawn is not altogether satisfactory in terms of blameworthiness. But this does not entitle the House to erode the distinction clearly drawn by Parliament in section 1(2) between (a) intending or knowing that a relevant fact shall or will exist, and (b) lesser states of mind, such as recklessness or suspicion, regarding the existence of a relevant fact. Parliament intended that in conspiracy cases proof of recklessness or suspicion would not suffice. In conspiracy cases the prosecution must go further. The unattractive outcome in the present case derives from the impact, post-Montila, of the way the particulars of the offence were framed and the acceptance of the appellant's qualified plea. But the desire to avoid an unattractive outcome in the present case cannot justify a distorted interpretation of section 1(2). It is not for the courts to extend the net of criminal conspiracy beyond the reach set by Parliament.
34. Counsel further submitted that by pleading guilty the appellant accepted he had the requisite purpose. By his plea he accepted all the ingredients of the charged offence with the one exception of knowledge. Thus he accepted that he intended to convert the banknotes for the purpose of assisting another to avoid prosecution for a criminal offence etc. That state of mind, it was submitted, is consistent only with the appellant knowing the money represented the proceeds of crime.
35. Again I cannot agree. I readily accept that, evidentially and inferentially, it is a short step from proof that the defendant's purpose was to assist someone to avoid prosecution to a conclusion that the defendant was aware the property had an illicit provenance. But that is an evidential inference. That step cannot properly be taken on the basis of a qualified plea which expressly proceeds on the footing of suspicion only.
36. In the present case the Court of Appeal, comprising Scott Baker LJ, Dame Heather Steel and Judge Roberts QC, expressed their conclusion as follows ( EWCA Crim 2936, para 67):
37. This decision was given before the decision of your Lordships' House in the Montila case. At that time the provenance of the property was not understood to be an ingredient of the substantive offence. It was not a fact necessary for the commission of the offence. That is no longer the law. For the reasons set out above this reasoning of the Court of Appeal cannot now stand. I would allow the appeal and set aside the appellant's conviction. I would answer 'no' to the first certified question. I would answer the second certified question in the sense set out in the speech of my noble and learned friend Lord Hope of Craighead. In an endeavour to avoid unnecessary complexity I have deliberately refrained from commenting on each of the recent reported authorities in this field. I mean no disrespect thereby to the experienced judges who decided these cases. I cannot conclude without recording my indebtedness to Professor Ormerod's article 'Making Sense of Mens Rea in Statutory Conspiracies', Current Legal Problems (2006). I have taken the liberty of drawing freely on this valuable survey of a notoriously difficult subject.
38. I have found the legal analysis set out in the opinion of my noble and learned friend Lord Nicholls of Birkenhead compelling. For the reasons Lord Nicholls has given I would also allow the appeal and set aside the appellant's conviction.
LORD HOPE OF CRAIGHEAD
39. This case raises an important and difficult issue about what the prosecution must prove where the defendant is alleged to have been engaged with others in a continuing course of conduct which involves the commission of the offence of money laundering. It has become the practice in cases of this kind, in order to avoid the problem of duplicity which arises where a defendant is charged on one count with having committed two or more separate offences, to charge the defendant on a single count of conspiracy. In 1977, on the recommendation of the Law Commission, the common law offence of conspiracy was abolished, with only a few exceptions. It was replaced by the general statutory offence which is set out in section 1 of the Criminal Law Act 1977. Money laundering has never been a common law offence. Various statutory offences have been created to deal with it. Some relate to the proceeds of drug trafficking. Others relate to the proceeds of crime generally.
40. A prosecutor who wishes to take criminal proceedings for conspiracy against a defendant who is alleged to have engaged in a continuing course of money laundering has to face up to the consequences of this statutory framework when he is considering whether he has a case that can go to trial. They are to be found in the answers that must be given to two questions. What are the essential elements of the substantive statutory offence of money laundering? And are these elements compatible with the statutory offence of conspiracy?
41. His problems are not made easier by the fact that, while the statutory offence of conspiracy was conceived as an inchoate crime, the essence of what he seeks to prove in these cases is not that the defendant was conspiring with others to commit an offence in the future. What he seeks to prove is that the defendant has got beyond that stage and has acted in pursuance of the conspiracy by actually engaging in money laundering. Dealing with a series of completed criminal acts by charging the defendant with conspiracy is a device. Its aim is to ensure that the entire course of conduct is brought under scrutiny in one count and that, when it comes to sentence, the defendant is punished for the totality of his criminal activity. This is as it should be, of course. But the statutory offence of conspiracy was not designed for use in this way. The prosecutor is trying to fit a square peg into a round hole. That is not always possible.
