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Turning a Blind Eye to Organised Crime

So much has already been said in the media and in legal circles about the impact of the Serious Crime Bill which is currently making its passage through Parliament and which is awaiting its second reading in the Commons1. This note wishes to focus on the impact to solicitors of the new “participation offence” which will enable law enforcement agencies to prosecute individuals (professional and non-professional) taking part in activities which they know to be or reasonably suspect are criminal activities of an organised crime group2.

Solicitors are already subject to money-laundering regulations in the profession and can be professionally sanctioned for breaches. So why then do they need to worry about the new “participation offence” and its impact on them? The answer is clear. The role of the law firm (or individual working in that law firm) is primarily that of 'professional enabler', rather than direct perpetrator. The law firm provides legitimacy to the funds, rather than obtaining the funds themselves. The legislature does not believe that professional sanctions alone are sufficient for activities as serious and grave as helping an organised crime group.

Proving the Offence

To prove the offence, law enforcers will need to show that the person actively participated in activities and that they had knowledge or reasonably suspected that in doing so, they were helping an organised crime group. While “knowledge” and “reasonable suspicion” are terms not defined in the Bill, guidance on how these may be interpreted is available elsewhere3.. It is clear therefore that it will not capture the naïve and unwitting participant who genuinely did not suspect that he or she was helping an organised crime group.

Law enforcers will also need to show that the group implicated was committing criminal activities in England & Wales that were punishable upon conviction on indictment with imprisonment for a term of seven years or more. This would include (but are not limited to) offences such as drug and human trafficking, assisting unlawful immigration, firearms offences, fraud, child sexual exploitation and cybercrime. These activities must also be carried out with a view and expectation that the group members would obtain (either directly or indirectly) a gain or benefit of some kind.

The Bill goes further to state that any activity carried on outside of England & Wales that would constitute an offence under the law in force of that country where they are carried out, would also be included and caught.

Clause 44(7) is also particularly worrisome. Clause 44(7)(a) provides that it is not necessary for the person accused of the offence to “...know any of the persons who are members of the organised crime group...”, while clause 44(7)(c) states for a person to be guilty of an offence, it is not necessary for the gain or benefit to be financial in nature. Clause 44(7) thus seems to suggest that the focus has shifted to the perpetration of the offence itself.

Keeping One’s Eyes Open

Both the Solicitors Regulation Authority and the Law Society has spoken and published extensively on what law firms and lawyers can do to prepare themselves for the impending changes that will be brought about by the new “participation offence”. It is not intended to create any extra burden on solicitors to go beyond their existing client due-diligence checks and processes but to encourage them to think twice about proceeding where they suspect that they are facilitating organised crime. Solicitors need to think carefully about the type of practices they are in and whether the type of work they undertake and the services they provide increase their risk of being used as “vessels” by criminals of organised crime. The list below provides some examples of situations where solicitors and law firms need to be alert:

  • where their clients come from high risk countries, are politically exposed persons or have known criminal connections
  • where large transaction amounts or cash is involved (including use of disproportionate amount of private funding and bearer cheques)
  • where the source of funds and/or ultimate beneficial owner is unclear
  • where their clients are overly secretive about the transaction
  • where onward payments to third parties are requested
  • where there is a lack of sensible commercial/financial/tax or legal reason for being engaged to undertake a transaction
  • where there is creation of complex corporate and trust structures and where shell companies are used
  • where there is a retainer put in place allowing the use of the client account without the provision of legal services contrary to rule 14.5 of the SRA Accounts Rule.

There is no underestimating the appointment of adequately senior and well-trained money laundering reporting officers in firms who can understand and assess risk areas and who know when and how to make suspicious activity reports to the National Crime Agency. All relevant individuals of the firm should also be adequately trained and made aware of risks areas and the role they can play to stop organised crime entering the door. With the offence being triable on indictment and subject to a maximum penalty of five years’ imprisonment, there is every reason to be vigilant.


Endnotes:

1. To track the progress of the Bill, see http://services.parliament.uk/bills/2014-15/seriouscrime.html
2. Organised crime group means a group consisting of three or more persons who act or agree to act for the purposes of carrying on of criminal activities.
3. See cases such as Da Silva [1996] EWCA Crim 1654