Introduction
Solicitors’ obligations in relation to Anti Money Laundering and Combating Terrorist Financing (AML / CTF) have existed since 2002. Our profession was brought within the AML / CTF umbrella because we handle so much of other people’s money – client money. We are seen as ‘gatekeepers’. Those who have money to ‘launder’ are likely to seek to use our services in all manner of ways – some seemingly legitimate, others downright illegal. Often the matter will be ‘dressed up’ to look like a legitimate activity.

Solicitors are legally obliged to police likely illegal activity and if we get it wrong we are in line for severe penalties, including imprisonment. This area is policed by the Serious Organised Crime Agency (“SOCA”).

But what is money laundering?
Money laundering is the process by which the proceeds of crime, and the true ownership of those proceeds, is changed so that the proceeds appear to come from a legitimate source. There are three acknowledged stages of money laundering. First the “placement”. This occurs when cash generated from crime is placed in financial systems. The middle stage is “layering”. After the proceeds of crime have been placed into the financial system, layering occurs when the money passes through a series of complex transactions in order to obscure the origin. Finally “integration” concludes the laundering process. Once the origin of the funds has been obscured, the funds can reappear as legitimate funds or assets.

Whilst the above may conjure pictures of drug running and multinational crime syndicates, money laundering is now deemed to occur not only in such sensational examples, but also the mundane area of tax evasion and benefit fraud. Moreover, there is no “de minimis” rule. A ten pound “cash in hand job” could be sufficient to oblige us to take action.

The Substantive Law
There are two quite separate issues to consider.

Firstly, we must be aware of the primary money laundering offences as set out in the Proceeds of Crime Act 2002 (“POCA”).

Secondly, we must abide by the duties imposed on us by reason of coming within the “regulated sector”. This commenced on 1 March 2004 by way of the Money Laundering Regulations 2003 (“ML Regs 2003”). The ML Regs 2003 have been repealed and replaced, as of 15 December 2007, by the Money Laundering Regulations 2007 (“ML Regs 2007”).

THE PRIMARY MONEY LAUNDERING OFFENCES

Section 330 POCA – failure to report
This first offence straddles the first section on the regulated sector and this second section on the new primary offences. Section 330 of POCA is a new primary offence but it relates to failures to report knowledge or suspicion of money laundering acts within the regulated sector.

Section 19 of the Terrorism Act 2000
This provides that anyone must report as soon as practicable to a constable (or SOCA) if they know or suspect that another person has committed a terrorist financing act based on information which came to them in the course of their working life.

Section 327 POCA
Under Section 327 it is an offence to conceal, disguise, convert, transfer or remove criminal property from England and Wales, Scotland and Northern Ireland.

Concealing or disguising criminal property is widely defined to include concealing or disguising its nature, source, location, disposition, removal, ownership or any right connected with it.

Section 328 POCA
Under section 328 POCA it is an offence to become involved in an arrangement which a person knows or suspects will facilitate the acquisition, retention, movement or control of criminal property by someone else. Arrangement is a wide term and can include, but is not limited to, transactions. We must be particularly aware of this section as land and matrimonial transfers/arrangements blighted by money laundering will fall within the definition of the offence.

Section 329 POCA
Under section 329 it is an offence to acquire, use or have possession of criminal property.

Solicitors can easily become embroiled in these offences. Where they have knowledge or suspicion that their client (or another party) has committed a money laundering act they must report the matter to SOCA or risk going to prison themselves. Moreover, if a solicitor should have had knowledge or suspicion, the same applies. Solicitors must be on their guard.

Sections 333 and 342 – tipping off
An offence is committed under Section 333 if we “tip off” the money laundering suspect that a report is being made to the Money Laundering Reporting Officer (“MLRO”) or to SOCA. An offence is committed under Section 342 if an investigation into money laundering is prejudiced by informing either the person who is the subject of the report or even someone other than the person named in the report.

THE OBLIGATIONS LAID DOWN BY THE MONEY LAUNDERING REGULATIONS 2007

Solicitors have been subject to money laundering regulations since 2004. The most recent regulations came into force on 15 December 2007.

We are obliged to establish such procedures of internal control and communication as may be appropriate for the purpose of forestalling and preventing money laundering.

Hatch Brenner has invoked many procedures since 2004, which have been adapted to take into account the further obligations set out in the ML Regs 2007. These include appointing a Money Laundering Reporting Officer and ensuring that all relevant clients are accurately identified.

Failure to comply with the ML Regs 2007 is an offence in itself, irrespective of whether money laundering has actually taken place.