Compliance Issues With The Payment Of Ransoms To Somali Pirates

Paul and Rachel Chandler

Since October 2009, attention has been focused on the plight of Paul and Rachel Chandler, British subjects who have been held captive by Somali pirates since their yacht was hijacked near the Seychelles. The prospect of a successful military operation to free them appears to be slim. If the pirates maintain their demands, it seems that the Chandlers will be released only by the payment of a ransom. Given the British Government's refusal to negotiate with the pirates, and the United Nations Security Council's concern about escalating ransom payments—Resolution 1897 (2009)—will the payment of a ransom be legal?

Extortion under English law

Different countries have different laws regulating responses to financial demands by kidnappers and hostage takers. In English law the payment of a ransom has in principle been legal for almost 200 years, since the reign of George IV. The question of whether the payment of ransoms should now be prohibited was considered last year by the House of Lords' EU Committee in their report "Money laundering and the financing of terrorism" (HL Paper 132-I, published 22 July 2009). The Committee concluded (paragraph 222) "We have received no evidence to suggest that the payment of a ransom should be made a criminal offence, and we do not suggest that the law should be changed." However, that still leaves a number of potential obstacles in the way of paying money to Somali pirates, whether or not in response to a ransom demand. The two main subjects to consider are money laundering and the financing of terrorism.

Proceeds of Crime Act, 2002

Part 7 of the Proceeds of Crime Act 2002 ("POCA") creates several offences in respect of money laundering. In relation to Somali piracy the most relevant features are likely to be s.327, dealing with the offence of transferring criminal property; s.328, facilitating the acquisition of criminal property; s.329, acquiring, using or possessing criminal property; and s.330, failing to disclose knowledge or suspicion of money laundering, gained in the course of a business in the regulated sector.

A key requirement for the committing of an offence under these provisions is the existence of criminal property, which for present purposes raises the questions (1) Is a ransom payment criminal property; and (2) If so, when does it become criminal property?

Meaning of Criminal Property

Money received by pirates for the release of ships and cargo and hostages is clearly...