Divorce, hiding assets and money laundering

An interesting case came before the Court of Appeal recently.

The defendant, Michael Geary, was appealing against his conviction for "entering into or becoming concerned in an arrangement which facilitated the acquisition, retention, use or control of criminal property for or on behalf of another, contrary to section 328(1) of the Proceeds of Crime Act 2002".

He had been approached by a friend of his, Mr Harrington, who told him his marriage was in trouble and he wanted to hide some money from his wife in the event of divorce and a financial claim from her.

Mr Geary agreed to receive some money from Mr Harrington, keep it for a while, buy some things for Mr Harrington with some of it and then return the goods and the rest of the money to Mr Harrington in cash - except for a few thousand pounds which he would retain for his trouble.  Mr Geary did exactly that.

What Mr Geary neither knew nor suspected was that Mr Harrington was misleading him.  Mr Harrington had obtained the money from a contact of his, who in turn was laundering the proceeds of a theft / fraud from Norwich Union.  Mr Harrington was using Mr Geary to unwittingly launder some of the money from the theft / fraud.

Police investigations into the theft / fraud eventually led to Mr Geary who was charged with the s328 offence.

Mr Geary was told that even if he knew or suspected nothing of the true criminal source of the funds, what he thought he was doing would have been an offence of conspiring to pervert the course of justice and conspiring to defraud Mrs Harrington (by helping Mr Harrington to mislead the divorce courts and his wife about his assets).

So, the prosecution argued, the money received by Mr Geary from Mr Harrington was money which he (Mr Geary) suspected to be proceeds of a crime (a conspiracy to mislead the divorce courts and Mrs Harrington) and he had 'entered into an arrangement' to facilitate Mr Harrington's retention of it.  Therefore he was guilty of the offence.

At the start of his trial the judge agreed with the prosecution that Mr Geary's "defence" (that he knew nothing of the theft / fraud and was embarked on a different crime altogether) was actually no defence to the s328 charge.  Faced with that, Mr Geary changed his plea to guilty.

But Mr Geary then appealed against his conviction on the grounds that the judge was wrong to say he had had no valid defence.

The Court of Appeal quashed the conviction under s328.  They held that Mr Geary had been convicted of the wrong offence.  He should have been convicted of transferring and of converting criminal property under s327, but since he had not been charged with that offence he could not now be convicted of it, so he left the court a free man.

The Appeal Court's logic was interesting.

The definition of 'criminal property' is that it is an asset which the alleged offender knows or suspects to be proceeds of a crime.  (The full definition is a bit more complex - but that's the heart of it.)

As Mr Geary neither knew nor suspected the money which he received from Mr Harrington was anything other than Mr Harrington's own legitimate funds it did not become criminal property (from Mr Geary's perspective) until he had received it (and thereby started the crime of concealing it from the divorce courts and Mrs Harrington).

So Mr Geary could not be guilty of entering into an arrangement involving criminal property because (in his mind) it only became criminal property by virtue of the arrangement being put into effect.  To be guilty of the s328 offence the property (in this case money) had to be criminal property before the arrangement took effect.

Also the court found that there was a single "arrangement" which involved receiving the money, buying some things, and returning the things and the cash.  So it was not possible to say that, for example, the returning of the cash was a separate "arrangement" which had commenced after the money had become criminal property (in Mr Geary's mind) and which would then be an arrangement contrary to s328.

Once Mr Geary had received the money as (he believed) part of a plan to mislead the divorce courts and defraud Mrs Harrington, then the money became 'criminal property' (from Mr Geary's perspective) and the purchase of goods by him was 'converting criminal property', and the returning the cash to Mr Harrington was 'transferring criminal property' - both of which are money laundering offences.

And of course if Mr Harrington's story about a divorce had been true, then his possession of the cash and goods received from Mr Geary would also have been a money laundering offence (under s329).

So the key legal point is that an arrangement to use lawfully acquired money in an unlawful way will not be caught by s328.  What s328 catches is an arrangement pertaining to money or other assets which were already 'criminal property' before the arrangement existed.

It also confirms that if a person, say Mr X, believes that money or assets are proceeds of a crime - but in fact they are not proceeds of that crime but they are proceeds of a different crime, Mr X's mistaken belief does not affect whether Mr X is guilty of money laundering (although it may have a bearing on the sentence which he receives on conviction).

Perhaps another key point for accountants is that husbands who defraud their wives (or ex-wives) by dishonestly concealing assets in their divorce proceedings thereby commit a criminal offence which may trigger an obligation to report under the Money Laundering Regulations 2007 and s330 PoCA 2002.  (And of course wives who dishonestly conceal their assets in divorce proceedings are equally guilty.)

David

Comments
cymraeg_draig's picture

Tax planning

cymraeg_draig | | Permalink

Perhaps another key point for accountants is that husbands who defraud their wives (or ex-wives) by dishonestly concealing assets in their divorce proceedings thereby commit a criminal offence which may trigger an obligation to report under the Money Laundering Regulations 2007 and s330 PoCA 2002.  (And of course wives who dishonestly conceal their assets in divorce proceedings are equally guilty.)

