Are section 330 POCA ‘failure to disclose’ prosecutions now on the cards?

To the best of our knowledge, no person employed by a UK licensed casino operator has ever been charged with a criminal offence under section 330 of the Proceeds of Crime Act 2002 (“POCA”), i.e. the section of POCA headed “Failure to disclose: Regulated sector”.

Nevertheless, in its “Guidance for remote and non-remote casinos: The prevention of money laundering and combating the financing of terrorism”, the Gambling Commission states as follows:

12 – Failing to report

POCA and the Terrorism Act (opens in a new tab) create offences of failing to report suspicious activity 174. Where a person fails to comply with the obligations to make disclosures to a nominated officer and/or the NCA as soon as practicable after the information giving rise to the knowledge or suspicion comes to the employee, they are open to criminal prosecution.

Warning: The criminal sanction under POCA or the Terrorism Act is a prison term of up to five years and/or a fine.

For all failure to disclose offences under POCA, it will be necessary to prove that the person or nominated officer either:

  • knows the identity of the money launderer or the whereabouts of the laundered property
  • believes the information on which the suspicion was based may assist in identifying the money launderer or the whereabouts of the laundered property. 175

Casino operators and nominated officers, therefore, must comply with the reporting requirements imposed on them by POCA and the Terrorism Act (opens in a new tab).

References

Notwithstanding the Gambling Commission’s above warning, a degree of complacency may have set in prior to 2 June 2021, when the Crown Prosecution Service (“CPS”) updated its “Money Laundering Offences” section of “The Code for Crown Prosecutors” guidance.

That is because before that date, the CPS did not charge under section 330 POCA where there was insufficient evidence to establish that money laundering was planned or undertaken.

However, the updated CPS guidance represents a fundamental change of approach in this respect, making it clear that:

  • “where individuals in the regulated sector receive information giving rise to a suspicion, or provides reasonable grounds for suspecting, that another is engaged in money laundering, an offence is committed by failing to make a report under section 330, regardless of whether it subsequently transpires that the money laundering cannot be proven, or that it did not occur” and
  • “it is possible to charge an individual under section 330 even though there is insufficient evidence to establish that money laundering was planned or has taken place”. 

It is possible that the Gambling Commission will harden its own enforcement approach in light of this updated CPS guidance. We therefore recommend that UK licensed casino operators and their Nominated Officers/MLROs take note of the following extract from the “Money Laundering Offences” section of “The Code for Crown Prosecutors” guidance (the complete section of which can be downloaded below):

Failure to Disclose

An offence is committed under Section 330 where a person:

  • receives information in the course of a business in the regulated sector, as defined in Schedule 9, and
  • thereby knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in money laundering, and
    can identify that other person or the whereabouts of any of the laundered property or believes, or it is reasonable for them to believe, that the information will or may assist in identifying that person or whereabouts of any of the laundered property; and
  • fails to disclose to a nominated officer (see sections 338(5)336(11) and 340(12)), or a person authorised for the purposes of Part 7 by the Director General of the NCA, the information on which his knowledge or suspicion is based as soon as is practicable after the information comes to him.

The inclusion of the wording “has reasonable grounds for knowing or suspecting” reflects the fact that individuals who carry out activities in the regulated sector are expected to exercise a higher level of diligence in handling transactions than those employed in other businesses.

The disclosure of the following is required in accordance with section 330(5):

  • The identity of the person mentioned, if known;
  • The whereabouts of the laundered property, so far as he knows it; and
  • The information or other matter mentioned.

The offence is triable either way with the same maximum penalty on indictment up to 5 years imprisonment.

Note that section 330 can be a standalone charge; it is not necessary to prosecute the defendant or other persons for money laundering under sections 327-329, although consideration should be given to this where the evidence is available.

Money Laundering Planned or Undertaken can be Proved

Under section 330 the prosecution has to prove the person:

  • Knows or suspects, or has reasonable grounds for knowing or suspecting, that another person is engaged in money laundering; and
  • The information or other matter on which this knowledge or suspicion is based, or which gives reasonable grounds for such knowledge or suspicion, came to the person in the course of a business in the regulated sector; and
  • Can identify the other person mentioned or the whereabouts of any of the laundered property, or he believes, or it is reasonable to expect him to believe, that the information or other matter mentioned will or may assist in identifying that other person or the whereabouts of any of the laundered property; and
  • Fails to disclose this information or other matter to nominated or authorised persons as soon as practicable.