The case against the defendant
42. The appellant was charged with conspiracy to launder money which was the proceeds of drug trafficking or other criminal activity. He pleaded guilty to this offence in the Crown Court at Kingston-upon-Thames on 18 October 2002. On 22 October 2002 he was sentenced by Judge Binning to seven years imprisonment. On 12 December 2003 the Court of Appeal granted him leave to appeal against his conviction. He also applied for leave to appeal against his sentence, and that application was heard together with his appeal against conviction. On 24 November 2004 the Court of Appeal (Scott Baker LJ, Dame Heather Steel DBE and HHJ Roberts QC) allowed the appeal against sentence. The sentence of seven years was quashed and replaced with one of five and half years imprisonment. But his appeal against conviction was dismissed. It is his conviction that is the subject of this appeal.
43. The offence with which the appellant was charged was set out in these terms in count 3 of the indictment:
Several other defendants were charged on the same indictment with drug trafficking and other money laundering conspiracies. The particulars relating to count 3 were designed to give notice of how the conspiracy offence was to be linked to the substantive offence of money laundering. Some of the wording was taken from section 93C(2) of the Criminal Justice Act 1988 in which the elements of the substantive offence were set out. The particulars of the offence were in these terms:
44. The appellant operated a currency exchange office. The prosecution case was that in the course of that business and between the dates referred to he converted a substantial quantity of pounds sterling provided by other defendants in the form of cash into foreign currency, and that the cash was or represented the proceeds of drug trafficking or other criminal activity. As Viscount Simon observed in Crofter Hand-Woven Harris Tweed Co v Veitch  AC 435, 439, conspiracy when regarded as a crime is an agreement between two or more persons to effect any criminal purpose and it is complete if there is such agreement, even though nothing is done to give effect to it. In this case however the allegation was that the conspiracy was put into effect by engaging in a course of criminal conduct between the dates mentioned in the particulars.
45. When the appellant pleaded guilty to count 3 he did so in accordance with a written basis of plea which was drawn on his behalf by leading counsel, signed by him and accepted by the prosecution. So far as material to his appeal against conviction it was in these terms:
The defendant Lemos pleaded guilty to count 3 on the basis that he knew that the money was the proceeds of drug trafficking. The defendant Ruiz also pleaded guilty to count 3. He did so on the basis that he was acting under the direction of Lemos.
46. In the Court of Appeal the appeal against conviction was argued on two distinct grounds. The first was that the conviction was unsafe as a matter of law. The second was that the plea of guilty was the result of erroneous advice that the appellant had received from his legal advisers. On 26 May 2005 the Court of Appeal, having rejected both arguments, certified that the following points of law of general public importance were involved in the first ground only. These points were the following:
The statutory provisions
47. To put flesh on the bones of what is set out in the preceding paragraphs I must now set out the statutory provisions on which count 3 of the indictment was based. They are to be found in section 1 of the Criminal Law Act 1977 and in section 93C(2) of the Criminal Justice Act 1988. Section 93C(2) was repealed when the Drug Trafficking Act 1994, the Criminal Justice Act 1988 and the corresponding legislation in Scotland and Northern Ireland were replaced by the Proceeds of Crime Act 2002.
48. Section 1 of the 1977 Act creates the statutory offence of conspiracy. The relevant subsections are subsection (1), as substituted by section 5 of the Criminal Attempts Act 1981, and subsection (2), which provide:
49. The conspiracy referred to in count 3 was to engage in a course of conduct contrary to section 93C(2) of the Criminal Justice Act 1988. This was one of a series of money laundering and other offences inserted by sections 29 to 32 of the Criminal Justice Act 1993 into Part VI of the 1988 Act, which introduced the power to make confiscation orders. Section 93C of the 1988 Act, which was inserted by section 31 of the 1993 Act, dealt with concealing or transferring the proceeds of criminal conduct. Subsection (2) of this section provided:
The offences to which that Part of the Act applied included any indictable offence other than a drug trafficking offence: section 71(9)(c) of the 1988 Act. Sections 29 to 32 of the 1993 Act extended not to England and Wales only but to Great Britain: section 79(3). This is relevant to something that I shall say later about how a continuing course of conduct contrary to section 93C(2) of the 1988 Act would have been prosecuted in Scotland.
50. The issue to which most of the argument in this appeal was directed is that raised by the first of the two certified questions. It raises some difficult questions about the interaction between the offence created by section 93C(2) of the 1988 Act and the offence of conspiracy as defined by section 1 of the 1977 Act. The second question raises a different and more straightforward issue about how a contravention of section 93C(2) can be proved. I should like to deal briefly with the second question first before addressing myself to the problem about section 1 of the 1977 Act which is raised by the first question. I do not think that application of section 1 to a conspiracy to commit a statutory offence ("the principal offence") can be understood without a clear understanding of the mens rea that is required for the commission of the substantive offence.
