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


Annex B

HOME OFFICE CIRCULAR 029/2008

Proceeds of Crime Act 2002: Obligations to Report Money Laundering—The Consent Regime

  1.  This circular contains guidance on the operation of the "consent" regime in the Proceeds of Crime Act 2002 (POCA). It has been drawn up in consultation with the Serious Organised Crime Agency (SOCA), Association of Chief Police Officers (ACPO), Association of Chief Police Officers (Scotland), the Crown Prosecution Service, HM Revenue and Customs, Revenue and Customs Prosecutions Office and others. It is being issued to ensure consistency of practice on the part of law enforcement in considering requests for consent under Part 7 of POCA. This is in response to concerns from the financial services industry and other sectors and professions that decisions are taken in an effective and proportionate way, with due engagement with all participants.

BACKGROUND

  2.  The Proceeds of Crime Act 2002 (POCA) created a single set of money laundering offences applicable throughout the UK to the proceeds of all crimes; these are known as the principal money laundering offences. There are separate offences of failure to disclose money laundering. These are set out in more detail in Home Office Circular 53/2005. A disclosure of money laundering or that another person is engaged in money laundering is commonly known as a Suspicious Activity Report (SAR). SARs can also be made under the Terrorism Act 2000. SARs submitted by firms in the regulated sector (defined by the legislation) reporting that another person is engaged in money laundering must be made to SOCA.

3.  Under POCA individual persons and businesses in the regulated sector are required not only to report before the event suspicious transactions or activity that they become aware of, but to desist from completing these transactions until a specific consent is received. This is the "consent regime" in section 335 of POCA. A person does not commit one of the principal money laundering offences in sections 327-329 of POCA if he makes a disclosure before the "prohibited act" takes place and obtains the appropriate consent. (Under certain conditions, as set out in section 338(3), a defence can be obtained by reporting after the event). Such disclosures, or "consent SARs", can be made to any constable or officer of Revenue and Customs. However, current practice is for them to be made to SOCA. Where they are made to a constable or officer of Revenue and Customs they must be forwarded to SOCA as soon as practicable.

  4.  The "consent" provisions in sections 327-329 and section 335 of POCA have two purposes: they offer law enforcement agencies an opportunity to gather intelligence or intervene in advance of potentially suspicious activity taking place; and they allow individuals and institutions who make reports seeking to consent to proceed with a "prohibited act" the opportunity to avoid liability in relation to the principal money laundering offences in the Act.

CONSENT—THE DECISION MAKING PROCESS

  5.  Decisions on requests for consent to proceed with a transaction or activity ("a prohibited act") are taken by SOCA in consultation with the relevant law enforcement agency. There is a great need to ensure that the practices of all law enforcement agencies are consistent in this area. A policy has been formulated, in agreement with key partner agencies, which sets out the high-level principles by which the law enforcement agencies should make decisions on consent, and how these principles should be applied. In broad terms it is important that law enforcement agencies recognise the potential significant impact that each report and decision can have, for example on whether or not:

    — the proceeds of crime are recovered;

    — crime is prevented;

    — honest individuals and businesses are exposed to financial loss or litigation; and

    — the smooth running of commercial business is disrupted.

  6.  The detailed policy is attached. It is very important that a consistent approach to dealing with requests for consent is adopted by all law enforcement agencies in order that the regime achieves its intended objectives. Against this background, chief officers of police and other relevant stakeholders should adopt and apply this policy in their organisations.

SOCA CIRCULAR ON CONSENT POLICY

  This document sets out the high-level principles by which decisions to grant or refuse consent under s.335 of the Proceeds of Crime Act 2002 should be taken.

BACKGROUND

  1.  One of the defences to the money laundering offences in sections 327-329 of the Proceeds of Crime Act 2002 (POCA) is the making of an authorised disclosure and the obtaining of appropriate consent.

2.  Further detail is available on the SOCA website, including on:

    — what constitutes an authorised disclosure for these purposes;

    — what constitutes appropriate consent;

    — the time limits within which SOCA must respond; and

    — the moratorium period before which the reporters cannot act in the event of a refusal of consent.

