The Evolution of Proceeds of Crime Act, 2002
A very important legislation that was enforced for AML in the UK is POCA, 2002. Let’s take a look at how this legislation was formed and enacted. And what led to it.
A brief history:
Before this act was enforced the money laundering crimes were tried using several other judicial rules such as the Drug trafficking Act, 1994 and Criminal Justice Act, 1993. In 1993, the first Money laundering regulation was introduced in the UK. The primary objective of these regulations was the execution of the EU Money Laundering Directive. The provisions in the regulations and introduction of new concepts such as “Know your customer” and EU directive led to the formation of the second directive in 2001 and 2003 ML regulations in the UK. Some of the main objectives of these regulations were:
- Systems and training to prevent money laundering
- Establishment of identification procedures
- Record-keeping procedures
- Internal reporting procedures [1]
Regulation 5 emphasised on the importance of reporting suspicious activity, and how failure to do so is a criminal offence. There is also a mention of training (regulation 5(1)(b)) that should be given to employees so they are well equipped and prepared to deal with customers during such situations legally. While regulation 14 throws some light into the internal reporting procedures that need to be followed, assimilation of information, judicious access to any relevant material, responsibility of appropriate authority, etc.
The Proceeds of Crime Act, 2002 is an act of the parliament of the United Kingdom. It was sanctioned following a new regulatory policy by the government back in the year 2000. Several money-laundering crimes from the preceding legislations along with new crimes are stated in this framework. This act (POCA) was enforced for all sorts of crimes that take place in the UK and not just serious financial offences, regardless of the amount laundered. It could go from 1 GBP to 1 Million. From confiscation of criminal proceeds, profits generated via tax from these crimes, recovery of the proceeds, UK anti money laundering legislation [2] etc. Money laundering offences were predominantly limited to just drug trafficking proceeds and the POCA changed this perspective. Other kinds of organised crimes were also taken into account with respect to such offences.
This act is divided into 12 parts and Part 7 of the Act deals with Anti-money laundering legislation in the UK. This part also covers and includes reporting to authorities, provisions related to the banking and investment sectors etc.
The duty to report such unusual activities lies on not just banks, but solicitors (legal privilege is an exception to this rule), accountants and anyone who knows about a client that participates in unusual financial crimes or even tax related frauds or criminal conducts. Part 7 talks about failure to report to be considered an offence in the UK and the maximum penalty for the same is 5 years imprisonment or a fine payment. This act takes forward the practice of reporting such offences on a universal level and makes it compulsory to report such unusual events. This legislation also amalgamates pertinent provisions of anti-money laundering into a single statute making it more convenient.
I hope everyone is staying safe at home! See you in my next post.
[1] , Robert Strokes and Anu Arora, ‘The duty to report under money laundering legislation within the United Kingdom’, Journal of Business Law.
[2] ‘The Money Laundering Legislations, 2007,’ <http://www.legislation.gov.uk/uksi/2007/2157/contents/made>