The potential for the benefit flowing from an offence under housing, licensing or planning legislation to be confiscated by the courts is nothing new, but often overlooked are the money laundering issues.
Where an offence of this kind has been detected or is suspected, it is capable of triggering reasonable grounds to suspect money laundering. In such situations, regulated property professionals will need to be mindful of discharging the obligation to report a suspicion of money laundering pursuant to section 330 of the Proceeds of Crime Act 2002. The application of section 330 is not optional and it will be important to not disregard such matters as minor infringements.
Recent confiscation cases highlight how “criminal property” can be generated by seemingly minor breaches and are also relevant to money laundering under Part 7 of the 2002 Act, which fundamentally hinges on dealings with criminal property.
A spate of cases this year reinforces the likelihood of confiscation proceedings brought against owners convicted of housing-related offences. R v Owadally [2020] EWCA Crim 391 is but one example. Although the landowner successfully appealed the amount he was fined after he pleaded guilty to failing to comply with a planning enforcement notice, there was no challenge to the confiscation order in the sum of £400,000, being the rental income received from a block of flats converted in the absence of planning permission. R v Bajaj [2020] EWCA Crim 1111 concerned confiscation proceedings against the landowner following a breach of the regulations relating to multiple-occupancy houses.
With an eye on such cases, it can be easy for conveyancing lawyers and estate agents to believe that it is only property owners impacted by a breach of any property-related regulation amounting to a criminal offence. The implications of such an offence, however, can be far wider.
The scope of the duty
Regulated property professionals have a duty to report to the National Crime Agency where there is knowledge, suspicion or reasonable grounds to suspect an act of money laundering. The failure to report is an offence. An act of money laundering is, in essence, dealings with criminal property or doing anything to facilitate dealings with criminal property. Joining the dots, “criminal property” is the benefit obtained as a result of or in connection with criminal conduct, which is defined as an offence contrary to the criminal laws of the UK regardless of where it occurred. Pertinently, there is no carve out for less serious criminal offences. It follows that – although one might consider money laundering to be parasitical on quintessential criminal conduct such as drug trafficking, bribery or fraud – there is a host of less obvious offences capable of generating criminal benefit. This includes offences which arise in a property or housing context, and conveyancing lawyers, lettings and estate agents should be alive to this.
Owadally provides an example. Although it is not an offence to breach planning controls, a failure to comply with a subsequent planning enforcement notice, contrary to section 179 of the Town and Planning Act 1990, can mean that any rental or business income received in breach of a notice mandating changes to a building will be criminal property. The same analysis will apply to income generated by the operation of an unlicensed house in multiple occupation, which is an offence under section 72 of the Housing Act 2004.
In relation to commercial premises, it is also worth remembering that many businesses require a licence or registration to operate. Scrap metal dealers and money services bureaus are just two examples. Discovering that the licence or registration was either not obtained, has lapsed or was not in force for a period has the potential to taint the turnover generated by the business. Whether this is the case will depend on a careful analysis of the activities of the business, the framework for the required licence or registration, and whether it was intended by lawmakers that absence of a licence renders the business or trade illegal.
A failure to comply with environmental obligations can also engage a criminal offence and, in so doing, require consideration of the money laundering position. Perhaps surprisingly, failure to comply with a tree preservation order can also lead to criminal property. R v Wilson (unreported, Bournemouth Crown Court) is a case in point. In 2019, Wilson had circa £20,000 confiscated after he pleaded guilty to removing a tree that was the subject of a TPO, an offence under section 210 of the Town and Country Planning Act 1990. The order was based on the value added to his home by the installation of a sunlit balcony – something only made possible by the illegal tree removal.
It pays to pay attention
In 2019, the Law Commission considered whether the reporting duty should only arise in the context of serious offences but ultimately decided against this, recommending the retention of the “all crimes” approach. With this in mind, although the above examples are drawn from confiscation cases, they are a reminder that discrete and seemingly less serious offences can generate criminal property. This may include, for example, rental or business income or something intangible such as an increase in property value. It follows that if, in the context of dealings with a particular property, a regulated professional identifies an offence has been committed or suspects that one may have been, the next step will be to consider the section 330 duty. Remembering that criminal property is defined broadly, there may be reasonable grounds to suspect money laundering (ie dealing with criminal property). A failure to report will expose the individual dealing with the matter and the firm to liability. Although it might seem unusual that certain breaches engage money laundering issues, to simply gloss over seemingly minor offences would be a mistake.
Anita Clifford is a barrister at Bright Line Law
