Introduction

1. On 22 April the Supreme Court handed down its judgment in the case of R v GH [2015] UKSC 24.
2. The Supreme Court was addressing the offence of entering into, or becoming concerned in, an arrangement which facilitates the acquisition, retention, use or control of criminal property for, or on behalf of, another person – contrary to s328 Proceeds of Crime Act 2002.
3. The key point is that at a time when the alleged money laundering arrangement operates on the property (but not necessarily when the arrangement FIRST operates on the property) the property must be ‘criminal property’ by virtue of some criminal conduct other than the arrangement itself.
4. In this context ‘property’ effectively includes an asset of any description.

By analogy

1. a person who, for example, steals goods from a shop does not thereby commit the money laundering offence of acquiring criminal property (he acquires legitimate property by theft).
2. However by retaining possession of the stolen goods he commits the money laundering offence of possession of criminal property (since the goods have now become criminal property in consequence of the earlier theft of them).

tax evasion

1. In terms of tax evasion (which was not under consideration by the Supreme Court in its recent judgment) matters could be a little more complicated.  This is because a tax evader side-steps a liability rather than acquiring an asset.
2. The legislation provides that a person who evades such a liability is “to be taken to obtain . . . a sum of money” equal to the value of the liability evaded.  But of course no such sum of money identifiably exists.
3. The courts have taken the pragmatic view that where tax has been evaded the identifiable turnover, income, profit or gain on which the tax has been evaded is in effect in part a person’s benefit from that evasion.
4. On that basis a money laundering offence can be committed in respect of, for example,
   1. the transfer or conversion of the money which forms that turnover, income, profit or gain.
5. But again the position is that technically the tax evasion occurs first & the money laundering offence follows.  However in practical terms it would seem to be impossible to commit tax evasion without going on to commit a money laundering offence of some description.

K Supreme Court rules on money laundering arrangements

The case

1. The case arose as a result of the actions of a fraudster, referred to as ‘B’.
2. Shortly before commencing his fraud the defendant, referred to as ‘H’, opened two bank accounts and handed control of them to ‘B’ who then used them in connection with his frauds.
3. ‘B’ conned unsuspecting members of the public into making payments into these bank accounts (for services which in truth were non-existent).
4. ‘B’ was convicted of fraud.
5. ‘H’ was charged with becoming concerned in an arrangement

H

1. The prosecution case was that ‘H’ must have known or at least suspected that ‘B’ had some criminal purpose even if he was not aware of the details of the con.
2. ‘B’ was convicted of fraud.
3. ‘H’ was charged with becoming concerned in an arrangement contrary to s328 PoCA 2002.

The Supreme Court was required to consider whether, in the circumstances alleged, ‘H’ could be guilty of a s328 offence – R v GH [2015] UKSC 24 (22 April 2015).

1. The Supreme Court broke the issue down into four key questions.
2. In addressing those questions it overturned some decisions of the courts below.

4 Questions

1 – Must the property be ‘criminal property’ before the arrangement operates on it?

1. Counsel for the prosecution submitted to the Supreme Court that the same conduct could both cause property to become criminal and simultaneously constitute the offence charged under s328.
   1. He made the same submission in relation to sections 327 and 329, correctly recognising that the three sections have to be construed coherently.
   2. So, he submitted, a thief who steals “legitimate” property is necessarily at the same time guilty of “acquiring criminal property” contrary to s329.
2. The Supreme Court rejected that view, holding that it failed to recognise the necessary distinction between a person who acquires criminal property and one who acquires legitimate property by a criminal act or for a criminal purpose.
   1. Sections 327, 328 and 329 are aptly described as “parasitic” offences
   2. Sections 327, 328 and 329 are aptly described as “parasitic” offences because they are predicated on the commission of another offence which has yielded proceeds which then become the subject of a money laundering offence.
3. The Supreme Court therefore approved the decision of the Court of Appeal in an earlier case R v Geary [2010] EWCA Crim 1925 that to say that
   1. s328 extends to property which was originally legitimate but became criminal only as a result of carrying out the arrangement is to stretch the language of the section beyond its proper limits.
   2. However, for example, a thief who steals legitimate property might then commit a s329 money laundering offence by his possession or use of that property after his acquisition of it.
   3. In practice such a thief should normally face a charge of theft rather than one of money laundering.  But the legal point that he may also be guilty of a money laundering offence is an important one because of the obligation on banks & others in the ‘regulated sector’ to report suspicions of money laundering under s330.

2  – Must the ‘criminal property’ exist before the defendant joins the arrangement?

1. What matters is that the property should be criminal property at a time when the arrangement operates on it
2. The Supreme Court agreed with the decision of the Court of Appeal in holding that it does not matter whether criminal property existed when the arrangement was first hatched.
3. What matters is that the property should be criminal property at a time when the arrangement operates on it.
4. It should be noted that the Supreme Court did not hold it to be necessary that the property should be criminal property at the time when the arrangement commences to operate on it.
5. The offence is complete when the arrangement becomes one which facilitates the acquisition, retention, use or control of criminal property for, or on behalf of, another person and the defendant knows or suspects this to be the case.

3 – Were the monies ‘criminal property’ before being paid into the defendant’s bank account?

1. Counsel for the prosecution made a somewhat technical submission to the Supreme Court that the monies banked were criminal property at the time of payment because they represented a chose in action, namely the obligation of the purchasers of the supposed services to pay for them.
2. The Supreme Court were unimpressed by this submission, holding that there was a stark absence of material before the court to substantiate a case of this nature.
3. However the court did not close the door on such an argument being successfully presented in a future case.

4  Was the actus reus of the offence committed on the facts of the case?

1. Looking at the substance of the matter, the money paid by the victims into the accounts was lawful money at the moment at which it was paid into those accounts.  It was therefore not a case of the account holder acquiring criminal property from the victims.
2. But by the arrangement the respondent also facilitated the retention, use and control of the money by or on behalf of ‘B’.
3. Did the arrangement regarding the facilitation of the retention, use and control of the money fall foul of s328 on the basis that it was criminal property at that stage, since it was the proceeds of a fraud perpetrated on the victims?
4. The money changed character and became criminal property but not because of the arrangement
5. In this case the character of the money did change on being paid into the defendant’s accounts.  It was lawful property in the hands of the victims at the moment when they paid it into the defendant’s accounts.  But it then became criminal property in the hands of ‘B’, not by reason of the arrangement made between ‘B’ and the defendant, but by reason of the fact that it was obtained through fraud perpetrated by ‘B’ on the victims.
6. There was a crucial difference therefore between this case and the situation in Geary (in which the arrangement itself had been the reason that the property in question became criminal property).
7. The Supreme Court (overturning the decision of the Court of Appeal) held that there was no artificiality in recognising that change in character of the money, and that it would be appropriate to regard the defendant as entering into or becoming concerned in an arrangement to retain criminal property for the benefit of another.
8. It was the retention, use & control of the monies after they had been paid into the bank accounts as the result of a fraud, under the bank account arrangement made earlier between ‘B’ & ‘H’, which could properly form the basis of a conviction of ‘H’ under s328.