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ombudsman news

issue 29

July 2003

the Proceeds of Crime Act 2002

The Proceeds of Crime Act 2002 ("the Act") extends provisions about money laundering and crime proceeds in a way that could, in a few cases, create practical issues for regulated financial firms and for the Financial Ombudsman Service.

assistance: under the Act, it is a criminal offence for anyone to be involved in arrangements that they suspect facilitate (in any way) someone else in acquiring, retaining, using or controlling the proceeds of crime.

reporting: under the Act, it is a criminal offence for anyone who works in a regulated financial firm not to report any dealing that they suspect, or ought to suspect, involves the proceeds of crime. The report should be made to the firm's money laundering reporting officer, who must report appropriate cases to the National Criminal Intelligence Service (NCIS).

In most cases this will be after the transaction has taken place. Where the firm has advance notice of the transaction, it is protected against an allegation of "assistance" if it gets consent, or "deemed" consent, from NCIS before it carries out the transaction.

NCIS is deemed to have consented if the transaction is reported to it, and NCIS:

  • does not refuse consent within seven working days of the report; or
  • does refuse consent within seven working days of the report, but does not obtain a "restraint order" within 31 days of refusing consent.

A law enforcement agency that receives information from NCIS can apply for a restraint order without giving notice to the person affected, who will be notified when a restraint order has been made.

"tipping-off": it is a criminal offence for anyone to do or say anything that might "tip-off" someone else that they are under suspicion of acquiring, retaining, using or controlling proceeds of crime. That applies whether or not any report has been made to NCIS.

The fact that the transaction was notified to NCIS, but the NCIS did not refuse consent within seven working days, or did not obtain a restraint order, does not alter the position so far as "tipping-off" is concerned.

This means that a financial firm, and the Financial Ombudsman Service:

  • cannot, at the time, tell a customer that a transaction is being delayed because a report has been made under the Proceeds of Crime Act; and
  • cannot later - unless NCIS agrees - tell a customer that a transaction was delayed because a report had been made under the Proceeds of Crime Act.

if a firm receives a complaint: if a firm receives a complaint in these circumstances, it may be unable to explain its reasons to the customer - who may then bring the complaint to the Financial Ombudsman Service.

If a firm receives a communication from one of our casehandlers about such a case, the firm should contact a member of our legal department immediately, preferably:

NCIS has confirmed that, in such cases, a financial firm can tell our legal department about a report to NCIS and the outcome, on the basis that we will keep the information confidential (which we must do, to avoid any "tipping off").

Our legal department will then oversee the case, to ensure that it is handled appropriately in these difficult circumstances - liaising as necessary with NCIS. But our communications with the customer will still be in the name of a casehandler/ombudsman, so that the customer is not alerted.

Walter Merricks, chief ombudsman

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.