Criminal Finances Act 2017

Jonathan Fisher KC and Anita Clifford

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CHAPTER 1 Extending the SAR moratorium period

Introduction

1.1 The most significant change to the anti-money laundering regime made by the Criminal Finances Act 2017 relates to an extension of the moratorium period. Sections 327(1), 328(1) and 329(1) of the Proceeds of Crime Act 2002 establish the principal money laundering criminal offences that are committed where a person handles criminal property or becomes concerned in facilitating another person’s handling of criminal property. The handling of the property or becoming concerned in facilitating another person’s handling of the criminal property, is known as ‘the prohibited act’. If a prohibited act is committed a person becomes liable to a maximum period of 14 years’ imprisonment. However, in respect of each of the three principal offences, there is a statutory exemption in sections 327(2)(a), 328(2)(a) and 329(2)(a) where a person ‘makes an authorised disclosure under section 338 and (if the disclosure is made before he does the [prohibited] act mentioned in subsection (1)) he has the appropriate consent’. 1.2 The concept of ‘appropriate consent’ is defined in section 335 of the Proceeds of Crime Act 2002. Broadly speaking, appropriate consent connotes the obtaining of consent from the National Crime Agency1after an authorised disclosure has been made to it (section 335(1)), or the obtaining of deemed consent in accordance with the statutory provisions (section 335(2)). To be precise, a person must be treated as having received appropriate consent to proceed with the commission of a prohibited act if (a) he makes an authorised disclosure2to the National Crime Agency, and before the end of the notice period he does not receive notice from the National Crime Agency that consent to the doing of the act is refused. Section 335(5) defines the notice period as a period of seven working days starting with the first working day after the person makes the disclosure. If, however, the person making the authorised disclosure receives a notice from the National Crime Agency before the end of the notice period or he receives notice from a constable or customs officer that consent to the doing of the prohibited act is refused then, pursuant to section 335(4), he must wait until the expiry of what is known as ‘the moratorium period’ before he can proceed with the prohibited act. Under section 335(6), the moratorium period is the period of 31 days starting with the day on which the person receives notice that consent to the doing of the act is refused. The purpose of the moratorium period is to allow investigators time to gather evidence to determine whether further action, such as restraint

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of the funds, should take place. The operation of these provisions became known as ‘the consent regime’. 1.3 The Government perceived there were serious problems with the operation of the consent regime. The key difficulty was that the moratorium period was not renewable, often does not allow sufficient time to develop the evidence, particularly where it must be sought from overseas through mutual legal assistance. 1.4 There were two solutions to the problem. Either the consent regime had to be abolished, or provision made for the extension of the moratorium period in appropriate cases.3 In the face of opposition from the regulated sector, the Government decided to pursue the second option, and this formed the genesis of the changes made to the moratorium regime by the Criminal Finances Act 2017. Section 10 of the Criminal Finances Act 2017 amends Part 7 of the Proceeds of Crime Act 2002 by inserting new sections 336A, 336B, 336C and 336D into the Act, the effect of which is to allow a court to grant an extension of the moratorium period for a period of up to 31 days on each application, but with a long-stop limit that the moratorium period must not be extended for a period of more than 186 days from the end of the initial 31-day moratorium period. 1.5 Rules of Court have been made to govern the procedure for an application to extend the moratorium period. These are to be found in rules 47.62 to 47.65 of the Criminal Procedure (Amendment No. 3) Rules 2017 (SI 2017 No. 755) (the Rules). In addition, the Government has published a circular giving guidance to law enforcement agencies on the application of the new provisions. This is entitled Home Office Circular, Criminal Finances Act 2017, Power to Extend Moratorium Period, sections 336A to 336C, 008/2018. The Proceeds of Crime Act 2002 (Investigations in different parts of the United Kingdom) (Amendment) Order 2017 facilitates mutual recognition of orders extending the moratorium period across the different nations in the UK. 1.6 The Government expressed confidence in its impact assessment that the legislative change would deliver important benefits to law enforcement authorities in the UK. The impact assessment noted that an extended moratorium period will make better use of intelligence flowing from the reporting sector to law enforcement.4 In referenced cases studies, the Government claimed that amounts of monies that are not restrained due to the early expiry of the moratorium period was ‘in the millions’:

It is estimated from a 5-month sample of cases that failed to reach the restraint order stage due the length of the moratorium period. Over the 5-month period, £102.7 million was potentially available to use by the subjects of those requests including corrupt [Politically Exposed Persons], drug traffickers, fraudsters, and human traffickers. This is based on a sample of cases, implying the total amount that could be restrained over a 12-month period may be higher, although the actual amount recovered will depend on successful [Law Enforcement Authority] action.5

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