Section 93C(2) of the 1988 Act
51. Section 93C(2) requires proof of what the defendant knew or had reasonable grounds to suspect on the one hand, and of the purpose for which he engaged in the activities that the subsection prescribes on the other. The appellant submits that there is an incompatibility between these two requirements. This is because proof that the defendant had reasonable grounds to suspect is an objective requirement - it does not require proof of an actual suspicion on his part - while proof that his purpose was to assist another to avoid prosecution or the making of a confiscation order is a subjective one. How, Mr Krolick asked, can a person who did not know that the property was another person's proceeds of criminal conduct, and of whom all that can be said is that he had reasonable grounds to suspect that this was so, be held to be guilty of engaging in the prescribed activities for the purpose which the subsection describes? He said that the two propositions were incompatible. The prosecution could never establish that the defendant had the required purpose if all that it could establish was that he had reasonable grounds to suspect, but did not actually suspect, that the property was the proceeds of criminal conduct.
52. I think that the apparent mismatch between these two requirements is based on a misunderstanding of what the first proposition involves. The test as to whether a person has reasonable grounds to suspect is familiar in other contexts, such as where a power of arrest or of search is given by statute to a police officer. In those contexts the assumption is that the person has a suspicion, otherwise he would not be thinking of doing what the statute contemplates. The objective test is introduced in the interests of fairness, to ensure that the suspicion has a reasonable basis for it. The subjective test - actual suspicion - is not enough. The objective test - that there were reasonable grounds for it - must be satisfied too. In O'Hara v Chief Constable of the Royal Ulster Constabulary  AC 286, where the issue related to the test in section 12(1) of the Prevention of Terrorism (Temporary Provisions) Act 1984 which gave power to a constable to arrest a person without warrant if he had reasonable grounds for suspecting that he was concerned in acts of terrorism, I said at p 298A-C:
53. The words used in section 93C(2) can, in my opinion, be analysed in the same way. By requiring proof of knowledge or of reasonable grounds to suspect that the property was criminal proceeds, the subsection directs attention in the case of each of these two alternatives to what was in the mind of the defendant when he engaged in the prohibited activity. Proof that he had reasonable grounds to suspect the origin of the property is treated in the same way as proof of knowledge. The subsection assumes that a person who is proved to have had reasonable grounds to suspect that the property had a criminal origin did in fact suspect that this was so when he proceeded to deal with it. A person who has reasonable grounds to suspect is on notice that he is at the same risk of being prosecuted under the subsection as someone who knows. It is not necessary to prove actual knowledge, which is a subjective requirement. The prosecutor can rely instead on suspicion. But if this alternative is adopted, proof of suspicion is not enough. It must be proved that there were reasonable grounds for the suspicion. In other words, the first requirement contains both a subjective part - that the person suspects - and an objective part - that there are reasonable grounds for the suspicion.
54. The second requirement, as to what the purpose was, is where the essence of the mens rea of the offence is to be found. It must be proved that the defendant's purpose was to launder the proceeds of another person's criminal conduct. If he knows the criminal origin of the property, his knowledge is linked to his purpose in engaging in the activity. If he had reasonable grounds to suspect that it had a criminal origin, his suspicion is linked to his purpose in the same way. Proof of what his purpose was will usually have to be found by drawing inferences. Evidence that the defendant knew or had reasonable grounds to suspect will usually be sufficient to show what his purpose was when, knowing or suspecting what the origin of the property was, he actually engaged in the prescribed activity.
55. The appellant tendered his plea of guilty to laundering money on the basis that he suspected that the money was the proceeds of crime. In my opinion this plea was based on a correct understanding of the offence created by section 93C(2). He was entitled to qualify his plea by referring to what the substantive offence requires for its commission. So qualified, the plea implied an acceptance on his part that, when he laundered the money, he suspected that it was the proceeds of crime and that he had reasonable grounds for doing so. It is to be noted that the plea does not mention the word conspiracy. The appellant was seeking to mitigate his part in the affair by making it clear that, when he committed the substantive offences, his role was a subsidiary one. He suspected but did not know. The question to which I now turn is whether what he pleaded guilty to was a contravention of the offence that he was actually charged with, which was conspiracy.
Section 1 of the 1977 Act
56. The statutory offence of conspiracy is committed by a person who agrees with any other person to engage in a course of conduct which will amount to or involve the commission of a crime. The essential elements of the offence are set out in section 1(1). The defendant and at least one other person must have entered into an agreement that a course of conduct will be pursued. And the course of conduct must be one which, if the agreement is carried out in accordance with their intentions, will necessarily amount to or involve the commission of an offence by one or more of the parties to the agreement. If the link between the offence and the intended consequences of the agreement is established, the defendant will be guilty of conspiracy to commit that offence.