Supreme Court clarifies extraterritorial scope of UK money laundering offences

Whilst this decision primarily concerned the UK’s extradition framework, this post focuses on the Supreme Court’s findings in relation to the extra-territorial application of POCA.

Substantive money laundering offences under POCA

The substantive money laundering offences in POCA are contained in sections 327 – 329. It is an offence to, for example, convert (s327) or acquire (s329) criminal property. Property will be criminal property in the hands of someone who knows or suspects it is the benefit of criminal conduct.   

One of the defences to a money laundering offence is for a person to make an advance disclosure (known as a Defence Against Money Laundering or DAML) to the NCA to seek consent to carry out the relevant act, e.g. converting or acquiring the criminal property.

Prior position in cross-border money laundering scenarios

POCA is clear that if the underlying criminal conduct occurs overseas, but it would be an offence in the UK if it were to have occurred in the UK, then it still gives rise to criminal property. What has been more complicated, until now, is whether the same principle applies to the substantive money laundering act. In other words, if the money laundering, e.g. conversion or acquisition (of criminal property), also occurs overseas, would that constitute a money laundering offence under POCA? That question is highly relevant for businesses operating internationally.

A controversial 2014 UK Court of Appeal decision (R v Rogers & ors [2014] EWCA Crim 1680) held that it would. In that case, a fraudulent scheme operated on UK victims. Rogers, a UK citizen resident in Spain, permitted profits from the scheme (the criminal property) to be paid into and withdrawn from a Spanish bank account controlled by him (the act of converting the criminal property under s327 POCA). Despite none of the money laundering acts taking place in the UK, the Court of Appeal held that there was jurisdiction to try Rogers in England under s327 POCA. The Court considered that various provisions in POCA supported an interpretation of its extraterritorial reach. It also found that a substantial measure of the underlying fraud took place in the UK, providing enough of a nexus to engage POCA.

Supreme Court rejects Rogers

That reading of POCA has now been overturned and its narrower territorial scope restored. The Supreme Court unequivocally confirmed that “to come within the territorial scope…the acquisition, use or possession of the proceeds of the criminal conduct must itself occur in the United Kingdom”. It noted that the reasoning applied in Rogers was based on a flawed interpretation of a provision in POCA, and suggested that parliament could have intended to give sections 327 – 329 extraterritorial effect but expressly had not. Rogers was “wrongly decided”.

Comment

Whilst commentators have long-criticised Rogers, it has until now complicated the analysis of whether it was possible to commit a money laundering offence under POCA despite all the elements of the money laundering occurring overseas. It gave rise to the risk of an offence even where both the underlying criminal conduct and the money laundering took place outside the UK. The potential extremity of this position was laid bare by the Supreme Court: “We do not think it seriously arguable that acquiring, using or possessing in the United States money which represents the proceeds of a crime in the United States can constitute an offence under section 329 of [POCA]”. 

The decision makes it clear that although overseas criminal conduct can still give rise to criminal property, for s327 – 329 POCA to be engaged (and a DAML considered), there needs to be an act of money laundering in the UK. 

This is reassuring for companies faced with potential cross-border money laundering scenarios needing to assess whether to make a disclosure to the NCA. Given the cross-border nature of many transactions, that will still involve a careful consideration of any potential nexus to the UK, bearing in mind that the scope of the s328 offence is wide and captures arrangements to facilitate the acquisition etc. of criminal property. The potential application of money laundering laws in other jurisdictions would also still need to be assessed.

The judgment does not impact the separate “failure to disclose” offences in s330 – 332 POCA applicable to businesses in the regulated sector and MLROs. Those catch acts of “money laundering”, which is separately defined in s340(11) POCA and include overseas acts which are transposed to the UK.  

The article is part of the A&O Shearman on Investigations blog - sign-up to receive more updates on important white collar crime and investigations.