David

 

Interesting, but there is a further point.

He was asked to hold these funds because the marriage was said to be in trouble.  However, from what I understand there were no divorce proceedings filed, certainly not at that time.

So, this could be viewed as "pre divorce planning".  ie. arranging one's affairs in a way which should a divorce occur would minimise liability. Obviously if he lied about the existence of these funds during proceedings then an offence is committed, but, as no proceedings took place no offence was committed.

We have to be very careful about allowing legitimate planning to be criminalised, as this would of course equally apply to tax planning where lawful transactions are planned and timed to minimise tax liability. 

There is a very fine line.

 

 

 

 

  

davidwinch's picture

"No offence was committed"?

davidwinch | | Permalink

C_D

Do you not think that Mr Geary made an agreement with Mr Harrington on a course of conduct which would (if put into effect as agreed) have necessarily involved the commission of an offence?

In other words the plan was that Mr Harrington would mislead the divorce court and defraud his wife.  In truth since there was to be no divorce that offence could not actually be committed.

But that doesn't matter.

It is the making of the agreement (not the carrying out of the agreed offence) which constitutes the crime of conspiracy.  See section 1 Criminal Law Act 1977.

Although I can see an argument to the effect that no "agreement" was made because, although Mr Geary thought he had agreed something with Mr Harrington, nothing was actually "agreed" because Mr Harrington was not actually proposing to do anything along the lines of what he was pretending to agree with Mr Geary (if you see what I mean)!

Some years ago I was involved in a case in which two brothers had planned to purchase a lorry load of cigarettes in Europe and smuggle them into the UK by covering up the cigarettes with flowers and declaring the goods to UK Customs as only flowers.

The brothers utterly failed to find anyone in Europe prepared to sell them the cigarettes and they returned to the UK empty handed.  However news of the enquiries they had made to legitimate European cigarette wholesalers reached the UK authorities and the brothers were arrested, interviewed and subsequently convicted of conspiracy to evade UK duty on cigarettes.

(When arrested the brothers declined the offer of legal advice and in interview freely admitted their plans, no doubt believing that they had - in the event - done nothing illegal.  Those admissions in interview were the final proof the prosecution needed in order to 'send them down'. Doh!)

As an aside, the brothers obtained no 'benefit' from the failed conspiracy and so did not commit a money laundering offence, so there would have been no suspicion to report to SOCA.

David

Jon Stow's picture

Thank you David

Jon Stow | | Permalink

That is a very interesting case. It is also a warning as to how comparitively innocent people can get themselves into trouble by not thinking through a request to help a friend. Mr. Geary was naive at the very least and was fortunate to "walk" in the end.

cymraeg_draig's picture

Conspiracy - or just an over zealous state ?

cymraeg_draig | | Permalink

The problem with "conspiracy" is that it is open to abuse by the authorities.

We have all had conversations in the pub along the lines of "how easy it would be to wear a burka and hold up a bank" and where the person you're taling to says, "yes, count me in", or how if we saw Gordon Brown crossing a zebra crossing wouldnt it be easy to swear "honest officer my foot slipped off the brake onto the accelerator".

Exactly where do we draw the line of "conspiracy" ?  Do such conversations constitute conspiracy?  Is there really any difference between that, and for example, discussing how easy it would be to smuggle cigarettes into the UK ?

 

stepurhan's picture

Action required?

stepurhan | | Permalink

I'd be interested in David's answer to that question. However, it seems to me that the brothers in the example David gave went beyond simply talking about it. They'd actually travelled abroad and contacted European wholesalers (albeit unsuccessfully) so there had been some effort to put the plan into action. Is that what makes the difference?

To use one of CD's examples, would you have to actually try to obtain a burka and other equipment (presumably firearms of some sort) before the pub conversation becomes a prosecutable matter?

Thought Crime

chatman | | Permalink

Didn't a young Muslim girl recently get imprisoned for writing poetry that involved using violence for political ends?  Her offence might have been classified as "glorifying terrorism", so that might be different to conspiracy, but it's all thought crime.

davidwinch's picture

Committing a conspiracy offence

davidwinch | | Permalink

Stephen

I think it is true to say that if you and I, sitting in a pub, agreed to steal a jumbo jet, fly it to South America and sell it to a local airline - and we intended to do it - we would commit an offence of conspiracy.

The fact that neither you nor I have the first clue how to even start the engines on a jumbo jet - much less are we capable of flying and landing it safely, making our 'plan' impossible to carry out - would be no defence.  (Unless we could refer to that as evidence that we were just joking and actually had no intention to carry out our 'plan'.)

But there is a world of difference between committing an offence and being convicted of it.  If every offence that were committed in the UK were prosecuted then virtually the entire working population in the UK would need to be police officers, lawyers, prosecutors or court staff.  And the rest of the population would be called up for jury service!

