When is an arrangement not an arrangement? – Police are entitled to rely on intelligence information and information provided by solicitors in suspicious activity reports when they are assessing whether it is appropriate to apply for a warrant to search the solicitor’s office or to arrest the solicitor on suspicion of money laundering offences.

So held the Queen’s Bench Division of the High Court in the recent case of Fitzpatrick and Others v The Commissioner of Police of the Metropolis [2012] EWHC 12 (QB), when dismissing claims that the police had breached the human rights of two solicitors from the same firm when they executed a search warrant on their office and arrested them in 2007.

Background

The solicitors had regularly acted for two clients who were known to each other. The first client was arrested in relation to drug offences and during his interview, at which a representative of the firm was present, there was evidence of a debt owed between the two clients. The firm was aware of previous allegations that the second client had been involved in drug dealing.

As a result of this information the firm submitted suspicious activity reports in relation to previous property dealings by the first client. In the course of representing the first client they became aware that his assets were the subject of a restraint order. Subsequently the first client terminated the solicitor’s retainer and obtained representation from another firm.

The second client at some point instructed the solicitors to recover the debt from the first client. The debt related to a cash payment of £330,000 for an investment property in Cyprus, for which there was no supporting paper work.

The solicitors did not ask about the source of those funds, did not submit a suspicious activity report, nor did they seek a variation to the restraint order to remove this asset from the scope of the order.

Instead they sought to contact the previous client repeatedly directly, rather than through his new solicitors and to have him sign a power of attorney to allow his father to facilitate the return of the funds or the signing over of the Cyprus property to the second client.

One solicitor was driven to the prison by an associate of the second client and had the power of attorney signed.

The police were aware of the activities of the solicitors through various intelligence sources and noted the lack of suspicious activity reports on this transaction. They obtained a warrant to search the firm’s office and arrested both the solicitor as she left the prison with the signed power of attorney and the firm’s money laundering reporting officer.

The solicitors claimed that they had merely been in the preparatory stages of transaction and that they intended to seek consent from the Serious Organised Crime Agency before they used the power of attorney.

Subsequently in 2007 both solicitors were advised that no further criminal action would be taken against them.

The decision

The court quoted with approval the section of the Law Society practice note which explains what constitutes an arrangement for the purposes of s328 of the Proceed of Crime Act 2002.

While the court was not required to decide whether the solicitors had in fact entered into or become concerned in an arrangement to facilitate money laundering, it did conclude that there was sufficient information to give rise to a reasonable suspicion that the solicitors were becoming concerned in an arrangement contrary to s328.

On this basis it was appropriate for the police to arrest them and to obtain a search warrant for their premises.

The court cautioned against a too legalistic approach to what constitutes preparatory steps in transactional work and what constitutes actually becoming a party to an arrangement.

The case clearly demonstrates the importance of making a suspicious activity report as soon as a suspicion is held, for drafting consent applications broadly and for considering whether it is appropriate in all of the circumstances to continue acting for a client.

The case also provides an interesting insight into the workings of a significant police investigation and the issues which the police must consider when obtaining warrants or arresting an individual.

Read the full case – http://www.bailii.org/ew/cases/EWHC/QB/2012/12.html

http://www.lawsociety.org.uk/newsandevents/news/view=newsarticle.law?NEWSID=445589