Guidance

Guidance on money laundering reporting obligations in relation to the DAML exemption provisions introduced by the Economic Crime and Corporate Transparency Act 2023

Published 10 January 2024

Introduction

The purpose of this guidance is to set out the government position on money laundering reporting obligations in the Proceeds of Crime Act 2002 (POCA) as amended by the Economic Crime and Corporate Transparency (ECCT) Act 2023 following Royal Assent.

Reporters should consider how they can apply this guidance to streamline their reporting process and to maintain the wider effectiveness of the suspicious activity reports (SARs) regime.

Background

A person may be liable for one of the three principal money laundering offences^{[footnote 1]} under sections 327-329 of POCA where they deal in certain ways with criminal property.

A person can avoid committing these offences by first submitting an authorised disclosure (a Defence Against Money Laundering (DAML) SAR) to the National Crime Agency (NCA) and receiving consent or deemed consent to proceed.

On 5 January 2023, the threshold amount specified in section 339A of POCA increased from £250 to £1,000 for acts in operation of an account (such as mortgage payments) maintained with a bank or similar firm. This does not apply to other actions such as returning funds when terminating a relationship with a customer.

The threshold amount is the value of criminal property below which a bank or similar firm (a deposit-taking body, electronic money or payment institution) can carry out a transaction without submitting a DAML, in operating an account for a customer, without committing one of the main money laundering offences under POCA^{[footnote 2]}.

Reporting exemptions introduced by the Economic Crime and Corporate Transparency Act

In addition to the raised threshold for acts in operation of an account, the ECCT Act has introduced further DAML exemptions from the principal money laundering offences to:

1. Exempt the whole of the AML regulated sector (beyond those to whom the threshold exemption already applies, to include those such as the legal sector, accountancy sector and casinos) when they end a relationship with a customer and pay away property with a value below £1,000. Before transferring or handing over the money or other property, the business must have complied with their existing customer due diligence duties under the Money Laundering Regulations 2017. Compliance with customer due diligence duties in practice refers to the business applying due diligence measures to the customer or client as required by regulation 27(1)(a) of the Money Laundering Regulations 2017 and nothing in sections 327(2E)(c), 328(7)(c) and 329(2E)(c) sets any expectations as to the nature, level, standard, or completeness of any due diligence undertaken.

2. Clarify the handling of mixed assets where only part of the assets are suspected to be criminal proceeds. This exemption will enable businesses in the regulated sector to allow customers proportionate access to the non-suspicious proportion of their assets.

The exemptions can be used for the same account or customer, but not within the same transaction because the mixed-property exemption will require the firm to retain at least the value of assets to which the suspicion or ground for suspicion relates and the exit and pay away exemption can only be used when the relationship is being terminated. The mixed-property exemption will operate in parallel to the threshold exemption for transactions below the amount specified in section 339A.

The ECCT Act has also introduced a reporting exemption under section 330 of POCA which creates a defence against the offence of failure to report, where the information only came to reporters as a result of a “status check” or “immigration check” carried out in compliance with the Immigration Act 2014.

Combined impact of exemptions

Firms should in any particular case consider whether they need to submit a SAR under s.330 of POCA.

1. concealing, disguising, converting, transferring or removing criminal property from England and Wales or from Scotland or Northern Ireland (section 327 POCA); entering into or becoming concerned in an arrangement, and knowing or suspecting that it facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person (section 328 POCA); and acquiring, using or possessing criminal property (section 329 POCA) ↩

2. The Statutory Instrument increasing the threshold can be found at: The Proceeds of Crime (Money Laundering) (Threshold Amount) Order 2022 (legislation.gov.uk). Further guidance on the current threshold, and submitting better quality SARs more generally, can be found at https://www.nationalcrimeagency.gov.uk/who-we-are/publications/446-guidance-on-submitting-better-quality-sars-1/file ↩