The first legislation which prohibited obtaining property which had been obtained unlawfully was contained in Section 22(1) of the Theft Act1968. The act states that if a person obtains goods that he knows are stolen and treats them like he is the owner then he is guilty of the offence. The Theft Act is a wide ranging piece of legislation but only relates to goods which are or represent the proceeds of stolen goods. Section 22 covers a wide range of laundering activities when money of other property could be dishonestly handled.
Until the Misuse of Drugs Act 1971 there was no legislation to cover the gains achieved from drugs. Section 27 (1) of the act permitted the court could order the forfeiture of any property including money found in the possession of the convicted person.
However the range of s27 of the Misuse of Drugs Act was limited in 1980 by the House of Lords ruling in the case of R v Cuthbertson (1981) where an appeal was granted against the forfeiture of £750,000. This resulted in the Home Office establishing the Hodgson committee to inquire into way to fill the vacuum created by the House of Lords decision.
The Hodgson’s committees findings along with a input from the Home affairs Select Committee led to the establishment of the Drug Trafficking Offences Act (1986). The Drug Trafficking Offences Act was restricted to drug trafficking-related money laundering offences it was the first time that financial institutions had been required to report knowledge or suspicion of drug trafficking. However when the financial institutions were suspicions of a particular transaction but did not have enough information to determine whether the action was based on drug trafficking or other illegal activities. This resulted in financial institutions reporting other illegal activities and in 1988 through the Criminal Justice Act they were given the same protection from civil suit for non drug disclosures as well as for drug related ones.
The Prevention of terrorism Act 1989 and the Criminal Justice Act 1988 outlawed concealing or transferring proceeds of crime to avoid prosecution. These acts along with the Money Laundering Regulations 1993 used to implement the First EU Directive extended the requirement to cover more and more offences. However this led to confusion as to what was covered and what was not.
The modern offence of Money laundering was created in the Criminal Justice Act 1993. The legislation was developed to take into account the EU Directive (1991) which itself was based on the 1988 UN Drugs convention and the Basle Statement of Principles, recommendations of FATF and the Council of Europe Laundering Convention. The act was significant as for the first time a person could be guilty of laundering the proceeds of criminal conduct even if all the conduct took place overseas. It also, for the first time created a obligation to report somebody suspected of laundering to the police.
As the threat of terrorism increased the Government tidied up and consolidated its laws to this subject with the passing of the Terrorism Act 2000. This covered terrorist finances but helped the government set out its future plans on money laundering. Also in 2000 the Financial Services and Markets Act 2000 set up the Financial Services Authority (FSA). The FSA has a objective to reduce financial crime and ‘must have regard to the desirability of regulated persons taking adequate measures to prevent money laundering, facilitate its detection and monitor its incidence’
With the new powers the FSA made several rules to deal with money laundering. These rules not only cover those who have a license from the FSA but the Act gives the FSA the power to bring criminal prosecutions for breaches of Regulation 3 of the Money Laundering Regulations 2003 to any firm or person who is covered by the regulations. This power to bring criminal prosecutions will make any company who fails to have appropriate systems and controls in place to prevent money laundering to think twice.
September 11th 2001 prompted the government to re evaluate the money laundering laws regarding terrorism an passed the Anti-terrorism, Crime and Security Act 2001. The authorities gained greater powers and the act amended the money laundering provisions of the Terrorism Act with regards to terrorist financing. The Act also ensured the UK would be in line with the appropriate requirements that had been agreed in the second EU directive. The Act also dealt with crime in general. Part 12 of the act deals with bribery and corruption and corruption outside of the United Kingdom making bribery and corruption that take place outside the UK prosecutable in the UK.
A significant enhancement to money laundering legislation was the Proceeds of Crime Act 2002. The Act repealed all previous money laundering legislation, except the money laundering provisions in the Terrorism Act 2000 and Anti-terrorism, Crime and Security Act 2000, and consolidates it into Part 7 of the Crime Act. The Crime Act was also an expansion to make it truly ‘all crimes’ legislation and also covered the requirements of the Second EU Directive.
The Crime Act has been amended by the Serious Organised Crime And Police Act 2005. Section 327 makes it a offence to conceal, disguise or remove criminal property. Section 328 makes it a offence to be involved in a arrangement that facilitates the retention, use or control of criminal property. Section 329 makes it a offence to acquire, use or have possession of criminal property.
The Serious Crime Act 2007 was an amendment of the Proceeds of Crime Act 2002. The act abolished the Assets Recovery Agency and transferred its powers and obligations to the Serious Organised Crime Agency in April 2008
The Money Laundering Regulations 2007 implement the EC Third Money Laundering Directive in the UK. The 2007 regulations require businesses to have in place checks and controls to prevent money laundering, appoint a nominated person to consider internal suspicions and report them to SOCA and to have in place procedure to identify a customer’s identify before entering into a business relationship.
