Speedread: Recent events suggest that management consultants are vulnerable to interacting with criminal property, thereby triggering a money laundering exposure under UK criminal law. Anita Clifford explores where the real tenderness lies and the safeguards that can be put in place to protect consultancy firms of all sizes.
The January 2020 release to the press of documents gathered by the International Consortium of Journalists has called into question the wealth accumulated by Isabel dos Santos, Africa’s most successful businesswoman and the daughter of Angola’s former president. It has also shone a spotlight on the conduct of a global network of professionals, including management consultants, identified as assisting Ms dos Santos’ investments. Embedded in the anti-money laundering regulated sector are banks, accountants, trust and company services providers and lawyers who, when carrying out business in the UK, are expected to adhere to the preventative duties in the Money Laundering Regulations 2017 (as recently amended) (MLR 2017) and be mindful of exposure to the main criminal offences of money laundering between sections 327—330 Proceeds of Crime Act 2002 (POCA), as well as the duty to report reasonable grounds to suspect money laundering in section 330. However, the dos Santos matter and 2018 allegations made against management consultants said to be in the background of allegedly corrupt contracts in South Africa highlight that management consultants do also have a noticeable money laundering exposure even though they fall outside of the AML regulated sector and are not subject to MLR 2017. It is imperative to understand how the vulnerability can manifest and what can be done to safeguard against it, irrespective of whether the management consultant is part of a small, mid-size or global firm.
Understanding the money laundering offences
In the UK, all individuals and corporate entities are subject to the criminal offences of money laundering appearing between sections 327—329 POCA. In essence, the offences criminalise interactions with ‘criminal property’, defined as a benefit of any kind (not necessarily monetary) from criminal conduct whether occurring in the UK or elsewhere. A criminal investigation, let alone conviction, is unnecessary for acts to be regarded as ‘criminal conduct’ capable of generating the proceeds of crime. The touchstone is that the conduct is or would be contrary to UK criminal law. Offences of bribery, tax evasion, trafficking are captured, alongside offences which may not be immediately recognisable such as environmental crimes or criminal offences which arise where a business fails to obtain the requisite licence or carry out a necessary inspection. Further, although there is a larger debate to be had as to whether criminal property can or should be severable from legitimate property, the current legal position is that property will be ‘criminal’ if only one part has been identified as deriving from a criminal source. Simplistically, if 25% of the funds used to acquire a rare first-edition book are from the proceeds of tax evasion, the book in its entirety falls to be considered ‘criminal property’ for the purposes of the money laundering offences under POCA.
The breadth of the offences is tempered by a mental pre-requisite. For a person, whether acting in a professional or private capacity, to be exposed to criminal liability, she must actually know or suspect that what she is interacting with or assisting another to interact with (ie., transfer, acquire, conceal, use) is criminal property. But running a defence of ignorance can be challenging. Whilst knowledge or suspicion may be the subject of direct evidence, in most cases, there will not be a smoking gun. Knowledge or suspicion that, for example, the rare book has been purchased in part from the proceeds of a dishonest crime can be readily inferred from wholly circumstantial evidence. Adding to the exposure, ‘suspicion’ is a low bar referring simply to a ‘possibility more than fanciful’: R v Da Silva  1 WLR 303.
Consultants and circumstantial evidence of criminal property
When it comes to professional advisers, including management consultants, knowledge or suspicion that the client is handling criminal property or has come for assistance on how to best handle criminal property can be supported by a raft of circumstantial factors. These include the nature of the relationship between the consultant and the client, evidenced by the regularity and content of communications, length and closeness, the consultant being in possession of clearly false or at least questionable documents, a lack of rational basis for the award of contracts, large sums of money or property acquisition given what is known about the client, the existence of opaque and complex structures that cannot be reasonably explained, reputable press calling into question the client’s conduct at the relevant time, and assets being bought and sold with the consultant’s knowledge at marked undervalue.
Caught in an arrangement
Alongside the risk of aiding and abetting the handling of criminal property, the real tenderness for consultants is the possibility of being caught by section 328 POCA which criminalises being ‘in an arrangement’ which facilitates the acquisition, use, retention or control of criminal property by another person. An ‘arrangement’ is deliberately not defined in POCA and is interpreted broadly, capturing the giving of advice as well as planning and executing transactions: R v Geary  1 Cr App R 8.
Despite the width of a critical component of section 328 POCA, bounds to the offence have been recognised by the courts. For exposure to the offence to arise, ‘criminal property’ must already be in existence: Loizou  2 Cr App R 618. Concern that the property will or could become criminal if further steps are taken is insufficient. For instance, if a consultant becomes concerned because of the nature of her corporate client’s disclosures to her that a coveted contract might be procured through bribery in the future and she is asked for strategic input on how best to structure a potential investment if that contract is ultimately secured, there is no section 328 exposure because – unless more is known or suspected – criminal property (ie., proceeds generated by the contract) does not yet exist.
Further, for the vulnerability under section 328 to arise the arrangement must ‘facilitate’ use, retention, control or acquisition of criminal property. The emphasis is on the present tense. In Dare v CPS  EWHC 2074 Mr Justice Bean observed that the offence:
“does not say ‘will facilitate’, still less ‘will probably facilitate’ or ‘may facilitate’. It envisages a snapshot being taken at the moment of the arrangement being concluded so that one can say that it facilitates (present tense) the acquisition.”
In this way, there is a clear temporal consideration to the section 328 offence.
Consultants will have a complete defence to a money laundering offence where an authorised disclosure (Suspicious Activity Report) is made to the authorities or where one was intended but there is a ‘reasonable excuse’ for not making one. Whether to make a report in the UK and implications for other jurisdictions requires careful consideration. Further, judging the reasonableness of any potential excuse for not doing so will typically be a finely balanced exercised and one which may require scrutiny of the existence of a UK nexus.
Looking ahead, management consultants should familiarise themselves with section 327—329 POCA and particularly how they may become ensnared in an arrangement which facilitates criminal property. Training of staff will be key. Whilst there are bounds to the offence, it should be remembered that the test for suspicion is low and can be met by circumstantial evidence. Consequently, it will be important to conduct a level of due diligence on the client in relation to each project for which consultancy services are sought even though there is no legal duty to do so. Further, although figures released by the Ministry of Justice in 2018 record that of the three main money laundering offences, successful convictions for section 328 sat at 225 in 2017 as opposed to over 530 each for offences under section 327 and 329 POCA, suggesting that the offence is difficult to prosecute, the number of criminal investigations into professionals, including management consultants, is unknown. Recent events suggest that whilst management consultants do sit outside of the AML regulated sector, they are not beyond the scope of money laundering scrutiny.