Recent Developments In Money Laundering

This article first appeared in Money Laundering Bulletin, December 2010

There have been two cases of significant interest to practitioners in the field of criminal litigation and money laundering compliance in 2010. The first, in February, was the case of Shah v HSBC Private Bank (UK) about the remedies available to a customer faced with a bank failing to carry out instructions and the second, in July, was the case of R v Geary, in which the Court of Appeal gave some useful guidance on the interpretation "criminal property" for the purposes of "arrangements" under section 328 of the Proceeds of Crime Act 2002 (POCA).

Defining the scope of 'criminal property' for the purposes of Part 7 of POCA 2002

The issue before the Court of Appeal in R v Geary [2010] EWCA Crim 1925 was the scope of the words 'criminal property' in the context of section 328 POCA 2002.

Section 328(1) reads:

'A person commits an offence if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person.'

The issue before the court was whether, for the purposes of section 328, property could be construed as 'criminal property' if it was only rendered so by the very 'arrangement' itself.

In Geary, H sought to launder with G money acquired through fraudulent means. G was to hold the money for a short while, spend some of it and then return to H the goods bought and the balance. H lied to G about the provenance of the money, spinning G the yarn that the purpose of the arrangement was to conceal H's matrimonial assets from his soon-to-be-ex-wife. G entered the arrangement on this premise. The basis of G's guilty plea at trial formed the subject of his appeal. G asserted that the mental element of the offence had not been satisfied, because he did not know or suspect that he was dealing with 'criminal' property. It is important to remember, as Moore-Bick LJ made clear at the beginning of his judgment, that the issue in the case was the mens rea, even if much of the argument centred on the actus reus.

The Crown's case was that the mental requirement was satisfied since G had knowingly entered a conspiracy to pervert the course of justice and/or defraud H's wife, thereby giving the money, in effect, a second layer of criminality. Alternatively, the Crown argued that, developing the conspiracy line of thought, the money became criminal property (for the purposes of G's mental state) when the money was first handed to G and the offence was satisfied only subsequently when G returned it to H.

The court favoured the appellant's argument, thus opting for a narrow interpretation of section 328. The rationale was that the natural and ordinary meaning of the section led to the conclusion that, for the offence to...