The Financial Services and Markets Act 2000 has been very effective against money laundering as it gave the FSA a very important tool in to fight money laundering. Part XI of FSMA 2000 gave the FSA extensive investigatory powers. The FSA has the power to request information from firms, to appoint investigators to ask for the assistance of foreign financial regulators and to give the appointed investigators additional powers. The FSA used these powers when it investigates Northern Ireland Insurance Brokers Limited to determine whether funds had been laundered through the firm. The FSA concluded that firm and the directors had laundered £8m. The FSA ordered the firm to cease trading in several regulated activities.
The Financial Services and Markets Act has also been effective as it aims to prevent those who are not authorised to deal in banking or investment business from doing so and those to make sure that those who are regulated do so correctly. The FSMA 2000 also made the FSA a prosecuting authority for certain money laundering offences. The FSA can prosecute both people who are authorised an not by the FSA. Where there has been a money laundering breach the FSA has not hesitated to impose a fine even when there was no evidence on actual money laundering. Under powers obtained under FSMA, the FSA fined the Bank of Scotland £750,000, Investment Services UK Limited £175,000, Raiffeisen Zentralbank £150,000, Northern Bank £ 1.25m, Bank of Ireland £375,000 and the Abbey National £2.2m. The FSMA 2000 has been effective and by giving the FSA these powers to fine companies it has resulted in change of attitude from businesses to combat money laundering. A 2005 survey revealed that the vast majority of firms complied with the anti laundering regulations to such a big extent was not because it wanted to combat money laundering but rather because the threat of sanctions. This shows that without the extensive powers given in the FSMA 2000 firms would be less vigilant about money laundering
The Proceeds of Crime Act (POCA) 2002 was passed because powers to confiscate criminal assets had developed in a piecemeal fashion resulting in legislative anomalies. It gives the courts power to confiscate criminal proceeds following a conviction for a criminal offence.
The effectiveness of POCA was examined in 2004 in a joint inspection by the Crown Prosecution Service Inspectorate, Her Majesty’s Inspectorate of Police and Her Majesty’s Magistrates Court Service Inspectorate named Payback Time. Payback Time concluded that while there were pockets of excellent practice, many opportunities for asset recovery were being routinely missed. It also discovered that there were that there was widespread lack of awareness of the powers amongst practitioners.
Confiscation orders granted by the courts under POCA have had major deficiencies in enforcement which have been highly visible. In Crowther v United Kingdom the European Court of Human Rights held that waiting a period of 4 years since a confiscation order was made before customs had acted on the order was a breach of Article 6(1) of the European Convention on Human Rights.
Levi (2000) noted that once a order was made, the prosecutors or court staff were reluctant on enforcing it unless the sums recovered were likely to be greater than the costs of enforcement. In light of these weakness an Enforcement Task Force was created in 2002 to enforce confiscation orders which had been obtained but not followed up by the authorities. The ETF is a multi agency team with staff from HMRC, the CPS and police. After two years it had enforced 826 confiscation orders and obtained £52 million in uncollected funds. The largest cash forfeiture made under POCA is £3.25 million ordered to e forfeited in 2005 by Dover Magistrates. It was seizes by HMRC after being discovered in a false floor of a empty German-registered refrigerated trailer.
Payback Time has concluded that the confiscation provisions are well designed and fit for purpose the have been described as “the central weapon” to fight money laundering. However Payback Time concluded that efforts to embed POCA as a mainstream weapon in the fight against money laundering has been disappointing. Police forces are missing countless opportunities to enforce POCA and concluded that the framework governing POCA related activities needs to be strengthened
The expansion of the forfeiture provisions have been a success. It does not appear that the legislation requires any major amendments as its system is a quick, cost effective means of forfeiting criminal proceeds. However police forces are not using the provisions to their full potential and police officers need more training to the point where they feel confident about seizing cash.
The Civil Recovery of criminal proceeds was introduced in POCA after being recommended the Home Office Working Group on Confiscation and the PIU reports . It is extremely effective for when confiscation after criminal proceedings is not a option due to death of the property owner, an acquittal in criminal proceedings, previous failures in confiscation hearings, where the defendant is not in the jurisdiction, where the property owner is not known or if there is insufficient evidence to prosecute a criminal offence.
The government also announced a incentive scheme in 2006-2007 that allowed recovery agencies to keep half of the funds that they recovering a attempt to recover more criminal assets.
Civil recovery litigation is both slow an expensive. The former director of the Assets Recovery Agency has been “beset by the time taken to litigate cases through the civil legal system”. Awaiting appeal decisions on crucial issues has had a significant impact on the lifetime of both the appeal cases and on other cases awaiting a hearing.
The agency has informed a parliamentary select committee that there are a number of changes to the legislation which would assist it to operate more effectively. This including in extending the legislation to include the civil forfeiture of the instrumentalities of crime, the inclusion of rebuttable presumptions and the provision of a scheme for “literary proceeds”.
In the 4 years that the ARA had been in operation it had only recovered £8m despite costing £60m to set up. In a effort to improve the speed and efficiency of the ARA the Serious Crime Act 2007 transferred its powers to the Serious Organised Crime Agency.