Evidence of planning or undertaking can support the prosecution in establishing the knowledge of the person that another is engaged in money laundering. Without such evidence of money laundering or planning, the prosecution will have to establish the suspect suspected or had reasonable grounds for suspecting money laundering.

Money Laundering Cannot be Proven

Prior to this guidance update, the CPS did not charge under section 330 where there was insufficient evidence to establish that money laundering was planned or undertaken.

It is noted that during the passage of the POC Bill (now POCA), in a parliamentary debate on 25 March 2002, the former Attorney General Lord Goldsmith QC stated that “The concern that the negligence offence is unfair overlooks the fact that the offence in Clause 330 of failing to report to the authorities is permitted only if the prosecution proves that money laundering was planned or undertaken.”

However, Lord Goldsmith’s statement cannot be taken as a binding undertaking on prosecutors on how section 330 should be applied. The issue is one of statutory construction. This can be seen in the case of Ahmad v HM Advocate [2009] HCJAC 60, in which the High Court of Justiciary in Scotland, distinguishing R v Montila [2004] 1WLR 3141, ruled that there is nothing in the language of section 330(2) that required money laundering to be taking place.

Therefore, it is possible to charge an individual under section 330 even though there is insufficient evidence to establish that money laundering was planned or has taken place. Section 330 therefore creates an obligation to report suspicions of money laundering to the authorities, regardless of whether money laundering actually takes place. This means that where individuals in the regulated sector receive information giving rise to a suspicion, or provides reasonable grounds for suspecting, that another is engaged in money laundering, an offence is committed by failing to make a report under section 330, regardless of whether it subsequently transpires that the money laundering cannot be proven, or that it did not occur.

Prosecutors should only pursue standalone s.330 prosecutions in these cases where the offence took place after the date on which this guidance is published, for clarity the effective date is the 2nd of June 2021 – therefore this approach will not be retrospective.

In these cases, the prosecution has to prove the individual:

  • suspects, or has reasonable grounds for suspecting, that another person is engaged in money laundering; and
  • the information or other matter on which this suspicion is based, or which gives reasonable grounds for such suspicion, came to the individual in the course of a business in the regulated sector; and
  • can identify the other person mentioned or the whereabouts of any of the laundered property, or he believes, or it is reasonable to expect him to believe, that the information or other matter mentioned will or may assist in identifying that other person or the whereabouts of any of the laundered property; and
  • fails to disclose this information or other matter to a nominated or authorised persons as soon as practicable.

Prosecutors considering a charge on this basis should refer the case to the Specialist Fraud Division in line with the Referral of Cases Legal Guidance.

Additionally, consideration should also be given to charges under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) (see below).

Defences for Non-Disclosure

There are a number of defences to non-disclosure. These include that a person does not commit an offence if:

  • He has a reasonable excuse for failing to disclose this suspicion (Subsection 6); or
  • He knows or believes, on reasonable grounds, that the money laundering is occurring outside of the UK and this money laundering is not unlawful in that country (Subsection 7A).

UPDATE: On 10 June 2021, the Gambling Commission posted its own “guidance update”, entitled “Updated CPS guidance relating to The Proceeds of Crime Act 2002”, (that you can download below), stating as follows:

The Crown Prosecution Service (CPS) has published revised guidance (opens in a new tab) to expand the circumstances under which the prosecution of a section 330 principle offence under The Proceeds of Crime Act 2002 (PoCA) (opens in a new tab) could occur. This will include both knowledge and suspicion of money laundering (previously just knowledge). It is therefore important for operators to note that section 330 creates an obligation to report suspicions of money laundering to the authorities, regardless of whether money laundering actually takes place.

Operators are reminded of the need to submit a suspicious activity report (SAR) to the UK Financial Intelligence Unit (UKFIU) wherever there is knowledge or suspicion of money laundering (including criminal spend) or terrorist financing (as required under PoCA and The Terrorism Act 2000 (opens in a new tab). Please see the National Crime Agency’s website (opens in a new tab) for details on the SAR submission process.

Operators are also required to submit a corresponding SAR key event to the Commission whenever they submit a SAR to the UKFIU (as required under Licence 15.2.1 of the LCCP).