Professionals such as lawyers, estate practitioners and tax advisers are increasingly being used by criminals to launder money. The legislation governing money laundering is wide ranging and impacts on many areas of practice which some practitioners may not necessarily be immediately aware of.
An example of this arises where there has been a failure in the duty to manage asbestos - that is not taking steps to identify, record and manage the risks from any asbestos present - this failure gives rise to criminal sanctions.
Prior to February 2003 money laundering offences were limited to the proceeds of indictable crime such as drugs and terrorism. The Proceeds of Crime Act 2002 (POCA 2002) extended that definition to the proceeds of any criminal conduct. Section 340(2) of the Act defines criminal conduct as follows: 'Criminal conduct is conduct which a) constitutes an offence in any part of the United Kingdom, or b) would constitute an offence in any part of the United Kingdom if it occurred there'.
Failure in the duty to manage asbestos therefore falls within section 340(2) of the Act and where, in the course of a transaction, a practitioner becomes aware that a relevant party is not able to provide an asbestos survey, the issue of disclosing this by submitting a POCA report to the National Criminal Intelligence Service (NCIS) must be considered.
Practitioners should also be aware that failure to disclose by submitting a POCA report to NCIS may leave themselves liable under sections 327, 328 and 329 of POCA (the substantive money laundering offences of concealing, disguising, converting, transferring or removing criminal property; entering into or becoming concerned with an arrangement which one knows or suspects facilitates the acquisition, retention, use or control of criminal property; and the acquisition, use and having possession of criminal property). Punishment may include a custodial sentence.
In many cases submitting a report to NCIS could well be seen as using a disproportionate amount of force or expense to overcome a minor problem, not least because of the potential delay in receiving clearance to proceed with the transaction. However, where a voluntary report is made to NCIS and the appropriate consent is given, it should amount to a defence to a charge under sections 327-329.
Section 335 lays down time limits for the delay between the authorised disclosure being made and the appropriate consent being given or presumed and in practice NCIS is consenting to asbestos disclosures in good time.
Note, however, that until consent is received no further progress must be undertaken on the transaction and this can lead to difficulties where acting on a property or properties which form part of a larger corporate transaction. It is therefore important that good communication with the MLRO and colleagues in other departments (for example, a corporate partner leading the overall transaction) is maintained at all times.
Managing this type of disclosure is a known problem and the Law Society is in discussion with NCIS with regards to dealing with the awkward position that practitioners can find themselves in of neither being able to effect a transaction nor inform the client that a report has been made to NCIS.
It is unlikely, in the context of the failure in the duty to manage asbestos, that a practitioner will fall foul of 'tipping off' and prejudice an investigation. However, it would be prudent to discuss tipping off with your MLRO to ensure that no offence is committed under sections 333 and 342.
In practice, obtaining an asbestos survey from the seller is the simplest way to avoid the issues set out above. It may be that the sellers' solicitors are not aware of the consequences that failing to supply an asbestos survey will give rise to and therefore an early call explaining the position may be all that is needed to avoid using your sledgehammer and involving NCIS.
- On any property transaction make an early check as to the availability of an asbestos survey.
- Where there is no asbestos survey - lean on the sellers to deliver one.
- If the sellers will not provide an asbestos survey, discuss the
consequences with your MLRO and
make colleagues aware of the issue and potential impact on timing.
- Disclose position in a report to NCIS.
- Receive clearance and proceed with transaction.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.