Financial Services European Money Laundering Directive

Financial Services Law 43 273

Assessed Course Work Part 1

The issue in question in this particular case is whether or not a professional legal adviser can be deemed in breach of the Proceeds of Crimes Act 2002 when negotiating a financial sum that he or she knows includes laundered money. The client has requested representation against her husband for the purpose of gaining a financial settlement over a proposed divorce. During instruction, the client revealed that her husband had unspecified amounts of undeclared earnings that the Inland Revenue had no knowledge of. The role of the lawyer must be scrutinized and it must be determined whether or not he is in violation if he chooses to continue representing his client with the understanding an act of laundering may take place. The issues of disclosure and professional privilege under the Proceeds of Crime Act 2002 are of particular importance here.

Part VII of the Proceeds of Crime Act 2002 outlines legislation related to Money laundering Offences. Section 330 of this act places a duty on employees of a regulated sector to report money laundering activity when they “know or suspect” a person is engaged in such an act or when they have “reasonable grounds for knowing or suspecting” that a person is engaging in the activity. Failure to disclose information in these cases relates to money laundering offences under sections 327 (Concealing Criminal Property), section 328 (Arrangements) and section 329 (Acquisition, Use and Possession) of the Act.

There are three principle criteria which must be established to prove the offence is taking place. It is necessary to show that “information came to a person in the course of business in the regulated sector” . A business in the regulated sector is determined by Schedule 9 as amended by the Money Laundering Regulations 2003 and The Procceds of Crime Act 2002. It is also necessary that “the information was information which the employee knew, suspected or caused the employee to have reasonable grounds for suspecting that another person is engaged in money laundering;” Thirdly it is important that “the employee failed to make the disclosure to a nominated officer or to the Suspicious Transaction Report Receiving Agency (NCIS).”

Part VII of the Proceeds of Crime Act 2002 also provides priviliged protection within Section 330. Again there are certain critera which must be applied to the individual if they are to be excused of these offences. A person is not committing an offence if: “he has a reasonable excuse for not disclosing the information or other matter” , if he is a “professional legal adviser and the information or other matter came to him in the priviledged circumstances” if he “does not know or suspect that another person is engaged in money laundering” or if he “has not been provided by his employer with such training as is specified by the Secretary of State by order for the purposes of this section.” . Legal privilege relates to “communcations between lawyer and client if the dominant purpose for that communication concerns advice or evidence in respect of litigation that exists or is contemplated or is reasonably in prospect between, is important here” Regulation 7(6) of the Money Laundering Regulations 2003 widens the definition of a legal adviser to “any person in whose hands information may come in privileged circumstances.”

It is also imporant to note that S.331 (11) provides that the privilege does not apply where “the information or other matter is communicated or given with the intention of furthering a criminal purpose” Emphasis is put on the intention of the client or his representative.

The application of the rules set out in the Proceeds of Crimes Act 2002 to this particular case will determine whether or not the legal adviser is in breach. With regards to the three principal criteria for offence, the following are relevant to the case: the information came to the lawyer during his course of business and the lawyer was working in a regulated sector. The information also caused the lawyer to suspect that another person (the client’s husband) was engaging in money laundering. These two criteria would usually result in an offence on the part of the lawyer. The lawyer would be free of any liability however as he meets the criteria set out in S 331(10) of the Act which states any professional legal adviser whom receives the information under priviledged circumstances will not be in breach. The lawyer naturally meets the requirements for the definition of “legal adviser” as does the information