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Money laundering offences apply to conduct occurring entirely outside the UK

 

20 April 2015

An individual can be prosecuted for committing a money laundering offence under the Proceeds of Crime Act 2002 even if their conduct took place entirely outside the UK, so long as a significant part of the underlying criminal scheme took place in the UK and it had harmful consequences in the UK (R v Rogers & ors [2014] EWCA Crim 1680, 1 August 2014).

The defendants were participants in a fraudulent scheme which involved persuading people in the UK to pay advance fees for certain services which were never performed. The money was paid into UK bank accounts and was used to pay expenses, with profits being transferred to accounts in Spain. Approximately GBP 5.7 million was obtained from the scheme. One of the fraudsters, Rogers, was a UK citizen resident in Spain who permitted GBP 715,000 to be paid into a Spanish bank account controlled by him. Rogers allowed the scheme’s principal to withdraw money from that account.

At trial in England, the defendants (apart from Rogers) were convicted of conspiracy to defraud and received prison sentences. Following extradition from Spain, Rogers was convicted of converting criminal property contrary to s327(1)(c) Proceeds of Crime Act 2002 (POCA) and sentenced to two years and ten months imprisonment. This article covers Rogers’ appeal against his conviction on the grounds that the Crown Court had no jurisdiction to deal with the allegations against him because he lived and worked in Spain and he had not committed any part of the offence within the UK.

The Court of Appeal (Treacy LJ, Lang J and HHJ Bevan QC) held that there was jurisdiction to try Rogers in England and dismissed his appeal. There were two bases for the court’s decision: (1) the provisions of POCA; and (2) modern principles of jurisdiction in criminal law derived from previous cases.

Extra-territorial reach of POCA

POCA s327(1) creates the offences of concealing, disguising, converting, transferring and removing criminal property. The court recognised the established presumption in construing a statute that creates an offence that, in the absence of clear words to the contrary, it is not intended to make extra-territorial conduct triable in an English court. However, the Court found that the following provisions of POCA indicate that Parliament intended s327 to have extra-territorial effect:

        Section (2A) provides a defence to a person who knows or believes that the criminal conduct occurred outside the UK if the conduct was lawful in that country at the time it occurred.

        Section 340(2)(b) defines criminal conduct as including conduct which would be an offence in the UK if it had occurred in the UK.

        Section 340(9) defines property as “all property wherever situated”.

        Section (11)(d) defines money laundering as an act which would constitute an offence under ss327-329 if it had taken place in the UK.

The money obtained by fraud in the UK became criminal property for the purposes of POCA once it reached the UK bank accounts, and it did not cease to be criminal property when it reached Rogers’ bank account in Spain. Rogers had therefore converted criminal property by allowing his bank account to be used for receiving and withdrawing the money. The court described money laundering as “par excellence an offence which is no respecter of national boundaries. It   would be surprising indeed if Parliament had not intended the Act to have extra-territorial effect”.

Extra-territorial criminal jurisdiction 

The court considered the Court of Appeal’s decision in R v Smith (Wallace Duncan) (No 4) [2004] Cr App R 17 and earlier cases, and concluded that if there is no geographical limitation in the definition of a statutory offence, where a substantial measure of the criminal activity takes place within the UK, the courts have jurisdiction to try the crime unless it should be dealt with by another country on the basis of international comity. It is not necessary that the essence of the offence took place within the UK. However, each state should refrain from punishing people for their conduct within the territory of another state unless that conduct had harmful consequences within the territory of the state seeking to impose the punishment.

Here, the court held that a “significant part of the criminality underlying the case” took place in the UK and impacted upon victims in the UK. Rogers’ conduct in Spain was directly linked to the criminal conduct in the UK through his conversion of the criminal property. The court decided that there was no reasonable basis for withholding jurisdiction, as this was unlikely to be an offence in which the Spanish authorities would have been interested.

Comment: This decision is important in clarifying that the money laundering offences created by POCA ss327, 328 (involvement in arrangements regarding criminal property) and 329 (acquisition, use or possession of criminal property) have substantial extra-territorial effect, allowing an individual to be prosecuted even if their conduct occurred entirely outside the UK. This is subject to the restrictions that a significant part of the underlying criminality must have taken place in the UK and it had harmful consequences in the UK. The Court’s approach in this case demonstrates its willingness to develop statutory interpretation and case law in a way that responds to the international nature of modern criminal activity.

Lawyers, those working in financial services firms, and others in the “regulated sector” for the purposes of POCA also need to consider this judgment when deciding whether to make a report to their Money Laundering Reporting Officer or the National Crime Agency under POCA s330. A disclosure may need to be made in circumstances where, for example, a crime is committed in the UK and the proceeds are then received and laundered abroad.

Previously, it could have been considered that ss327‑329 of POCA were more narrowly intended to apply only where the relevant conduct had taken place in the UK, with s340 allowing the prosecution of an individual in the UK who had been involved in laundering within the UK the proceeds of a crime committed overseas, or an individual who had acted within the UK to launder the proceeds of crime situated overseas.

The court also extended the restriction in Smith (that a substantial measure of the activities constituting the crime must take place in the UK) to cover the situation in this case, where none of Rogers’ activities took place in the UK. Instead, the court found that it was sufficient if a significant part of the underlying criminality, in the sense of the defendants' entire scheme, took place in the UK.

Further information

This case summary is part of the Allen & Overy Litigation Review, a monthly update on interesting new cases and legislation in commercial dispute resolution.  For more information please contact Sarah Garvey sarah.garvey@allenovery.com, or tel +44 20 3088 3710.

 

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