UK Crown Prosecution Service Increases Risk of AML Prosecution with new “Failure to Disclose” Guidance

On 2 June, 2021, the UK Crown Prosecution Service (CPS) updated its guidance (the updated guidance) on the offence of “failure to disclose” under Section 330 of the Proceeds of Crime Act 2002. The offence of failure to disclose is committed when a person:

1. Receives information in the course of a business in the regulated sector; and
2. Thereby knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in money laundering; and
3. Can identify that other person or the whereabouts of any of the laundered property, or believes, or it is reasonable for them to believe, that the information will or may assist in identifying that person or whereabouts of any of the laundered property; and
4. Fails to disclose to a nominated officer or to the National Crime Agency, the information on which his knowledge or suspicion is based as soon as is practicable after the information comes to him.

The offence of failure to disclose carries a maximum sentence of five years in prison, and/or a fine. 

Previously, the CPS would prosecute individuals of a regulated firm under Section 330 where evidence had been substantiated to prove that a money laundering offence was premeditated or had occurred, i.e., individuals having knowledge of another person(s) complicity in money laundering. 

What is New?

The updated guidance stipulates that individuals can now be prosecuted under Section 330 as a standalone offence, even if there is insufficient evidence to establish that money laundering was planned or has taken place. The updated guidance firmly focuses on suspicion rather than knowledge. This means where money laundering cannot be proven due to lack of evidence of planning or undertaking, the prosecution can now proceed if it just suspects the crime took place.

There is now an increased risk of prosecution of individuals in regulated firms, as the requirement is for the CPS to establish that the individual had suspected or had reasonable grounds for suspecting money laundering rather than having actual knowledge of money laundering. 

What This Means for You

The updated guidance will be enforced from 2 June, 2021, and will not be applied to cases retroactively. The updated guidance should prompt financial institutions to assess their financial crime framework to ensure adherence to regulatory and reporting requirements. Financial institutions should also ensure that all relevant individuals of the firm are aware of their obligations to report their suspicions of money laundering and the associated risk of failing to report. A compliance alert or supplemental training for personnel can help remind them of their obligations and the increased risk of prosecution.

How Guidehouse Can Help

Guidehouse can rapidly review and assess your financial crime framework to determine whether it is operationally effective and meets the new regulatory expectations. Guidehouse has in-depth knowledge of the regulatory environment, both in the UK and globally, and financial institution processes. Guidehouse’s relevant expertise includes: 

• Compliance solutions. 
• Financial crime framework risk assessments and gap analyses.
• Advising on the effectiveness and efficiency of financial crime processes and systems.
• Investigations and reporting. 
• Training.
• Compliance system testing, system configuration, and model validation.

Guidehouse’s financial crime consultants work with financial institutions of all sizes to build effective and efficient risk management and compliance frameworks to help clients protect against legal, fiduciary, shareholder, and reputational risk. Guidehouse experts include distinguished former prosecutors, regulators, compliance officers, law enforcement and consultants, who leverage their combined experience to help clients conquer their compliance challenges.

Please reach out to us if you would like to discuss further how we can assist you to develop or review your anti-money laundering programme to ensure it is fit for the challenges introduced by these new challenges.

Special thanks to Sajeev Kanagarajah for contributing to this article.