Preventing money laundering and the financing of terrorism
Requesting a defence
8.29 If casino operators handle any proceeds of crime they may commit one of the principal money laundering offences in POCA or the Terrorism Act. However, if the nominated officer submits a SAR to the NCA this can provide a defence. There is a statutory mechanism which allows the NCA either to grant or refuse the 'prohibited act' going ahead, or to prevent the suspected money laundering going ahead (section 335 of POCA). This statutory mechanism is called 'appropriate consent' and is referred to by the NCA as Requesting a defence from the NCA under POCA and TACT (http://www.nationalcrimeagency.gov.uk/about-us/what-we-do/economic-crime/ukfiu/seeking-consent-for-financial-transactions).
8.30 The decision whether or not to obtain a defence (appropriate consent) will arise in the following scenarios:
- concealing, disguising, converting, transferring or removing criminal property (section 327 of POCA)
- facilitating the acquisition, retention, use or control of criminal property by, or on behalf of, another person (section 328 of POCA)
- acquisition, use or possession of criminal property (Section 329 of POCA).
These are referred to as 'prohibited acts'.
8.31 In any of these scenarios, casino operators will have two choices. They may choose not to go ahead with the activity in question, or they may choose to proceed. A decision to proceed will mean that the operator may be committing a money laundering offence. However, if they have made an authorised disclosure and have obtained a defence (appropriate consent), they will not be committing an offence.
8.32 Nominated officers need to consider how they will approach their reporting obligations and consider:
- the timing of the report(s) – particularly second or subsequent reports
- whether the casino operator wishes to continue to do business with the customer while awaiting a defence (appropriate consent).
8.33 A nominated officer, police constable, NCA employee or customs officer can give a person (which may include, for example, a casino employee) actual 'appropriate consent' to a suspect transaction proceeding (section 335(1) of POCA). However, it should be noted that the NCA is the only body able to issue formal notification of a defence (consent) by means of an official NCA letter, which the nominated officer can then retain for their records.
8.34 Alternatively, a person will be treated as having appropriate consent if notice is given to a police constable or customs officer (but, note, not the nominated officer) and either:
- consent is not refused within seven working days (beginning with the day after the notice is given)
- if consent is refused and following such refusal, the 'moratorium period' (31 calendar days starting with the day on which the person receives notice that consent to the doing of the act is refused) has expired (but see paragraph 8.35) (section 335(2) of POCA).
Although notice can be given to a constable or customs officer, there is a need to ensure that the practices of all law enforcement agencies are consistent in this area. Therefore, the NCA operates as the national centre for all SARs and for the issue of decisions concerning the granting or refusal of a defence (appropriate consent). To avoid confusion requests for a defence (consent) should be routed through the NCA. See paragraphs 8.45 to 8.56 for more detail.
8.35 Casino operators should be aware that the NCA and other authorities, such as the FCA and Serious Fraud Office, can apply to the Crown Court (or, in Scotland, the sheriff) for an order to extend the moratorium period for a further 31 days. An order can be given on up to six occasions which allows the moratorium period to be extended for a maximum period of 186 days in total. To grant an order for an extension, in each case the Court must be satisfied that the NCA or other authority's investigation is being carried out "diligently and expeditiously", additional time is needed to complete the investigation and an extension would be reasonable in the circumstances (section 336A of POCA).
8.36 However, POCA provides that a nominated officer must not give appropriate consent unless he has himself already made a disclosure to an authorised officer of the NCA and, either:
- the NCA employee has provided a defence (consented to the transaction)
- a defence (consent) is not refused within seven working days (beginning with the day after the notice is given)
- if a defence (consent) is refused and following such refusal, the 'moratorium period' (31 calendar days starting with the day on which the person receives notice that consent to the doing of the act is refused) has expired (but see paragraph 8.35) (section 336 of POCA).