POCA has provided a adequate e state in regards to the confiscation and cash forfeiture provisions and require no further amendments. However the civil recovery provisions require major changes in order for them to evolve to a more effective state. However the act also carried anomalies. Section 7 of the act outlaws gains from acts carried out abroad which are illegal. This means that a British lorry driver who gets paid for transporting goods from France and drives on the right in France, a criminal offence in Britain a and a Spanish bullfighter who buys a property in London with the money earned in the bullring have both fallen foul of the Act.
b) can the intrusion into people’s private lives be justified?
I believe that the intrusion can be justified provided that the Government does not exceed the limits in which personal information can be released further than they already are. I believe that the balance in protecting others by releasing information and protecting customers privacy has been achieved by the following developments in the law.
The concern of personal and confidential information being released to other parties has been a concern to people for hundreds of years however the first concept of Banker-Customer confidentiality developed from Tournier v National Provincial and Union Bank of England. The Court of Appeal stated two key principles: firstly that there was, as a matter of law, a duty of confidentiality owed by a bank to a customer through the principles of contract law upon which the relationship was based and secondly that this duty was not absolute and was subject to four qualifications. The Court stated:
.....On principle I think that the qualifications can be classified under four heads:
(a) Where disclosure is under compulsion by law;
(b) where there is a duty to the public to disclose;
(c) where the interests of the bank require disclosure;
(d) where the disclosure is made by the express or implied consent of the customer.
After Tournier v National Provincial and Union Bank of England the concept of bank confidentiality was central to the bank- customer relationship. A duty of confidentiality is owed to the customer by the bank and begins when the customer makes contact with the bank. However as stated in Tournier this obligation is not absolute and is subject to the four qualifications mentioned.
A bank can be compelled to release a customer’s information if a Act of Parliament compels it to. The major legislation is as follows: The Banking Act 1979 sets out restrictions on the release of information without consent. The Taxes Management Act 1970 which compels banks to notify the Inland Revenue of customers accounts which are credited with interest about a certain amount. There are also Money laundering legislation which orders a bank to notify the authorities if money laundering is suspected. Under the Proceeds of Crime Act 2002 and amended by the Serious Crime Act 2007 a bank must disclose suspicions transactions to the Serious Organised Crime Agency. It is then a offence to tip off the customer that a disclosure has been made.
The second exception is a duty to disclose information where such disclosure would be in the public interest. This duty is rarely exercised as the many Acts of Parliament created cover most instances where information would be disclosed in the public interest. However the duty still exists in time of war if the bank had knowledge of a customer trading with a enemy state.
The third exception is where it is in the banks interest to disclose information. When a bank wishes to sue a customer for unpaid debts it must disclose information in trying to obtain that debt back. A common practice is sharing information about the accounts through Credit Reference Agencies. In addition banks now pass details to the subsidiary companies to attempt to sell other goods.
The fourth exception is where the bank has given express or implied consent. The bank may then pass information to third parties. Express written or verbal consent will always be requested for bankers references as the bankers use of “implied consent” was tested in Turner v Royal Bank of Scotland (1999). RBS had relied on implied consent but Turner had objected to a reference being sent. The court held that even though it was a common thing to do amongst banks it was insufficient to bind customers as it “did not amount to usage”. It was also a breach of the banking code.
I believe that the intrusion into people’s private lives can be justified. The boundaries in which the authorities and other interested people can look at a person bank details is at a perfect balance between the customers privacy and the other factors in which the disclosure is aimed at such as crime, terrorism and money laundering. Banks will always be used as a means of these satisfying illegal activities and if a balance is drawn in reducing these illegal activities and not interfering is good law abiding citizens accounts then the intrusion can be justified.
Bibliography
Cranston, Principles of Banking Law, 2nd edition, Claredon Press, Oxford, 2002
Delton, Introduction to finance, 5th edition, Harvard Business School Press, 2007
Gems, Work of the FSA, 1st edition, Prentice Hall, 2006
Wadsley, D and Penn, G, The Law relating to Domestic Banking, 2nd edition, Sweet & Maxwell, London, 2000
Table of Cases
Crowther v United Kingdom 2005
R v Cuthbertson (1981)
Tournier v National Provincial and Union Bank of England (1924)
Turner v Royal Bank of Scotland (1999)
Table of Statutes
Anti-terrorism, Crime and Security Act 2000
Banking Act 1979
Criminal Justice Act 1988
Drug Trafficking Offences Act 1986
European Convention on Human Rights
Financial Services and Markets Act 2000
Misuse of Drugs Act 1971
Prevention of terrorism Act 1989
Proceeds of Crime Act 2002
Serious Crime Act 2007
Taxes Management Act 1970
Terrorism Act 2000
Theft Act 1968
Website
Emerald, Antony Kennedy, Assets Recovery Agency, Belfast, Northern Ireland
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/EmeraldFullTextArticle/Articles/3100100102.html
Access on 4 January 2009
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