I often get involved in cases in which a defendant has been suspected of committing a serious offence XYZ, and an investigation has been carried out but, at the end of the day he will instead be convicted of another (and usually less serious) offence ABC.  This may be because sufficient evidence to prove XYZ cannot be found, but there is sufficient to prove ABC.  Or it may be that a prosecution was launched for the offence of XYZ and the defendant has offered to plead guilty to ABC if the charge of XYZ is dropped, and the prosecution have accepted that 'deal'.

Or it may be that defendant M is charged with a relatively minor offence in connection with the prosecution of defendant N for a more serious crime.

For example, a chap was prosecuted for issuing an invoice showing deliberately incorrect details of the work done (which was 'false accounting').  The point was that the invoice had then been used by another person to perpetrate a significant fraud.  Whilst prosecuting the second defendant it made sense for the police to buttress their case by having the first defendant convicted of the minor offence.  Had the invoice not been used in the second offence the police would not have bothered to prosecute the first offender.

So someone doing something fairly trivial might just find himself prosecuted for reasons quite outside his control.  Just bad luck, if you like.

David

davidwinch's picture

Thought crime

davidwinch | | Permalink

In criminal law what the alleged offender had in his mind is very often crucial.

That is not to say that merely thinking something is a crime.  Even conspiracy involves agreeing a plan with someone else.

But take this example:  Jim is running along the pavement.  He bumps into Bill who is standing at a bus stop.  Bill falls into the road and is run over by a passing lorry and killed.

If Jim was simply not looking where he was going and intended no harm to Bill, then no crime has been committed.  It is a tragic accident.

If Jim deliberately bumped into Bill intending to cause him serious harm, or even to kill him, then Jim is guilty of murder.

It is what Jim had in mind that makes the difference!

David

cymraeg_draig's picture

A question - or is it a conspiracy ?

cymraeg_draig | | Permalink

Statutory conspiracy is defined by section 1 of the criminal law act 1977

Under section 1(1) if a person agrees with any other person or persons that a course of conduct shall be pursued which, if the agreement is carried out in accordance with their intentions, either -
(a) will necessarily amount to or involve the commission of any offence or offences by one or more of the parties to the agreement, or
(b) would do so but for the existence of facts which render the commission of the offence or any of the offences impossible,

He is guilty of conspiracy to commit the offence or offences in question.

______________________________________________________________________

 

Another example of bad law.

When faced with people who claim to be "honest" I always ask one question -

You are driving along a road 20 miles from anywhere. Some distance in front of you a Securicor vans doors swing open and a sack falls out. The van continues on its way blissfully unaware of this. You stop and discover that the sack contains £1million in used untraceable £20 notes.  There are no other cars on the road and no witnesses.  That morning you had received a threatening letter from the bank threatening to repossess your house.

How many people can honestly say that they would not be tempted ?

How many would take the entire sack ?

How many would remove £20,000 and leave the open sack so if recovered they would assume some of it had blown away?

How many would actually call plod and hand it over?

And now I should add - how many have just by considering their response committed an offence by considering a course of conduct which, if carried out will necessarily amount to or involve the commission of any offence ?

 

 

davidwinch's picture

Changing the scenario slightly

davidwinch | | Permalink

If instead of being in the car alone, let's say I am with a passenger (who is neither my spouse nor a person under the age of criminal responsibility). 

If myself and my passenger agree to take some of the cash secretly and keep it then I think we both commit the criminal offence of conspiracy. 

Suppose just as we get out of our car a police car appears behind us and so we never get our hands on any of the cash.  We have still committed the conspiracy offence (since the agreement to do the crime completes the offence of conspiracy).

But for some reason, one cannot in law be guilty of conspiracy if the conspiracy is only with one's spouse.  So if the only passenger is my wife no conspiracy offence is committed.

I cannot conspire with myself - so I need a passenger if I am to commit the conspiracy offence.

You also cannot conspire with the intended victim of the offence.

There was an interesting case recently on that.  Two young men X and Y were enemies.  They met one day on a street.  Both were armed.  They commenced firing at each other.  Neither was hurt, but a shot hit and killed an innocent passer-by. 

In the event there was insufficient evidence to identify X.  A man believed to be X was arrested but never charged.  But a man believed to be Y was also arrested and he was linked to a gun which was found and which had been used in the shooting.  That gun however had not fired the bullet which had killed the passer-by.  The issue was, what could Y be charged with?  The prosecution argued that, by taking part in a gun battle on the street, Y was guilty of the murder of the passer-by.

But that would involve some sort of a conspiracy or joint enterprise between X and Y, and that was not possible in law since each was the intended victim of the shots fired by the other and, far from a 'joint enterprise', they had separate and diametrically opposed enterprises - each intending to kill the other.

Ultimately Y was acquitted of the murder of the passer-by but convicted of the attempted murder of X, the unidentified person at whom he had been shooting.  Y, who was aged 17 at the time of the offence, was sentenced to a minimum term of 15 years imprisonment.

David

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