The Court of Appeal has overturned a High Court ruling on the ongoing effects of using the “adequate consideration” defence when acquiring the proceeds of crime. The World Uyghur Congress had challenged a decision letter from the NCA. It said that the NCA had acted under two misapprehensions:
- that it is necessary to identify a specific product as criminal property before starting a money laundering investigation; and
- once one person in a supply chain has relied on the exemption in s329(2)(c) POCA for acquiring the proceeds of crime for “adequate consideration”, this has the effect of “cleansing” the property so it can’t be recovered from anyone else who subsequently acquires it, or from the proceeds of its onward sale.
The case had at its root a growing body of evidence of serious human rights abused in the XUAR cotton industry. It follows that products derived from forced labour anywhere in the world can be “criminal property” for POCA purposes (and “recoverable property” for the purposes of the POCA civil recovery provisions). All parties agreed this, and that funds from the sale of relevant products and any property into which they were put could also fall within POCA’s scope. The WUC had approached the NCA in 2020 asking it to investigate a number of companies for money laundering offences. The NCA had decided not to investigate, and the reasons it gave in its decision letter led the WUC to challenge it in the High Court. The High Court had backed the NCA so the WUC took its application to the Court of Appeal.
On point 1, the NCA argued that it had not intended to convey that it would not start an investigation without having identified the criminal property. The Court held, however, that on a reasonable reading of the NCA’s letter that is what it said, and that this was wrong – so the question of whether to carry out an investigation would go back to the NCA to reconsider.
The nub of the Court of Appeal judgment focussed on the second point. The Court of Appeal held that the s329(2)(c) defence is personal to the individual concerned in the circumstances in which they use it. The Court pointed out that if a recipient has no knowledge or suspicion that the property they are receiving is the proceeds of crime, they do not need the defence in the first place – they only need it where they do have that knowledge or suspicion. But the Court was clear that this does not mean the proceeds are not proceeds of crime in the hands of any other person. Whether any person who subsequently acquires the proceeds can also use the defence is a matter individual to that person, but the Court of Appeal was clear that the funds are still the proceeds of crime notwithstanding the use of the defence. And any person who has used the defence but then seeks to dispose of the funds will need to consider the need to apply for a DAML in order to do so, since the defence applies only for s329 POCA and not to the other money laundering offences POCA contains.