Criminal Finances Act 2017: Explaining the unexplained

• United Kingdom

• Litigation and dispute management

31-10-2017

Introduction

The Criminal Finances Act 2017 (“the Act”) received Royal Assent on 27 April 2017.  Part 3 of the Act (relating to offences of facilitation of tax evasion) was brought into effect on 30 September 2017 and on 31 October 2017 the Criminal Finances Act 2017 (Commencement No. 2 and Transitional Provisions) Regulations 2017/991 (the “Regulations”) brought into force further provisions of the Act which introduce and amend law enforcement powers by amending the Proceeds of Crime Act 2002 (“POCA”) and the Terrorism Act 2000.

The following amendments and powers come into effect as from 31 October 2017:

1. Suspicious Activity Report (“SAR”) moratorium period

The Act amends POCA and enables a “senior officer”[1] to apply to the Crown Court for an order extending the moratorium period for an additional 31 days (beyond the initial 31 days after consent has been refused).  Additional applications for orders extending the moratorium period can subsequently be made with a maximum extension of 186 days beyond the end of the original 31 day period.

With the Court only able to grant extensions in 31 day periods, this should enable the Court to exercise judicial scrutiny over the relevant authorities.  Upon an application, the Crown Court will be required to consider whether the applicant’s investigation is being conducted diligently and expeditiously and whether it is “reasonable in all the circumstances” for the moratorium period to be extended.  The Home Office previously estimates that there will be 173 applications to extend the moratorium period per year[2].

2. Information sharing and power to obtain further information

The Act also introduces provisions which enable regulated entities to share information (which came to them in the course of business) relating to suspected money laundering, with other regulated entities if certain requirements are met.  

The Act also enables the National Crime Agency (“NCA”) to seek further information relating to a SAR by way of a further information notice.  If the information is not provided the NCA will be able to apply to the Magistrates’ Court for a “further information order” which would compel the provision of information. Failure to comply with such an order may result in a fine of up to £5,000.

3. Civil Recovery Powers

The Act makes a number of amendments to existing civil recovery powers pursuant to Part 5 POCA and the Regulations brought into effect, on 31 October 2017, the extension of assets capable of being seized to now include precious metals and stones, watches, artistic work and postage stamps.

Further provisions of the Act will, in due course, also bring into effect the following:

• Civil recovery powers will be extended to the FCA and HMRC:

• The extension of the definition of “unlawful conduct” for the purposes of obtaining a civil recovery order to include gross human rights abuse; and

• Money greater than £1,000 held in a bank account will be able to be frozen without notice if there are “reasonable grounds to suspect” it is recoverable or intended for unlawful conduct.

Conclusion

2017 has seen a number of significant changes to the UK’s anti-money laundering framework and further changes are anticipated.  On 26 October 2017, the UK’s second national money laundering and terrorist financing risk assessment was conducted and notes that the changes brought into effect (including those in the Act) provide a strong foundation in preparation for the UK’s mutual evaluation by the Financial Action Task Force (“FATF”) which is due to take place and be published by December 2018.  FATF’s 2018 mutual evaluation will be the UK’s first peer review since 2007 and will provide a strong indication of how the UK’s AM/CTF regime is performing against global standards. 

The need for regulated entities to implement effective and integrated systems and controls to tackle financial crime must remain at the top of the priority list.

[1]                 Including the Director General of the NCA or any other NCA officer authorised by the Director General, a police officer of the rank of at least Inspector, the Director of the Serious Fraud Officer (or an authorised member of staff) or a designated member of staff at the Financial Conduct Authority

[2]             https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/621203/Impact_Assessment_-_SARs_Moratorium_extension.pdf