Money laundering and the financing of terrorism - European Union Committee Contents


Annex A

THE LAW IN THE UK ON RANSOM PAYMENTS

  1.  In UK law the payment of a ransom is not an offence as such, although HMG itself will not make or facilitate a ransom payment, and will always counsel others against any such substantive concessions to hostage takers. Acts of piracy, and other forms of extortion, may include a threat to life of any persons taken, and potential damage to property. The person or group of whom the demand is being made may also be instructed not to contact the authorities. Although the payment of ransom per se is not illegal, depending on who the money is paid to and in what circumstances, there is a possibility of a money laundering or terrorist financing offence being committed.

2.  In kidnap situations there are invariably extremely testing judgements to be made between paying a ransom and not making a payment which could endanger the hostage(s) and any property held. If ransom payment was an offence it would risk criminalising families and employers who were already in the position of having to make these difficult decisions regarding the fate of the hostages. A change in the law could also discourage those of whom the demand is made from contacting the law enforcement authorities for their assistance.

PROCEEDS OF CRIME AND RANSOM PAYMENTS

  3.  Section 328(1) of the Proceeds of Crime Act 2002 makes it an offence for a person to enter into or become 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.

4.  Criminal property is defined in section 340 as property that constitutes a person's benefit from criminal conduct or represents such a benefit (in whole or in part and whether directly or indirectly), and the alleged offender knows or suspects that it constitutes or represents such a benefit.

  5.  There are defences to the offence in section 328(2) if a person makes a report to and obtains prior consent from the Serious Organised Crime Agency (SOCA) (who operate the suspicious activity reporting system in the UK); intends to make such a report but have a reasonable excuse for not doing so; or the person is carrying out a function relating to the enforcement of any provision of the Act or any other enactment relating to criminal conduct or benefit from criminal conduct.

  6.  Money which is assembled in the UK in preparation for the payment of a ransom to pirates is not at that stage criminal property. It becomes criminal property when in the hands of the recipient. Therefore, consent may be required when assembling money in order to provide a defence to the money laundering offence under section 328(1) of the Proceeds of Crime Act. Determining whether consent is required under POCA occurs on a case-by-case basis. Where such a request for consent is made SOCA considers it in the light of Home Office guidance (Circular 029/2008) (attached at Annex B). Their decision is made on the facts of each case and the effect of their decision will be to confer, or not, a defence to a prosecution for a money laundering offence; it is not to judge the propriety of the planned ransom payment. In the event that a person did not seek consent, and the money was in all respects legal until it reached the hands of the pirates, it is unlikely that a prosecution for money laundering, solely because consent was not obtained, would be regarded as being in the public interest.

TERRORIST FINANCING AND RANSOM PAYMENTS

Terrorist finance offences

  7.  Section 15 (3) of the Terrorism Act 2000 makes it an offence for a person to provide money or other property if he knows or has reasonable cause to suspect that it will or may be used for the purposes of terrorism. Section 17 of that Act makes it an offence for a person to enter into or become concerned in an arrangement as a result of which money or other property is made available or is to be made available to another, and the person knows or has reasonable cause to suspect that it will or may be used for the purposes of terrorism. There is extra-territorial jurisdiction over these offences, meaning that a person could still be found guilty in a UK court if the action took place overseas (s.63).

8.  The definiton of terrorism for the purposes of these offences is set out in s. 1 of the 2000 Act (as amended by the Counter-Terrorism Act 2008) as being the use or threat of action which is designed to influence the government or an international governmental organisation or to intimidate the public or a section of the public, and is made for the purpose of advancing a political, religious, racial or ideological cause. The types of action that fall within the definition of terrorism are set out in s.1(2) and (3). The definition of terrorism includes action taken for the benefit of a proscribed organisation (s.1(5)).

Failure to disclose offences

9.  Section 19 of the Terrorism Act 2000 stipulates a general duty to report suspicions of terrorist finance offences to the police or SOCA, failure to do so being an offence. Section 21A makes separate provision for those individuals working in the regulated sector; it is an offence not to report suspicions of terrorist finance offences to the police or SOCA. There are certain defences to these offences, including that the person had a reasonable excuse for non disclosure, and that the person is a professional legal adviser who received the information in privileged circumstances.

Defences to terrorist finance offences

10.  Under s. 21, a person does not commit one of the terrorist finance offences (s.15-18) if he is acting with the express consent of a constable. Under s. 21ZA a person does not commit one of the terrorist finance offences if he has made a SAR to SOCA about the transaction or financial arrangement in question before becoming involved and has received consent from SOCA to becoming involved in the transaction or arrangement.

11.  Section 21ZB provides that an offence is not committed if a person who is involved with a transaction or arrangement had a reasonable excuse for not making a SAR beforehand, and made one as soon as practicable (and on their own initiative) afterwards. Section 21ZC provides a defence for those who have a reasonable excuse for failure to make a disclosure of the kind mentioned in section 21ZA and 21ZB.

Could payment of a ransom constitute a terrorist finance offence?

  12.  In broad terms therefore, the payment of ransoms to individuals who are acting purely for personal gain would not constitute a terrorist finance offence. As such the issues of consent under the Terrorism Act do not arise.

13.  In the case of Somalia, the existence of terrorist groups in the area is well-known. However it is not thought at the present time that Somali pirates are connected in any systematic way to those terrorist organisations. If in the future it were to become known that such a connection existed, then it might become the case that the knowledge or suspicion limb of the offence would be satisfied, ie that a person had "reasonable cause to suspect that [the money or property involved in a ransom] … may be used for the purposes of terrorism", and therefore an offence under ss15-18 of the Terrorism Act 2000 would be committed by the provision of a ransom payment to Somali pirates. Were this to be the case, a person would need to provide a SAR if they had a suspicion that such an offence was taking place, and seek consent from SOCA to proceed with any transaction they were involved in.

  14.  There is no current Home Office guidance on ransom payments and terrorist finance offences, and it is not Home Office policy to offer legal advice in specific situations. Anyone involved in the provision of a ransom payment must satisfy themselves that there is no reasonable cause to suspect that the money or other property will or may be used for the purposes of terrorism.

May 2009



 
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