The Serious Crime Bill received Royal Assent on 3 March 2015 and will now enter into force as the Serious Crime Act 2015 (the “Act”).
It introduces changes in a broad range of areas relating to both financial and non-financial crime.
Significantly for regulated firms, it includes
- The introduction of additional protection from civil liability for those reporting suspicions of money laundering.
- It also creates a new offence, of potentially broad scope, of participating in the criminal activities of an organised crime group.
This briefing explores these two changes in more detail, and outlines the other amendments made by the Act.
Overview of the Serious Crime Act
The Act is:
- Designed to give effect to a number of legislative proposals set out in the Government’s Serious and Organised Crime Strategy, http://bit.ly/Mbcr9h
- Together with measures intended to enhance the protection of vulnerable children and others.
In summary, the Act includes the following:
1. Amendments to the operation of the confiscation provisions of the Proceeds of Crime Act 2002 (“POCA”), and some more minor changes to the civil asset recovery regime; Amongst other matters, the amendments seek to
- enable assets to be frozen more quickly and earlier in investigations,
- to strengthen prison sentences for failing to pay confiscation orders and reduce the time that the courts can give offenders to pay confiscation orders,
- to extend the investigative powers in POCA so that they are available to trace assets once a confiscation order is made, and
- to give statutory effect to the Supreme Court’s judgment in R v Waya [2012] UKSC 51 by introducing a proportionality restriction on confiscation orders.
2. Amendments to the Computer Misuse Act 1990, including
- the creation of a NEW OFFENCE OF UNAUTHORISED ACTS IN RELATION TO A COMPUTER that result, either directly or indirectly, in serious damage to the economy, the environment, national security or human welfare, or which create a significant risk of such damage;
3. Amendments to the law governing Serious Crime Prevention Orders and gang injunctions;
4. Additional powers for law enforcement to seize drug-cutting agents;
5. Clarification of the offence of child cruelty in the Children and Young Persons Act 1933;
6. NEW OFFENCES relating to sexual communication with a child and the possession of paedophile manuals; Additional provisions to seek to combat female genital mutilation (“FGM”);
7. The introduction of criminal sanctions for a pattern of repeated or continuous coercive or controlling behaviour where perpetrated against an intimate partner or family member, in an attempt to tackle domestic abuse;
8. Additional measures relating to prison security including new offences relating to the unauthorised possession of a knife or other offensive weapon in prison and throwing articles into a prison; and
9. Amendments to the Terrorism Act 2006 extending the UK courts’ extraterritorial jurisdiction for the offences of preparation of terrorist acts and training for terrorism.
And this briefing explores the next two changes in more detail, and outlines the other amendments made by the Act.
10. The introduction of a NEW OFFENCE OF PARTICIPATING IN THE ACTIVITIES OF AN ORGANISED CRIME GROUP (discussed in more detail below);
11. The introduction of new protections from civil liability for those reporting suspicions of money laundering under POCA (discussed in more detail below);
Reporting SARS – Protection from civil liability – amendments to POCA,
Section 37 of the Act adds a new subsection 338(4A) to POCA, providing that:
• “where an authorised disclosure is made in good faith, no civil liability arises in respect of the disclosure on the part of the person by or on whose behalf it was made”.
This section of the Act will come into force on a date to be appointed by the Secretary of State.
Care still needs to be taken, of course, in submitting SARs. Indeed, in presenting the amendment to the House of Lords last week, Lord Bates again emphasised that
• “the immunity from civil proceedings will apply only where a suspicious activity report is submitted in good faith, and those in the regulated sector…will continue to be liable for any negligent or malicious conduct.
• We will work with the National Crime Agency and the Financial Conduct Authority to ensure that the change to the law does not lead to an abuse of the process”.
Interestingly, it is not clear that a negligent but good faith reporter would in fact be outside the scope of the section (although a malicious reporter would clearly not be covered).
It remains important, for a whole range of reasons, for firms to continue ensure that the basis for any suspicions of money laundering is adequately documented.
The amendments to POCA have not addressed the position of firms who make disclosures under sections 330/331 of POCA, as opposed to “CONSENT SARS” made pursuant to section 338 of POCA (albeit that the former are generally less likely to lead to loss to a customer or counterparty, and hence to a civil claim).
Participation in the criminal activities of an organised crime group
Section 45 of the Act provides that any person who participates in the criminal activities of an “organised crime group” commits an offence and is liable to up to five years’ imprisonment. We summarise the key elements of the offence below.
1. An “organised crime group” is a group:
- that has as its purpose (or one of its purposes) the carrying on of criminal activities and
- consists of three or more people who act, or agree to act, together to further that purpose.
2. A person will participate in the group’s criminal activities if he or she takes part in any activities that he or she knows or reasonably suspects are criminal activities of an organised crime group or will help such a group to carry on criminal activities.
3. “Criminal activities” are activities that are carried on with a view to obtaining (directly or indirectly) any gain or benefit (although this is not limited to a financial benefit) and are either:
- carried on in England and Wales and constitute an offence punishable on conviction with imprisonment of seven years or more; or
- carried on outside England and Wales, constitute an offence under the law of the country where they are carried on and would constitute an offence punishable of imprisonment of seven years or more if carried on in England and Wales.
4. It is not necessary for a person to know any of the members of the organised crime group.
As long as one act/omission comprising participation in the group’s criminal activities takes place within England and Wales, it is not necessary for all such acts to take place within the jurisdiction.
This offence is subject to a defence that the person’s participation was necessary for a purpose related to the prevention or detection of crime.
This section of the Act will come into force on a date to be appointed by the Secretary of State.
The government’s fact sheet on the Serious Crime Bill gives the examples of delivering packages, renting warehouse space and drafting a contract as activities that may be caught by the new offence.
· Fact sheet = http://bit.ly/1BM07mH
The fact sheet dealing specifically with the new participation offence explains that the existing offence of conspiracy is, and will continue to be, used to prosecute organised crime but that it is difficult to capture those who are part of a wider group who “ask no questions” but nonetheless support organised crime at arm’s length.
By setting the mental element for this offence at knowledge or reasonable suspicion, the government intends to capture this wider category of advisors and enablers who do are not necessarily involved in the group’s criminal activities.
The Government’s Impact Assessment in relation to the offence, published in June 2014, suggested that discussions with the police and the Crown Prosecution Service indicated that there could be an estimated additional 100-200 prosecutions per year for this offence.
· Impact Assessment = http://bit.ly/1HVzVH8
The offence is targeted at both professional and non-professional “enablers”.
In relation to the former, there is some overlap between this offence and the as yet little-enforced offence of failure to report reasonable grounds to suspect money laundering (section 330 of POCA).
On one view, better enforcement of the existing law would have been a sensible first step, rather than the creation of yet more offences. However, we are where we are.
The offence is broad in scope and has the clear potential to capture conduct that would not fall within most people’s conception of an ‘organised crime group’.
Additionally, as explained above and as with section 330 of POCA, the offence has an objective mental element:
· reasonable grounds to suspect, instead of actual suspicion.
The imposition of criminal liability, punishable by a term of imprisonment, on individuals who are merely negligent, remains uncommon in English criminal law, yet the offence has passed through Parliament with little controversy.
The effect is to create significant potential exposure for careless professionals.
This new offence can be seen as adding to the (many) reasons why AML compliance, and financial crime compliance more generally, is more important than ever.
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