England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		28th January 2009

1. LORD JUSTICE TOULSON: On 23rd November 2007 at Kingston-upon-Thames Crown Court before Her Honour Judge Matthews QC, Abbas Hussain Khanani and his son, Ameer Khanani, were each convicted of entering into a money laundering arrangement, contrary to section 328 of the Proceeds of Crime Act 2002. Each was given leave to appeal against conviction by the single judge on limited grounds. Mr Khanani (Junior) has not pursued his appeal and we are therefore concerned only with the appeal of Mr Khanani (Senior). That appeal has proceeded on a single issue but to see how the issue arises it is necessary to give some more general account of the prosecution's case.
2. In a nutshell, the prosecution case was that the appellant and his son were responsible for the United Kingdom operation of a Hawala banking network and that they utilised that arrangement to facilitate the acquisition of criminal funds on behalf of the appellant's principal in Pakistan. There is nothing unlawful or irregular in itself about a Hawala banking system. The judge and jury were assisted by admissions made by both parties about the nature of such a system. We quote from the admissions:

"Hawala is a method by which funds can be transferred between people or companies, often across international boundaries. A particular Hawala system will generally be built upon links based upon family, tribe or ethnicity. Transfers of Hawala funds are facilitated through an informal system operated by active Hawalader Brokers, who execute swaps of value or transfers between themselves to settle debts, thus reducing the amount of administrative records and avoiding local controls. The system is built both upon trust and on a history of success.

In 2005 the Court of Appeal in Hussain and Ali [2005] EWCA Crim 87 21 & 22 paragraphs described the detail of the process as follows:

'21. Hawala banking is an arrangement by which individuals (or intermediaries who have collected money from individuals) deposit money, usually in the form of modest amounts of cash, with a Hawalader in, for example, the UK to be remitted to beneficiaries abroad, commonly in the country from which the remitters' family originate, for example Pakistan. The UK Hawalader will have a Hawala contact in Pakistan who will pay a sum in rupees, at a rate of exchange which may have been agreed with the remitter in advance. The payment will commonly be made more quickly, more cheaply and with less formality than any corresponding service that might be available through the medium of the commercial banks. There is commonly a family relationship between the UK Hawalader and his contact in Pakistan which enables the transaction to be completed with a greater reliance on trust than is necessary in other commercial financial dealings.

22. For ordinary Hawala there must be records to show the identities of the individuals from whom the money had originally been collected in the UK and of those to whom it was ultimately to be paid in Pakistan.'

It is not inconsistent with the Hawala process that a Hawaladar or his agent in the UK should collect a stock of cash from different customers and use it to compete entirely separate transactions on behalf of a Pakistani Hawaladar.

Hawala banking represents (for the customer) an alternative to the use of the conventional banking system, but a Hawala banker in the UK is subject to exactly the same legal obligations as a conventional banker."

3. The case against the appellant was that very large sums of cash were collected, generally by the appellant's son in an unorthodox way and for which the appellant and his son did not keep proper records.
4. During the weeks leading up to the search of the appellant's premises there were surveillance activities, as a result of which the appellant's son could be seen going about by car and collecting what the prosecution said were transfers of cash in the street or outside an underground station, in peculiar circumstances, that is to say, that the transfers were carried out swiftly and without the monies being counted or a receipt given.
5. On 31st August 2004 customs officers searched the home address from which this business was conducted. The appellant himself was at this stage in Pakistan having flown there a few days earlier. Cash books and ledgers were found. The records were mainly in the appellant's handwriting.
6. The records, which did not go back before 2004, had some striking features about them. The true names of many depositors were not recorded. The amounts recorded as received were in many cases shown as 1 per cent of the true amount which could be deduced from other documents. There was, for instance, an entry recording £1049.20 but which from other evidence could be shown to relate to a receipt of £104,920. On the day before the police search, officers had observed a Dutch national, named Floor, enter the United Kingdom from Amsterdam. He flew into Heathrow and checked into a hotel. He checked out of the hotel on the following morning and took a taxi to Leyton Underground station. There he met the appellant's son, who was in a Fiat car. Floor put a brown holdall on the back seat of the car. At that point both men were arrested. The holdall contained £140,000 in bank notes. Floor was granted bail but later absconded. Although the appellant himself was out of the country, the prosecution relied on this incident not only against the appellant's son but also more generally as showing the nature of the business at that time. If the £140,000 was honest money, there were much simpler ways for it to have been moved than by Floor flying to England, taking a taxi to East London and handing it over in a holdall to the appellant's son outside an Underground station.
7. As an indication of the scale of the appellant's activities, over £2 million in cash was received in a 2-month period from the beginning of July to the end of August 2004. The money received by the appellant was not banked but kept in cash at his home. At the time of the police search the cash found there amounted to over £90,000.
8. The prosecution's case was that these features taken together provided ample material from which a jury might properly infer that the appellant was providing a service to criminals in possession of large sums of cash who wanted it processed in a way which obscured their identity and left no documentary trail that would lead back to them.
9. The sole issue pursued on this appeal concerns the dates within which the offence charged under section 328 was alleged to have been committed. Whereas in many cases juries are told that precise dates in an indictment are immaterial, that was not the case here. For the appellant to be guilty as charged, the offence must have been committed not earlier than the indictment period, because this was the effect of the statutory instrument bringing the relevant section into force. If the conduct which constituted the offence had begun prior to the indictment period, it would not have been criminal and therefore prosecution for it would contravene the principle against imposing retrospective criminal liability.
10. The offence is defined as follows:

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

The way in which the prosecution presented its case was that the relevant "other person" for the purposes of this case was the appellant's principal in Karachi. But the prosecution did not have to prove any mens rea on the part of that other person. Under section 328 one may have an arrangement between an agent, A, and principal, P, which in the mind of P is at all times lawful, but which at some stage is used by A to facilitate the acquisition on behalf of P of property which is criminal and is known or suspected by A to be criminal. If so, at that point A becomes guilty of an offence under the section, albeit that P is not guilty. It all seems rather technical but this flows from the various ingredients of the offence.

