R v GH [2015] UKSC 24

Earlier this year, the Supreme Court gave guidance on the section 328 POCA offence (the ‘arrangement offence’) in the case of R v GH [2015] UKSC 24. This case concerned two individuals, B and H, and a fraudulent scheme to sell fictional motor insurance policies to customers. B pleaded guilty to a number of offences arising from establishing four websites and falsely pretending to offer discounted motor insurance through those sites. B recruited associates to open bank accounts to receive the proceeds obtained from customers. Almost £600,000 was paid into two accounts opened by H. H was charged under s. 328 POCA for entering into or becoming concerned in an arrangement which he knew or suspected facilitated the retention, use or control of criminal property by B.

H argued that there was no case to answer because at the time he entered into the arrangement with B, no criminal property actually existed – the customer money had yet not been obtained through the fraud. The trial judge agreed and H was acquitted but the prosecution appealed to the Court of Appeal. The Court of Appeal held that under s. 328, it was not necessary for the criminal property to exist at the moment when the parties make a prohibited arrangement, but that the arrangement must relate to property which is criminal property at the time when the arrangement began to operate on it. This followed the case of R v Geary where the Court of Appeal held that it would “stretch the language of [s. 328] beyond its proper limits” to say that it extended to property that was originally legitimate and became criminal only as a result of carrying out the money laundering arrangement. (In the Geary case, the property remained lawful property of Mr Harrington, who had transferred it to the defendant in an attempt to hide money from his ex-wife (and the court) during divorce proceedings. The defendant was found not guilty of the s 328 offence.)

Leave for appeal was granted to the Supreme Court to consider a number of questions, including:

“Where, by deception, A induces the payment of money to a bank account opened for the purpose by B (pursuant to an arrangement with A to receive and retain that money), then may B commit an offence contrary to section 328 of the Proceeds of Crime Act 2002, on the basis that the arrangement to receive and retain the money in that bank account can be treated as both rendering the property ‘criminal property’ and facilitating its retention, use or control?”

The Supreme Court ruled that the arrangement between B and H was capable of constituting an offence under section 328, but on a much more limited basis than the prosecution had contended. The court made the following key points in reaching its decision:

• The offences under ss. 327-329 were “parasitic” offences predicated on the commission of another offence which gives rise to the proceeds of crime that are then subject to the money laundering offences. To interpret these provisions more widely (i.e. to allow for the money laundering itself to make the property criminal property) would have “serious potential consequences for third parties including banks and other financial institutions…[who] already have an onerous reporting obligation…”. The court suggested that this would mean that banks would have to consider the potential use to which funds were going to be put before they agreed to open an account to hold those funds. This was too wide and was not the intention of the legislation.
• The arrangement offence requires actual facilitation of the acquisition etc of actual criminal property, as well as the requisite knowledge or suspicion that it is criminal property. The offence becomes complete when these two elements are present at the same time (i.e. acquisition of property that is already criminal property at a time when the arrangement operates on it and suspicion or knowledge that this is so).
• The case could be distinguished from earlier Court of Appeal authority (in particular, from R v Geary) because the character of the money changed on being paid into H’s accounts. According to the court: “It was lawful property in the hands of the victims at the moment when they paid it into the respondent’s accounts. It became criminal property in the hands of B, not by reason of the arrangement made between B and [H] but by reason of the fact that it was obtained through fraud perpetrated on the victims.” In contrast, R v Geary was not “a case of a defendant holding proceeds originating from a crime independent of the arrangement made between them” and therefore, it could be distinguished.
• The same reasoning would apply to ss. 327 and 329 (the court gave the example of a thief, who would not be guilty of acquiring criminal property by stealing the property from the rightful owner but that would not prevent him from being guilty of one of these other offences, given the wide ambit of ss. 327 and 329). However, the Supreme Court considered it would be “bad practice for the prosecution to add additional counts [of POCA offences]…unless there is a proper public purpose in doing so…” and that the “courts should be willing to use their powers to discourage inappropriate use of the provisions of POCA to prosecute conduct which is sufficiently covered by substantive offences…”