THE ROLE OF SOCA AND OTHER LAW ENFORCEMENT AGENCIES

  3.  In practice SOCA operates as the national centre for all authorised disclosures and also for the issue of decisions concerning the granting or refusal of consent. However, the majority of consent requests are of interest to other law enforcement agencies (LEAs) beyond SOCA.[4] In such cases, the decision-making process will consist of a collaborative effort between SOCA and the other LEA, with the latter providing a recommendation to SOCA. While the final decision will be taken by SOCA, in most cases it is likely to be based largely on the recommendation provided by the interested LEA.

CONSENT—THE BALANCING EXERCISE

  4.  Policy on the operation of the consent regime, including on the basis for making decisions on whether to grant or refuse consent, has been developed in line with the Government's anti-money laundering and counter-terrorist financing strategy. This determines three organising principles which must guide anti-money laundering activity:

    — effectiveness—making maximum impact on the criminal threat;

    — proportionality—ensuring that the approach is balanced as far as possible in respect of the costs and benefits; and

    — engagement—collaborative working amongst regime participants to ensure success.

  5.  The manner in which these three principles should be applied to the consent regime is set out below.

  Effectiveness: Decision making in relation to whether to grant or refuse, including the formation of recommendations by LEAs, should be informed by the need to ensure the regime delivers law enforcement objectives in accordance with the Proceeds of Crime Act 2002. These objectives are to:

    — enable suspected money laundering and other underlying criminal activity to be detected;

    — prevent money laundering, and lead to the possible prosecution of offenders and recovery of the proceeds of crime which would otherwise be used to fund further crime or a criminal lifestyle or both; and

    — prevent the movement of suspected criminal property for a limited period to allow such measures to be taken.

  Proportionality: However, decisions on whether to grant or refuse consent, including the formation of recommendations by LEAs, are also informed by the need to balance the public interest of the impact on crime with other interests. This includes the private rights of those involved in the activity which is subject to the consent request, and those of the reporter. All parties may have contractual and/or property rights which may be affected by a refusal of consent. Officers should also bear in mind the practical implications for these parties. If the case does not prove to involve money laundering a decision to refuse consent will cause a legitimate transaction to be frustrated. The results of this might include:

    — significant financial loss,

    — a legitimate business might cease trading; or

    — severe financial or personal consequences to an individual (for example if concerns the purchase of residential property).

  The result of such a balancing of interests is that, in the majority of cases, consent should only be refused when a criminal investigation with a view to bringing restraint proceedings is likely to follow or is already under way. However consent may be refused for other reasons (for example, to permit an application for a property freezing order) subject to the outcome of the same balancing exercise.

  Engagement: as well as consultation with interested LEAs to obtain relevant information and reach a decision, SOCA will also consult with reporters to obtain further information as required. In addition, when a decision has been taken to refuse consent, SOCA is responsible for actively monitoring the situation throughout the moratorium period. This is to ensure that, in cases where consent continues to be withheld, this is justified. SOCA Officers therefore engage with interested LEAs to conduct periodic reviews accordingly. In addition, SOCA will consider any reasonable request for a review by persons affected by the decision (such as the reporter).

RECORDING THE DECISION

  6.  Any decision or recommendation to SOCA, particularly if a refusal of consent, should be properly documented, in order to demonstrate compliance with this guidance, and to reduce the likelihood of legal dispute.

THE NEED FOR REVIEW

  7.  Where a decision has been taken to refuse consent, it should be kept under review during the moratorium period. SOCA officers are responsible for actively monitoring the situation throughout the moratorium period to ensure that, in cases where consent continues to be withheld, this is justified. It is equally the responsibility of the appropriate LEA to monitor any change in circumstances and to inform SOCA. SOCA will conduct regular periodic reviews in collaboration with any interested LEAs. The potential of a refusal to have a serious impact on any party and the speed at which circumstances are changing will determine the frequency of these reviews.

WIDER APPLICATION OF THE POLICY

  8.  LEAs are invited to make their own recommendations by reference to these criteria. It is in the interests of fairness to all those affected, and in the interests of good public administration, that any recommendations are provided consistently with this policy and the strategic principles of the Government's anti-money laundering strategy.


4   54.5% of requests for consent were referred to LEAs in the year October 2007 to end-September 2008. Back


 
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