From the definition of money laundering it clearly states that is the laundering of ‘criminal property’. Criminal property needs to be distinguishable from proceeds arising from civil affairs or innocent errors. For the purposes of POCA the definitions of ‘criminal conduct’ and ‘criminal property’ were widely drawn. Property is criminal if; (POCA S293)
- It constitutes a person’s benefit from criminal conduct, whether whole or in part and whether directly or indirectly; and
- The alleged offender knows or suspects that it constitutes or represents such a benefit
This simple statement is wide reaching and needs understanding. The first part states criminal property is property which was obtained as a result of criminal conduct and in the second part that the person knows or suspects that it was obtained from such conduct. The property can be in any conceivable legal form, whether money, rights, real estate or any benefit. It may have changed from one form to another or been through several hands but it could still be criminal property if the original property was obtained from criminal conduct.
Because the definition of criminal property (an essential element of money laundering) requires actual knowledge or suspicion of the person alleged to be involved, it is not possible to money launder inadvertently. Unless committed deliberately, strict liability offences (such as non-payment of VAT), although offences in their own right, do not give rise to criminal property or, therefore, money laundering.
Criminal conduct is conduct which would result in conviction for a criminal offence if proved before a UK court. You are expected to assess whether activity is criminal conduct by its nature. There does not have to be a police investigation, a trial or a conviction in relation to conduct for it to be criminal conduct. For example, drug dealing is criminal conduct even if undetected. In assessing whether conduct is criminal conduct, you may have regard to the following:
- the legal presumption that persons are law-abiding. This presumption will not apply if circumstances suggest otherwise.
- if it is a moot point whether the conduct is criminal, you should not decide that it is. For example, a client might have legal arguments as to why VAT is not payable. You should not determine the outcome of unsettled law or dispute.
- if it is capable of reasonable explanation, you should afford your client the opportunity to provide an explanation, unless you have cause to fear recriminations from your client.
- you are not expected to be expert in criminal law but you are expected to have the knowledge of a reasonable member of staff working in your particular field, at your particular level.
For the purposes of the legislation, criminal conduct can relate to any crime known to UK law, regardless of how serious or trivial.
There is an important distinction between criminal conduct and money laundering. While the conduct may be criminal, it is only the possessing or dealing with property arising from criminal conduct that amounts to money laundering. If, for example, a client submits a false tax return to understate the tax owed, he may be attempting to commit a fraud, but until he gains the benefit of his fraud – that is, he knowingly and deliberately retains the tax after it has become due and owing – he is not engaged in money laundering because there is no criminal property prior to this point.