The Terrorism Act 2000 and Proceeds of Crime Act 2002 (Amendment) Regulations 2007

Explanatory Note

(This note is not part of the Regulations)

These regulations implement, in part, Directive 2005/60/EC of the European Parliament and of the Council of 26th October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (“the Directive”). The regulations give effect to Chapter 3 of the Directive. Schedule 1 to the regulations makes amendments to the Terrorism Act 2000. Schedule 2 to the regulations makes amendments to the Proceeds of Crime Act 2002.

Paragraph 2 of Schedule 1 inserts three new sections into the Terrorism Act 2000 to cover the requirements of Article 24 of the Directive. Section 21ZA provides a defence to the offences in sections 15 to 18 of the Terrorism Act 2000, if the person has made a disclosure to an authorised officer before becoming involved in a transaction or an arrangement and the person acts with the consent of the authorised officer. Section 21ZB provides a further defence to the offences in sections 15 to 18 to cover those who become involved in a transaction or an arrangement and then make a disclosure, so long as there is a reasonable excuse for failure to make a disclosure in advance. Finally, section 21ZC provides a defence for those who have a reasonable excuse for failure to make a disclosure.

Article 28.1 of the Directive prohibits the persons covered by the Directive from disclosing to the customer concerned or to other third persons the fact that information about known or suspected money laundering or terrorist financing has been transmitted in accordance with Articles 22 and 23 or that a money laundering or terrorist financing investigation is being, or may be, carried out. The remainder of Article 28 provides a number of exceptions. Paragraph 5 of Schedule 1 to the regulations amends the Terrorism Act 2000 to give effect to Article 28. New section 21D contains a new offence of tipping off and new sections 21E to 21G set out the exceptions from Article 28. Paragraphs 3 and 4 of Schedule 2 to the regulations give effect to Article 28 in the Proceeds of Crime Act 2002. The existing offence of tipping off in section 333 of that Act is repealed by paragraph 3. Paragraph 4 inserts a new section 333A into the Proceeds of Crime Act 2002 to create a new offence of tipping off to cover the regulated sector. New sections 333B to 333D give effect to the exceptions in Article 28. The regulated sector is defined in Schedule 3A to the Terrorism Act 2000 (as amended by the Terrorism Act 2000 (Business in the Regulated Sector and Supervisory Authorities) Order 2007 (S.I. No. 2007/3288)) and Schedule 9 to the Proceeds of Crime Act 2002 (as amended by the Proceeds of Crime Act 2002 (Business in the Regulated Sector and Supervisory Authorities) Order 2007 (S.I. No 2007/3287)).

Article 21 of the Directive requires Member States to establish a Financial Intelligence Unit (“FIU”). The Serious Organised Crime Agency is the United Kingdom’s FIU. This is further expanded on in Recital 29 of the Directive. Recital 29 makes it clear that reports of suspicious activity may be made to persons other than the FIU so long as the information is forwarded promptly and unfiltered to the FIU. Both the Terrorism Act 2000 and the Proceeds of Crime Act 2002 allow disclosures to be made to a person other than the Serious Organised Crime Agency and so new section 21C of the Terrorism Act 2000 (inserted by paragraph 5 of Schedule 1) and section 339ZA of the Proceeds of Crime Act 2002 (inserted by paragraph 7 of Schedule 2) give effect to the requirements of Article 21 together with recital 29.

Paragraph 3(2) and paragraph 4 of Schedule 1 to the regulations amend sections 21A and 21B of the Terrorism Act 2000 respectively, in order to give full effect to the requirements of Article 22.1 of the Directive. Article 22.1 requires those covered by the Directive to make reports of knowledge and suspicions of money laundering and terrorist financing that have been attempted as well as committed.

Paragraph 3(3) to (6) of Schedule 1 amends section 21A of the Terrorism Act 2000 to give effect to Article 23.2 of the Directive, which provides that Member States are not required to apply the reporting obligations to legal and other professionals when giving legal advice.

The remaining amendments to the Terrorism Act 2000 and the Proceeds of Crime Act 2002 are consequential amendments. The relevant changes appear in paragraph 6 of Schedule 1 and paragraphs 2, 5, 6 and 8 of Schedule 2.