The shadow of Shah

One of the aspects of my work that I love – and there are plenty – is that the goal-posts are always moving.  Criminals change what they do, launderers change how they work, and jurisdictions change their laws.  (I tried to think of a good goal-posts analogy, as moving goal-posts are generally seen as bad, but I failed.  To be fair, I am writing this at 0634, so my brain is not quite up to speed.  So for my purposes today, moving goal-posts are good.)

For instance, the UK is currently considering a small but significant change to the Proceeds of Crime Act 2002 which will clarify things for institutions reporting suspicions of money laundering.  Under PoCA (as in most other jurisdictions) there is an obligation on firms conducting certain types of business to report suspicions of money laundering via disclosures to the authorities (in the UK, the NCA).  They can either report after the event (“We’ve seen this and we think it might involve the proceeds of crime”) or ahead of it, asking for consent (“We’ve been asked to do this and we’re concerned it might involve the proceeds of crime – do you think we can or not?”).  In the latter situation, there will of necessity be a delay between asking for consent and receiving a response; this delay is usually short, but the legislation does allow (in total) up to about five weeks.  And of course, clients can be impatient and even antsy, but you can’t tell them why you’re waiting (tipping off…).

In the past, some clients (notably Shah when dealing with HSBC) have claimed that the institution is responsible for any loss that the client has incurred as a result of this delay.  Such claims have been unsuccessful, but they have highlighted a lack of clarity in the legislation.  And this proposal seeks to remove that lack of clarity – thus making things clearer (unlike this sentence).

So on 8 January 2015, Karen Bradley MP (Minister for Modern Slavery and Organised Crime) tabled several new amendments to the Serious Crime Bill 2014, which is currently working its way through the system.  And one of her proposed amendments is this:  “In section 338 of the Proceeds of Crime Act 2002 (money laundering: authorised disclosures), after subsection (4) insert— ‘(4A) Where an authorised disclosure is made in good faith, no civil liability arises in respect of the disclosure on the part of the person by or on whose behalf it is made.’”  Should it make it into the final legislation, this is good news for reporting institutions – although those whose legal teams might suggest (perish the thought) making a defensive disclosure just to secure this immunity should point out with a large and pointed stick the phrase “in good faith”.  You can track the progress of the Serious Crime Bill 2014 here.

This entry was posted in Legislation, Money laundering and tagged , , , , , , , , , . Bookmark the permalink.

3 Responses to The shadow of Shah

  1. Roy McCarthy says:

    Indeed. In Shah wasn’t the main claim by the client that SARs were made without proper grounds? Maybe they’ll remove the ‘in good faith’ bit as it moves along.

  2. Good morning Roy
    Yes, that was the basis of his claim – HSBC’s difficulty was being able to show (in the face of poor record-keeping) that they had made sensible SARs. You can read a good report on this aspect of the case here:
    Best wishes from Susan

  3. Pingback: Cakes and liability | I hate money laundering

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.