11. The judge in due course gave the jury written directions in which she correctly directed the jury that an offence would be committed under the section if and when three separate elements all requiring to be proved were established. Those three elements were these: first, there must be money which the jury was sure represented the proceeds of crime, directly or indirectly and in whole or in part. Secondly, the defendant must enter into or become concerned in an arrangement in relation to that money, namely one which he knew or suspected would facilitate its acquisition, use, control or retention. Thirdly, the jury had to be satisfied that the defendant knew or suspected that the money represented the proceeds of crime. No offence would be committed unless and until all three ingredients were established. One could therefore have an arrangement which was initially intended to be lawful, and which remained lawful in the mind of P, but under which A committed an offence contrary to section 328 by utilising that arrangement for the acquisition on P's behalf of property which was criminal and he knew to be criminal. At that stage he would then become concerned in an arrangement prohibited by the section.
12. The appellant gave evidence to the effect that in 2001 to 2002 he entered into an arrangement with a respected businessman who carried out a money exchange business in Karachi, and that thereafter the money collecting that he did in the United Kingdom was done pursuant to that arrangement and for the benefit of that principal. The appellant denied any suspicion at any stage that the monies which he was instrumental in receiving and passing on had a criminal source. The jury plainly disbelieved him on that. He also maintained that the nature of his arrangement with his Pakistani principal was the same throughout the material period. The judge summarising his evidence on this point said as follows:

"He told you that once the system had started it didn't operate differently between 2002 and 2004, though, he said, by 2004 the operation was less active and the amounts that were going through were smaller. He said, 'From the time I started this arrangement with Altaf Khananai I never had any suspicions. He had been introduced by someone I knew. He was a credible businessman. The company of Khanani and Khalia enjoyed an excellent reputation and I thought the cash came from the money service bureaux and I had no reason to doubt this. I never considered or wondered if it came from crime.'"

13. After the appellant had given his evidence Mr Csoka, who appeared for the appellant below as he has done before this court, submitted that the judge ought to withdraw the case from the jury because on that evidence the arrangement, whatever it had been, had begun before the indictment period, which itself was from 23rd February 2003 to 1st September 2004. Therefore, if the prosecution were right in their arguments about the nature of the arrangement, the offence under section 328 predated the indictment period and predated the time when such an arrangement became criminal. The judge rejected that submission. Mr Csoka has renewed it before this court.
14. In our judgment the argument contains a fallacy. As already stressed, the offence could only be committed when the prosecution were able to show that all the necessary ingredients of that offence were established. They therefore had to show that there was an arrangement under which the transfer of criminal property was being facilitated by the defendant. Their case for showing that criminal property was being processed during the indictment period was based on the evidence to which we have referred, that is to say, that there was ledger evidence showing receipts of substantial sums of cash and there was surveillance evidence showing the unusual way in which some of those cash transfers were being made. That was the basis for the prosecution establishing the first ingredient, namely that criminal property was being processed.
15. During the period before the indictment there was no such evidence. None was available to the prosecution because when they conducted their search, the records which they found did not go back to any such earlier period. It may well be that the arrangement made between the appellant and his Pakistani principal ante dated the indictment period, but it by no means follows that criminal property was being processed under it. As to that, there simply was no evidence other than the broad assertion by the appellant that the nature of the arrangement was the same. But this was not, we stress, a case in which the appellant himself was putting forward material to show the receipt of criminal property at an earlier date. Quite the reverse. Moreover, even if the jury were to disbelieve the appellant's evidence about being in honest receipt of substantial sums, prior to the indictment date, that did not mean that there was evidence that he had received criminal sums prior to the indictment date. As Scrutton LJ we believe once commented, if a man says that he did not go to Paris and is disbelieved, that is no evidence that he went to Paris.
16. Mr Csoka went further. He submitted that in this case it was positively incumbent on the prosecution to prove that the appellant had not been guilty of criminal conduct prior to the indictment period. He accepted in his submissions that there was no evidence upon which the jury could have made a positive decision when the appellant first received criminal property. All that the prosecution evidence went to show was that he had received criminal property during the indictment period. He submitted that in such circumstances it was incumbent on the prosecution positively to prove that he had not received criminal property prior to that date. No authority was cited to support that proposition, which we consider to be wrong in principle and would place upon the prosecution a burden which would in practical terms be impossible to discharge.
17. Finally, Mr Csoka criticised the way in which the judge summed-up this issue to the jury. In our judgment, there is no substance in that criticism and accordingly this appeal is dismissed.
18. MR BIRD: My Lords know that there is an earlier judgment of this court on the interlocutory appeal. There was a ruling given then in relation to publicity. Now there is going to be no more trial for the Khananis, it seems that the ruling on publicity can be lifted.
19. LORD JUSTICE TOULSON: Have you anything to say about that, Mr Csoka?
20. MR CSOKA: No, my Lord.
21. LORD JUSTICE TOULSON: We agree.