England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		27th January 2011

1. LORD JUSTICE ELIAS: These are two applications for permission to appeal lodged by the Registrar. The appeal raises a point of some interest, namely the construction of section 328 of the Proceeds of Crime Act 2002 ("the 2002 Act").
2. The background is as follows. The appellant Akhtar owned a mortgage business called the Mortgage Shop in Staffordshire. He introduced clients to mortgage brokers, who paid a fee for the introduction. He was prosecuted for knowingly submitting false mortgage applications on behalf of third parties as co-defendants. They were charged under section 329 of the 2002 Act. Akhtar would give false information to the brokers. In the case of the co-appellant, Amir, for example, he contended that she had a particular income which was untrue and he supported the application with a false employer's reference. Similar deception was practised with respect to other parties.
3. Akhtar was tried at the Crown Court at Stoke-on-Trent before His Honour Judge Eades. He pleaded guilty on re-arraignment to five separate counts of money laundering contrary to section 328(1) of the 2002 Act. Each count reflected a different transaction. On 22nd April 2008 he was sentenced to 22 months' imprisonment on each count and was also subject to a confiscation order, which is the subject of challenge in this appeal. We return to that later.
4. There were five co-accused. The case against them was, in essence, that they knew or suspected that false information had been given. Two were acquitted, but Amir, Kausar and Noreen were convicted of acquiring criminal property contrary to section 329 and Nawaz pleaded guilty to attempting to do so. They each received a 26 week sentence suspended for 18 months, and in some cases there were additional elements of the sentence such as a supervision element.
5. Subsequently, on 30th July 2009 Kausar successfully challenged his conviction on the grounds that the judge had not left the jury a potential defence which was open to him under section 329(3), namely that he may have given good consideration for the benefit he received. An argument was also advanced that section 329 requires that there should be an acquisition of criminal property but that the benefit received was not criminal property at the time he acquired it. The court concluded that the consideration point was correct and in the circumstances it declined to consider the argument based on the definition of criminal property. Accordingly, it quashed the conviction (see [2009] EWCA Crim 2242).
6. On 19th March 2010 Nawaz and Noreen had their convictions overturned by this court, the court relying on the Kausar decision. Again, the wider argument was canvassed but did not have to be determined by the court (see [2010] EWCA Crim 819).
7. Amir seeks permission to appeal almost two years out of time, and of course the sentence has now been completed. The Crown properly does not oppose the appeal, which it accepts is determined by the earlier decisions in relation to the co-accused. Accordingly, with respect to Amir we extend time, grant permission to appeal and quash the conviction.
8. Akhtar similarly now challenges his conviction, notwithstanding that he pleaded guilty at the time. The Crown does not, however, accede to that application because it is submitted that the defence available to the co-defendants under section 329 is not available under section 328, and it considers that the arguments advanced by Akhtar's counsel are wrong.
9. In order to understand the submissions on this point we first need to spell out the relevant legislation.
10. Section 328 is part of a series of money laundering provisions which criminalise those who deal in various ways with criminal property, knowing or suspecting that it is property which has been acquired by criminal activity. Section 327 is concerned with concealing, disguising, converting or transferring criminal property. Section 329 is concerned with acquiring, using or possessing it. In each case there are a number of specific defences.
11. Section 328(1) is 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."

There are then a number of specific defences set out in the following subsections but they are not material to this application.

12. It is pertinent to note that these three offences were all concerned in one way or another with dealing with criminal property, so the definition of criminal property is important. That is found in section 340 of the Act. That section is as follows:

"(1) This section applies for the purposes of this Part.

(2 )Criminal conduct is conduct which -

(a) constitutes an offence in any part of the United Kingdom, or

(b) would constitute an offence in any part of the United Kingdom if it occurred there.

(3) Property is criminal property if -

(a) it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and

(b) the alleged offender knows or suspects that it constitutes or represents such a benefit.

(4) It is immaterial -

(a) who carried out the conduct;

(b) who benefited from it;

(c) whether the conduct occurred before or after the passing of this Act.

(5) A person benefits from conduct if he obtains property as a result of or in connection with the conduct ...

(9) Property is all property wherever situated and includes -

(a) money;

(b) all forms of property, real or personal, heritable or moveable;

(c) things in action and other intangible or incorporeal property."

