UK: Money laundering reporting requirements refined at last

The government finally appears to have acknowledged that the current money laundering reporting regime is onerous. The need for refinement was recognised last month by the chairman of the Serious and Organised Crime Agency, the body which will take responsibility for money laundering from NCIS next April. Sir Stephen Lander told a Financial Times conference that he intended to make the reporting system less time-consuming and more effective and to create a closer partnership with the private sector.

The statement came just ahead of important changes to the money laundering provisions contained in the Proceeds of Crime Act 2002 ("POCA"), which came into effect on 1 July this year. The key changes introduced by the Serious Organised Crime and Police Act ("SOCA"), the legislation which established Sir Stephen’s new agency, are:

• A "deposit-taking body" (such as a bank) will no longer commit the concealing/arranging money laundering offences if it carries out those activities in connection with criminal property in the course of operating an account maintained with the body where the value of the criminal property concerned is less than the "threshold amount" (currently set at £250). Whilst this change will be of great assistance to banks, others in the regulated sector must continue to make reports to NCIS in respect of trivial sums below this threshold. (s.103 SOCA)

• The stand-alone obligation of those in the regulated sector/ nominated officers to report money laundering suspicions to NCIS will now only apply in cases where the reporting party knows the identity of the suspected money launderer or the whereabouts of laundered property (or has information which would assist in that regard). This change is likely to be of most significance to banks and accountants which have previously been making frequent NCIS reports in circumstances when the identity of the launderer is not known (as would be the case with most credit/debit card fraud). (s.104 SOCA)

There is no timetable currently in place for the bringing into force the other significant change to POCA, the so-called "Spanish Bullfighter" provision in s.102 SOCA. Currently the definition of "criminal conduct" for the purposes of the POCA money laundering offences includes overseas conduct which is lawful in the foreign jurisdiction but would amount to a criminal offence if it took place in the UK. Section 102 will provide:

• Money laundering offences will no longer be committed in this situation if a person knew or believed at the time that the criminal conduct giving rise to the criminal property took place overseas and was not contrary to the law of the foreign jurisdiction. To fall within this carve out from liability, the belief that the conduct was not unlawful overseas must have been based upon reasonable grounds. This will be a welcome amendment to the current position, although those conducting business abroad will still need to investigate the applicable laws in sufficient depth to satisfy themselves to a reasonable degree of certainty that any conduct with which they are involved is not illegal. (s.102 SOCA)

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 05/07/2005.