Anti-money laundering

Current project status

  • Initiation: Could include discussing scope and terms of reference with lead Government Department
  • Pre-consultation: Could include approaching interest groups and specialists, producing scoping and issues papers, finalising terms of project
  • Consultation: Likely to include consultation events and paper, making provisional proposals for comment
  • Policy development: Will include analysis of consultation responses. Could include further issues papers and consultation on draft Bill
  • Reported: Usually recommendations for law reform but can be advice to government, scoping report or other recommendations

Helping law enforcement crackdown on money laundering. Our consultation is open until 5 October 2018.

Download the consultation

Download the summary

The problem

Money laundering is the process where criminals hide the origins of their illegally gained money.

Money laundering is estimated to cost every household in the UK £255 a year and allows criminals to profit from their crimes. It is widespread, with between 0.7 and 1.28% of annual European Union GDP detected as being involved in suspect financial activity.

The current law has a system for reporting suspicious financial activity.

This provides law enforcement with the means to investigate and gather intelligence and protects honest businesses from inadvertently committing a crime.

But the reporting scheme isn’t working as well as it should. Enforcement agencies are struggling with a significant number of low-quality reports and criminals could be slipping through the net.

The project

In December 2017 the Home Office asked the Law Commission to review the anti-money laundering regime in Part 7 of the Proceeds of Crime Act 2002. And the counter-terrorism financing regime in Part 3 of the Terrorism Act 2000.

This is to make one aspect of the UK anti-money laundering law – known as the ‘consent regime’ – even more effective.

The review will focus on the consent provisions in:

  • 2002 Act: sections 327 to 329 and sections 335, 336 and 338.
  • 2000 Act: sections 21 to 21ZC

The review will also consider the disclosure offences in sections 330 to 333A of the 2002 Act. And sections 19, 21A and 21D of the 2000 Act.

The review aims to analyse and produce proposals addressing the problems with the anti-money laundering and counter-terrorist finance reporting regimes.

This includes:

  • Defensive reporting of suspicious transactions under the consent and disclosure provisions and the high volume of reports;
  • The burden placed by the consent and disclosure provisions on businesses under duties to report suspicious activity;
  • The impact of the suspension of transactions under the consent provisions on reporters and those who are the subject of reporting.

Our proposals

On 20 July 2018 we published our open public consultation paper. Proposals include:

  • statutory guidance on what to look for and a set format for submitting suspicious activity reports
  • asking whether new tools could help enforcement like US-style Geographic Targeting Orders
  • a new power to require additional detail and record keeping requirements targeted at specific transactions
  • cutting back on low quality reports by focussing on accounts where there are reasonable grounds to suspect property is criminal property
  • legal protection for banks which choose to lock into an account the suspected criminal funds but leave the rest of the account open to trade thereby minimising the risk of severe financial loss for those who are the subject of a disclosure
  • providing detail as to what amounts to a defence of ‘reasonable excuse’ for not making a suspicious activity report
  • asking whether commercial organisations, rather than the individual employees, should be liable for failure to prevent a criminal offence when an employee fails to disclose a suspicion

It is hoped that these proposals will help banks and businesses provide better information to law enforcement agencies and help refocus attention on the most suspicious activity.

Respond

The consultation closes on 5 October 2018.

Comments may be sent:

By email: anti-money-laundering@lawcommission.gov.uk

By post: Criminal Team, 1st Floor, Tower, Post Point 1.54, 52 Queen Anne’s Gate, London SW1H 9AG (access via 102 Petty France)

By telephone: 020 3334 0200

If you send your comments by post, it it would be helpful if, whenever possible, you could also send them electronically.

Documents and downloads

Project details

Area of law

Criminal law

Commissioner

Professor David Ormerod QC