13. The short point in this appeal is this: is property criminal property for the purposes of section 328 only after some other offence has been committed, or is it to be characterised as criminal property because of the criminal objective which the arrangements were designed to achieve?
14. Mr Farrell QC, counsel for the applicant, submits that when the appellant entered into the arrangements with the mortgage broker, and indeed even when they were carried into effect, he was not thereby facilitating the acquisition of criminal property because at that time the property was not criminal in the hands of the mortgage company. It only became criminal property when it came into Akhtar's hands or those for whom he was securing the mortgage. Mr Farrell says the whole premise of these money laundering sections is that there has been an earlier criminal offence committed. The purpose of the wrongdoers is to conceal or disguise the criminal origin of the proceeds and thereby obscure their criminal origins. It is an artificial and false reading of the statute to say that property in a case such as this has already become before the crime of deception is complete.
15. Mr Farrell relies on a number of decisions of this court in support of these submissions. The first is the decision in Loizou [2004] EWCA Crim 1579, [2005] 2 Cr App R 37. It is not necessary to go into the facts in any detail. Suffice it to say that the defendants were involved in the transfer of some £87,000 in highly suspicious circumstances. They were charged under section 327(1)(d) of the 2002 Act for transferring criminal property. An issue in the trial was whether the property was criminal. The prosecution wished to put its case in two ways: the first was that they could produce evidence from which the jury could infer that the money was the proceeds of a crime; the second was that it would be criminal property if it was transferred for a criminal purpose. The judge gave a ruling, which he treated as a preliminary ruling under section 29 of the Criminal Procedure and Investigations Act 1996, as to whether the second analysis was correct in law. He held that it was and the defence lodged an interlocutory appeal under section 35 of that Act. This court (Clarke LJ, Hughes J and Dobbs J) held that the criteria for a preliminary ruling had not been satisfied and therefore they had no jurisdiction to hear the appeal. However, they went on to express their views on the merits of the argument. They indicated that they agreed with the proposed appellants that the judge had erred in his approach. Judgment was given by Clarke LJ, who held that there was no offence under section 327 if the property was not criminal at the time of transfer. He said this:

"31. A simple reading of the indictment reinforces the point. As already indicated the indictment alleged transferring criminal property, the particulars being transferring cash, which was criminal property, knowing or suspecting that the cash constituted a personal benefit from criminal conduct. That naturally means earlier criminal conduct and not the conduct which is the subject of the indictment.

32. Take this example. Suppose I receive pay as a judge in cash, that cash is not criminal property. Suppose I use that money to pay Hughes J for a car which I know he has stolen. In that event I, of course, commit the offence of receiving goods knowing them to be stolen. I do not, however, commit the offence of transferring criminal property because the property I am transferring, namely the money which I earned as a judge, is not criminal property. Of course, in the hands of Hughes J as the seller of the stolen car, the cash is criminal property because it constitutes "a person's benefit from criminal conduct" within section 340(3)(a) which he knows suspects constitutes such a benefit within section 340(3)(b). Does Hughes J commit an offence under section 327(1)? The answer is plainly no, because he has not concealed, disguised, converted or transferred criminal property. He has simply received what is now criminal property and retained it. Section 327(1) does not create an offence of receiving criminal property.

33. There was some discussion during the course of the argument as to whether in this example he might have committed an offence under section 329(1)(a) on the footing that he was in possession of criminal property. However, the point was not fully argued and we express no opinion upon it. After all, no charge under section 329 has been brought in this case."

Then later he considered whether property could become criminal property merely because it was the defendant's intention that it should be so used. His Lordship held that it could not:

"35. Mr Fender submits in his skeleton argument that property acquired legitimately becomes criminal property within section 340, if a person forms a purpose or intention to use it for criminal purposes. We are not sure that he went so far in oral argument. It would certainly be a very surprising result and it is not in our view justified by the statutory language. Such cases are dealt with by the civil forfeiture provisions in the 2002 Act. They are set out in section 294, which provides for seizure of cash if it is intended by any person for use in unlawful conduct and is section 298, which provides for forfeiture of cash if it is intended by any person for use in unlawful conduct. As Mr Levett puts it in his skeleton argument, both sections are triggered as a pre-emptive measure before any crime has been committed.

36. More significantly, Mr Fender relies upon section 340(4) and (5). As to section 340(4), he submits that it shows that it is immaterial when the conduct was carried out. We accept, of course, that by section 340(4)(a) and (b), it is immaterial who carried out the criminal conduct, but, except for paragraph (c), section 340 does not address the question when the criminal conduct must be carried out. Moreover, we do not think that the criminal conduct referred in section 340(2) and (3) can be the criminal conduct referred to in section 327(1). Such an argument would be circular."

16. Mr Farrell submits that the logic of this argument applies to section 328 also; there is no proper basis for distinguishing the instant case from the approach adopted there.
17. Perhaps more significantly, he also relies on the decision of this court which deals with section 328 itself. This is the case of R v Geary [2010] EWCA Crim 1925. It is not necessary to spell out the facts of the case. One of the issues before the court was identified by Moore-Bick LJ, who gave the judgment of the court (Moore-Bick LJ, Rafferty J, HHJ Gilbart QC) in the following way:

"... whether it is necessary for the property which is the subject of the arrangement to be criminal property at the time when the arrangement attaches to it."

