News

U.K. authorities opened only 23 criminal cases against employees of banks and other companies for failing to report suspicious activity in the decade up to December 2021, the latest available government data shows.

Under section 330 of the 2002 Proceeds of Crime Act, or POCA, employees of companies subject to anti-money laundering rules can be held criminally liable for not sharing their suspicion, or actual knowledge, of an illicit transaction with their institution’s money laundering reporting officer, or MLRO, or with the U.K. financial intelligence unit directly.

Section 331 of the law further empowers prosecutors to charge an MLRO with failing to respond to a legitimate internal disclosure of possible or actual illicit finance by filing a suspicious activity report, or SAR, to UKFIU. Both offenses carry a maximum sentence of five years in prison and an unspecified monetary penalty.

Statistics from the U.K. Justice Ministry indicate that from 2012 to 2021, prosecutors launched 21 cases and secured 16 convictions against individual employees accused of violating section 330.

They also secured four convictions against MLROs during those 10 years, but opened only two new cases.

Averaging only two prosecutions a year suggests a reluctance to hold individuals accountable for AML-related infractions of a criminal nature, said Ruth Paley, a partner at Eversheds Sutherland in London who obtained and shared the figures with ACAMS moneylaundering.com.

In June 2021, the Crown Prosecution Service effectively lowered the threshold for charging individuals under section 330 by clarifying that prosecutors can open such cases even in the absence of evidence showing that money laundering actually occurred.

Investigators immediately welcomed the change but the CPS pumped the brakes on their expectations, predicting that the new policy would not lead to a “significant increase” in prosecutions against professional enablers of financial crime.

The CPS and other agencies have said little about any of the cases brought under sections 330 and 331, though employees who knowingly, rather than negligently, handled or ignored illicit funds make the likeliest targets for prosecution, said Paley.

“These are unlikely to be hapless individuals who haven’t done their job properly,” said Paley. “It’s probably people … tangled up in wider criminal conduct, such as employees who’ve been placed inside a bank branch to help launder money.”

Past and present

One of the rare cases opened under section 331 targeted Dominic Thorncroft, the owner, director and MLRO of VS1, a money services business in London through which Chinese fraudsters moved £850,000 in criminally derived funds nine years ago.

Thorncroft was convicted in June 2021 of failing to report suspicious payments to UKFIU, breaching AML rules and retaining a wrongful credit, but acquitted of laundering money.

Six months later, a court in London fined NatWest £265 million for AML breaches that allowed Fowler Oldfield, a jewelry wholesaler in Bradford, to funnel nearly £290 million of suspicious cash into and through the bank from 2012 to 2016.

The FCA found that NatWest staff internally flagged large cash deposits into Fowler Oldfield’s account at least 11 times during those four years but on several other occasions failed to do so. In one branch, employees neither noticed nor warned their managers of at least £42 million of cash deposits that credited the wholesaler.

NatWest did not file a single SAR pertaining to Fowler Oldfield until July 2014, when the bank learned from the National Crime Agency that the company was under investigation. But those alleged reporting failures have not led to a prosecution of NatWest or any of the bank’s employees.

Section 330 of POCA has been the subject of multiple debates since taking effect in 2002, emerging as a point of contention again during the ongoing reform of U.K. policies for filing SARs, which reached a record total of 901,000 in the fiscal year that ended in March 2022.

In 2019, the Law Commission noted that the threat of individual criminal liability for failing to report potentially illicit transactions has encouraged defensive reporting, a strategy in which MLROs file low-quality reports without clear suspicions of financial crime to eliminate their and their employer’s exposure to enforcement and prosecution.

Susan Hawley, executive director of Spotlight on Corruption, agreed that prosecuting financial services professionals under sections 330 or 331 could exacerbate defensive reporting.

But no such reason exists for the government to not pursue cases against real estate agents, corporate services professionals and employees in other non-financial sectors subject to AML rules that have long faced criticism for disregarding suspicious activity, said Hawley.

“If they want those sectors to report more, you’d think you’d see more strategic use of the offenses there,” Hawley said.

The data Paley shared from the Justice Ministry also shows that from 2012 to 2021, U.K. prosecutors charged only one individual with “tipping off”—the act of alerting an account holder that their transactions have drawn attention from law enforcement.

The case ended without a conviction.

Prosecutors accused three other individuals of “prejudicing” a money laundering investigation by falsifying, hiding or destroying evidence or by making an unlawful disclosure, but did not secure any convictions.

Contact Koos Couvée at kcouvee@acams.org