No need to seek DAML in two new pay-away situations

Previously a firm in the regulated sector¹ faced an onerous burden when exiting a customer relationship where the account was suspected to contain criminal property.  The firm had to seek a ‘defence against money laundering’ (DAML) from the UK National Crime Agency (NCA) before paying the property away.  This required a firm to wait for up to seven days after seeking a DAML (and sometimes longer) without tipping off its client before it could action a payment.  It was also difficult for a firm to make payments from a customer’s account which contained mixed clean funds and suspected criminal property without first obtaining a DAML. 

The Act reduces this burden:

• Section 182 amends the Proceeds of Crime Act 2002 so that, even if a firm has knowledge or suspicion of criminal property, it can transfer money or other property owing or belonging to a customer for the purposes of exiting that customer relationship, provided the value is not over GBP1000 and required customer due diligence has been done. This figure may seem low, but it would nonetheless simplify a large number of retail account closures. This provision comes into force as from 26 October 2023.

• Section 183 provides that a firm can pay money or other property from a customer’s account if the amount left in the customer’s account equals or exceeds the amount to which the knowledge or suspicion relates. For example², where a customer’s account contains GBP2000 from a legitimate salary and a further GBP3000 from what the bank suspects to be a fraudulent loan application, the bank can allow the customer access to up to GBP2000 without seeking a DAML, as long as it keeps at least GBP3000 in the account.  This provision comes into force from 15 January 2024.

In both situations, the firm will still have to report its suspicions of money laundering to the NCA, but will not be required to obtain a DAML to avoid committing a money laundering offence.

The need for old and new financial gatekeepers to keep up to date with AML rules was one of ten key challenges identified for in-house investigations lawyers in the 2022 Allen & Overy White Collar Crime and Investigations Review.

1. As defined in the Proceeds of Crime Act 2002 – includes banks, deposit taking bodies, electronic money institutions and payment institutions, cryptoasset exchanges and custodian wallet providers.

2.  Example as summarised from the Explanatory Notes to the Economic Crime Bill.