The court summarised its answer to that question at paragraph 19 in the following way:

"In our view the natural and ordinary meaning of section 328(1) is that the arrangement to which it refers must be one which relates to property which is criminal property at the time when the arrangement begins to operate on it. To say that it extends to property which was originally legitimate but became criminal only as a result of carrying out the arrangement is to stretch the language of the section beyond its proper limits. An arrangement relating to property which has an independent criminal object may, when carried out, render the subject matter criminal property, but it cannot properly be said that the arrangement applied to property that was already criminal property at the time it began to operate on it."

18. The court also referred to another decision, Kensington International Ltd v Republic of Congo [2008] 1 WLR 1144, which concerned the question whether a payment of a bribe would constitute an offence under section 328(1) on the part of the person who paid it. Moore-Bick LJ held that it would not. He summarised his conclusion as follows:

"A person who gives a bribe may know that it will constitute criminal property in the hands of the recipient, but that does not make him guilty of entering into an arrangement which facilitates the acquisition of what is already criminal property".

He also observed that property cannot be criminal property until it has been acquired by means of criminal conduct. Mr Farrell contends that these authorities too compel the conclusion that the appellant ought not to have been convicted in this case.

19. Mr Morse, for the prosecution, submits that section 328 is framed differently from sections 327 and 329. He accepts that under those two sections the property must be criminal at the time it is transferred, or used or possessed as the case may be, but he says that under section 328 the crime may be committed where the property is not criminal property at the time of the arrangement, but where it is intended that it should be. He says that the appellant entered into an arrangement which he knew would facilitate the acquisition of criminal party for the third parties and that in those circumstances the property was acquired pursuant to the arrangement, and it should be treated as criminal property. As an alternative submission, he referred to the observation of Moore-Bick LJ in the Geary case where he said that the property would be criminal "at the time when the arrangement begins to operate on it" and he submitted that that would be at the point where the mortgage company had sent out the funds to the third parties.
20. We reject these submissions. We see no warrant for his construction on the language of section 328, nor do we see any justification for adopting a different principle to the construction of section 328 than has been adopted with respect to sections 327 or 329. They are all concerned in one way or another with dealing with criminal property. By section 340(3) that is property which in fact constitutes a person's benefit from criminal conduct or represents such a benefit and the offender knows or suspects that that is so. The definition does not embrace property which the accused intends to acquire by criminal conduct and the language of the statute is not capable of construing the definition in that way. Property is not criminal property because the wrongdoing intends that it should be so.
21. Mr Morse's argument, in our submission, involves a re-writing of the statutory provision. On his analysis an offence is committed where a defendant becomes concerned in an arrangement which facilitates the criminal acquisition of property. The statute requires an arrangement facilitating the acquisition of criminal property. There is a material distinction. Nor do we accept his submission that the property is criminal because that is its character when it leaves the mortgage company. Even if that were so, and there are difficulties with that analysis posed by section 340(5), as Mr Farrell points out, we do not accept that it is therefore criminal property at the time when the arrangement begins to operate. The money, by definition, has already been sent once it leaves the hands of the mortgage company.
22. We were also referred by the appellant to certain directives which the UK money laundering offences are designed to implement. These are EC Directives 91/308/EC, 2001/97/EC and 2005/60/EC. It is not necessary to lengthen this judgment by analysing those provisions. Suffice it to say that to take as an example the third EC Money Laundering Directive, the property which is the object of the legislation is defined as "property ... derived from criminal activity or from an act of participation in such activity". The construction we have given to the statute is entirely in accordance with the language of those directives. Certainly there is nothing in the directives, in our view, which would require the domestic legislation to be construed in the manner suggested by the prosecution.
23. It follows that in our view this appeal must succeed and the conviction is quashed. It follows that the confiscation order falls and the appeal with respect to it is no longer relevant. In fact, it concerned the question whether a certain sum attributed to the appellant was rightly attributed to him, and the Crown conceded that it had not been, but it is not necessary to dwell further on that aspect of the appeal.
24. We should add, of course, that our judgment does not mean that the appellant could with impunity act in the way he did. It is common ground that he could have been tried under the Theft Act. The relevant section at the time was section 15A, which concerns obtaining a money transfer by deception and the relevant offence now would be one under the Fraud Act, but the prosecution chose to use section 327, it seems, because it thought that it would be easier to prove. The fact that the appellant is very likely to have been convicted under the alternative section is not of course a reason for not quashing this conviction. Accordingly, we quash the conviction and the confiscation order falls with it.
25. MR FARRELL: My Lord, there were some costs incurred prior to the granting of a representation order. Could I please ask for a defendant's costs order to be assessed.
26. LORD JUSTICE ELIAS: What were the costs?
27. MR FARRELL: I cannot remember the exact sum. I was instructed privately to write an advice and draft the original application. Can I just ask my solicitor what the sum was. My costs were £3,000 plus VAT and the solicitors costs, I am afraid, are currently unknown. In my submission, he should be entitled to his costs as he has succeeded.
28. LORD JUSTICE ELIAS: We do not normally award costs in these circumstances. If you wish to pursue it you can make an application on paper and we will consider it.
29. MR FARRELL: I will submit one, thank you very much.