8.37 Reporting suspicious activity before or reporting after the event are not equal options which a casino operator can choose between, and retrospective reporting is unlikely to be seen in the same light as reporting prior to the event. A report made after money laundering has already taken place will only be a legal defence if there was a 'reasonable excuse' for failing to make the report before the money laundering took place (Section 327(2)(b) of POCA). Where a customer request is received prior to a transaction or activity taking place, or arrangements being put in place (for example, where a customer requests the opening of a gambling account), and there is knowledge or suspicion, or reasonable grounds for suspicion, that the transaction, arrangements, or the funds/property involved, may relate to money laundering, a SAR must be submitted to the NCA and a defence (consent) sought to proceed with that transaction or activity. In such circumstances, it is an offence for a nominated officer to agree to a transaction or activity going ahead within the seven working day notice period from the working day following the date of disclosure, unless the NCA provides a defence (gives consent) (section 336(3) and (4) of POCA).
8.38 The defence (consent) provisions can only apply where there is prior notice to the NCA of the transaction or activity. The NCA cannot provide a defence (consent) after the transaction or activity has occurred. A defence (consent) request which is received after the transaction or activity has taken place will therefore be dealt with as an ordinary SAR.
8.39 In the casino environment, business is often conducted out of normal office hours. In addition, gambling transactions may sometimes be more ‘immediate’ than, for example, depositing funds into a bank account where the funds may be withdrawn at a later date. In these circumstances it may sometimes not be feasible or practical to obtain a defence (appropriate consent) prior to or during a transaction. Knowledge or suspicion of money laundering or terrorist financing may be triggered after a customer has completed all the stages of a gambling transaction; that is, they have bought in, they have played and they have cashed out. Under those circumstances, it may be reasonable to report after the transaction. However, the defence of 'reasonable excuse' when reporting after the transaction is untested by case law and should be considered on a case-by-case basis (section 327(2)(b) of POCA). Where the relationship with the customer is expected to have an element of duration and involve numerous transactions, it is advisable to seek a defence (consent) prior to transacting with the customer.
8.40 Casinos should include in their policies, procedures and controls details on how they will manage circumstances where there is knowledge or suspicion of money laundering or terrorist financing. If knowledge or suspicion is present, particularly if this occurs out of normal office hours, there must be a mechanism for involvement of the senior manager on duty and contact with the nominated officer as soon as is practicable. If the circumstances amount to reasonable grounds to suspect, then reporting the matter to the nominated officer should be sufficient, and for the nominated officer to receive the matter at the earliest practicable opportunity.
8.41 The nominated officer will need to think very carefully about whether or not to continue to do business with the suspected customer. Relevant considerations should be the potential commission of criminal offences under POCA or the Terrorism Act, as well as potential damage to business reputation and other commercial factors.
8.42 Casino operators should also note that in the Commission’s view the reporting defence is not intended to be used repeatedly in relation to the same customer. In the case of repeated SAR submissions on the same customer, it is the Commission’s view that this is not a route by which operators can guarantee a reporting defence retrospectively. If patterns of gambling lead to an increasing level of suspicion of money laundering, or to actual knowledge of money laundering, operators must seriously consider whether they wish to allow the customer to continue using their gambling facilities. Casino operators are, of course, free to terminate their business relationships if they wish and, provided this is handled appropriately, there will be no risk of 'tipping off' or prejudicing an investigation. However, operators should think about liaising with the law enforcement investigating officer to consider whether it is likely that termination of the business relationship would alert the customer or prejudice an investigation in any other way.
8.43 How customers suspected of money laundering or terrorist financing will be dealt with is an important area of risk management for all casino operators. They should deal with the issue in their policies, procedures and controls. As all operators are at risk of committing the principal offences, it is advisable to consider these issues carefully before they arise in practice.
8.44 For example, the casino operator may consider one transaction to be suspicious and report it to the NCA as such, but may be less concerned that all of an individual’s future transactions are suspicious. In these circumstances, each transaction should be considered on a case-by-case basis and reports made accordingly, and a defence (appropriate consent) sought where necessary. Where subsequent reports are also made after actual or suspected money laundering or terrorist financing has taken place or appears to have taken place, the nominated officer is encouraged to keep records about why reporting was delayed, and about why a defence (appropriate consent) was not requested before the suspected money laundering or terrorist financing took place.
Next chapter: Applying for a defence