Guy_Stuckey-Clarke_phFactual background

The case arose from the activities of a fraudster, known as “B”, who established four ‘ghost’ websites falsely pretending to offer cut-price motor insurance and recruited associates to open bank accounts for channelling the proceeds.

One website was named AM Insurance, which operated from 1 September 2011 to January 2012. Shortly before the website went live, the Respondent, “H”, opened two bank accounts, one with Lloyds and the other with Barclays. B subsequently took control of these accounts and the related bank cards. In total, the public was conned into paying £417,709 in the Lloyds account and £176,434 into the Barclays account for non-existent insurance cover.

B pleaded guilty to a number of offences. Following B’s conviction, H stood trial at the Central Criminal Court charged with entering into a money-laundering arrangement contrary to the Proceeds of Crime Act 2002, s 328(1), which states:

“A person commits an offence if he enters into or becomes concerned in an arrangement which he know or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person.”

Appellate history

The trial judge, Recorder Greenberg QC, upheld the submission that H had no case to answer because, at the time that the respondent entered into the arrangement, no criminal property was yet in existence.

The Court of Appeal dismissed the prosecution’s appeal. Lloyd Jones LJ and Irwin and Green JJ held that under s 328 of the 2002 Act it is not necessary for criminal property to exist at the moment when parties come to a prohibited arrangement, but that the arrangement must relate to property which is criminal property at the time when the fraudulently procured funds enter H’s bank account.

The prosecution appealed to the Supreme Court, and the appeal was heard on 24 February 2015 by Lord Neuberger, Lord Kerr, Lord Reed, Lord Hughes and Lord Toulson. Judgment was handed down on 22 April 2015.

Supreme Court decision

The UK Supreme Court allowed the appeal by way of a unanimous decision. Lord Toulson’s leading judgment (with which the other Justices agreed) addressed four issues in turn:

(i) Whether the commission of an offence under s 328 of the 2002 Act requires property to constitute “criminal property” prior to the arrangement coming into operation.

On this point, the Court upheld an unbroken line of Court of Appeal authority that it is a prerequisite to an offence under ss 327, 328 and 329 of the 2002 Act (the “POCA Provisions) that the property alleged to be criminal property should have that quality or status at the time of the offence. The Court concurred with Moses LJ in JSC BTA Bank v Ablyazov [2009] EWCA Civ 1124 at 14, where he described the POCA Provisions as “parasitic” offences, because they are predicated on the commission of another offence that has yielded proceeds which then become the subject of a money laundering offence. The Court was clear in the view that these sections are not aimed at the use of clean money for the purposes of a criminal offence, which is a matter for the substantive law relating to that offence.

At a policy level, the Court warned that a wider interpretation would have serious potential consequences in relation to banks and other financial institutions which are already subject to onerous reporting obligations for suspected money laundering. Lord Toulson agreed with the analysis of the Hong Kong Court of Final Appeal in HKSAR v Li Kwok Cheung George [2014] HKCFA 48, which involved a similar issue arising from a Hong Kong money laundering ordinance. In that case, Ribeiro and Fok PJJ stated:

“It is one thing to criminalise dealing with funds where the dealer knows or has reasonable grounds to believe that they are the proceeds of crime, it is quite a different matter to stigmatise as a money launderer, a lender dealing with its own ‘clean’ funds because of what the borrower does or intends to do with them.”

(ii) Whether “criminal property” has to exist when the defendant enters or becomes concerned with the arrangement.

The Court of Appeal was right to hold that it does not matter whether criminal property existed when the prohibited arrangement was first hatched. What matters is that the property should be criminal property at a time when the arrangement operates on it.

(iii) Whether the sums received into the bank accounts constituted “criminal property” before being paid into the account.

The prosecution submitted that property will amount to criminal property if it constitutes or represents a benefit from criminal conduct. As the 2002 Act defines property as including a thing in action, if the money paid by the victims into the respondent’s bank accounts represented underlying choses in action (namely the obligation of the purchasers of insurance to pay the price), the money paid would satisfy the definition of being criminal property.

The Court held that, while this reasoning was sound, the prosecution would have to establish the existence of a prior bilateral contract between AM Insurance and the victims which bound the purchaser in advance of paying the supposed premium (as opposed to a unilateral contract). There was a stark absence of material to substantiate the existence of such a contract.

(iv) Whether the actus reus of the s 328 offence was committed.

The Court reasoned that the character of the money, although lawful at the moment of payment, changed on being paid into the bank accounts. The money became criminal property in the hands of B by reason of the fraud perpetrated on the victims. As such, the Court held that it is legitimate to regard H as entering into or becoming concerned in an arrangement to retain criminal property for the benefit of another.


The Court has adopted a wide interpretation of the scope of the POCA Provisions. By this reasoning, as Toulson J explained:

“A thief is not guilty of acquiring criminal property by his act of stealing it from its lawful owner, but that does not prevent him from being guilty thereafter of an offence under one or other, or both, of those sections by possessing, using, concealing, transferring it and so on.”

The inherent danger with an unduly broad interpretation is that the POCA Provisions may be used to prosecute conduct instead of charging the specific statutory offence (for example, the Theft Act). However, the Court stated that the wide ambit of these sections could be managed by: (i) the prosecution only adding parasitic counts to substantive ones where there was a proper public purpose; and (ii) courts using their powers to discourage inappropriate use of the POCA Provisions to prosecute conduct which is sufficiently covered by substantive offences.