Business - Crime doesn't pay.

(From Reinsurance)

The legal profession in England is expressing grave concern about the implications of the Proceeds of Crime Act 2002 - and the (re)insurance sector would do well to take heed of the warnings.

The logic of stopping people from being able to profit from criminal activity is clear. Common sense suggests that it allows the confiscation of luxury boats and cars purchased with drug money and thwarts the funding that enables terrorists to carry out attacks. However, the latest English legislation means that dealing with any property where there is knowledge or even the suspicion that it is the benefit of any criminal activity is enough to be a potential criminal offence. As the transfer or conversion of criminal property or its removal from the UK are all offences under section 327 of the Proceeds of Crime Act 2002 (PoCA), anyone who handles money for clients is potentially at risk. Disclosing the information to the National Criminal Intelligence Service (NCIS) in a suspicious transaction report is one of the few ways of ensuring a defence. The maximum penalty for money laundering offences under the act is 14 years' imprisonment.

Complex issues

For the legal profession there are major implications. A recent presentation by Adam Davis, Peter Caldwell and Gavin Irwin of 2 Dyers Buildings, who have studied the legislation in detail, emphasised how many complex issues there are. They suggest the legal profession will have to consider the legislation both from their client's point of view but also to protect their own position. Because the 'knowledge or suspicion' that the property is criminal is enough, there is a potential inclination to be cautious and make the authorised disclosure. The only other defences that are likely are if there was an intention to make the disclosure but with a reasonable excuse for not doing so (the legal community struggles to think when this might apply) or if the property was acquired for 'adequate consideration' (this might be where a lawyer charges a fixed fee that is significantly less than the value of the property).

However the process of authorised disclosure is not without difficulties.

A detailed form has to be filled out and faxed to the NCIS. If there is no reply from the NCIS within seven working days then it can be accepted that there is appropriate consent to go ahead. If consent is withheld within the seven working days, the agency involved has another 31 calendar days to take further action such as a court order to restrain the assets.