Key Changes Introduced by the Criminal Finances Act 2017 and their likely Impact in Combatting Financial Crime and Terrorist Financing

AuthorHuw Thomas
A Critical Analysis and Evaluation of the
Key Changes Introduced by the Criminal
Finances Act 2017 and their likely Impact in
Combatting Financial Crime and Terrorist
Financing
Huw Thomas*
This essay critically analyses key
legislative provisions introduced by the
Criminal Finances Act 2017 aimed at
recovering the proceeds of crime and
preventing terrorist financing. In
particular, it evaluates provisions
implementing unexplained wealth
orders, amendments to the Suspicious
Activity Report regime, account
freezing orders, unlawful conduct
through human rights abuse outside the
United Kingdom (“UK”) and the
creation of corporate offences of failure
to prevent facilitation of tax evasion. It
considers the effect of the new measures
on the UK’s ability to effectively combat
financial crime and terrorist financing,
highlighting the unsatisfactory state of
the UK’s anti-money laundering
(“AML”) and counter-terrorist
financing (“CFT”) regime. Not only
does this necessitate a holistic review of
174 SLJ 5(2)
the UK’s AML/CFT regime; it
reinforces the requirement for a far more
effective framework that penalises and
deters money laundering and terrorist
financing whilst simultaneously
maintaining the integrity and viability
of the UK’s financial system.
I. Introduction
The terror attacks in London1 and Manchester2 and the
continued threats posed by Al-Qaeda and the Islamic State
have once again ‘seen fresh emphasis placed by financial
regulators around the world on countering terrorist financing
and money laundering’.3 In light of this, the Financial Action
Task Force has:
* Huw Thomas is a Future Trainee Solicitor (Middle East) at
Allen & Overy LLP and is currently enrolled on the Allen &
Overy LLM Commercial Legal Practice programme at BPP Law
School. He holds an LLM in International Commercial Law and
LLB from Cardiff University.
1 Jason Hanna, 'London Train Blast: Latest Of 5 UK Terror
Incidents In 2017' (CNN, 15 September 2017)
2017/index.html> accessed 6 April 2018.
2 'Manchester Arena Attack | UK News | The Guardian' (The
Guardian, 2017)
news/manchester-arena-explosion> accessed 6 April 2018.
3 David Miller, 'Financial Crime And Counter Terrorist
Financing Updates' (Regtechfs.com, 4 March 2016)
Criminal Finances Act 2017: Analysis 175
[…] highlighted the need to increase levels of
communication and information sharing, to put
in place legal frameworks to penalise and deter
money laundering and terrorist financing and
develop a detailed understanding of how
technology and the evolution of financial services
is changing how people can transfer and hide
funds and launder money.4
The Home Office estimates that ‘amounts laundered globally
are equivalent to 2.7% of global GDP, or US $1.6 trillion in
2009, while the National Crime Agency (NCA) assesses that
billions of pounds of proceeds of international corruption are
laundered into, or through the UK’.5 In 2017, ‘40% of terrorist
plots in Europe are believed to be at least partly financed
through crime, especially drug dealing, theft, robberies, the
sale of counterfeit goods, loan fraud, and burglaries’.6 The
Serious and Organised Crime Strategy 20137 and Strategic
Defence and Security Review 20158 aim to collaborate with
financing-updates/> accessed 6 April 2018.
4 Ibid.
5 Explanatory Notes to the Criminal Finances Act 2017.
6 ‘2017 EU Terrorism Report: 142 Failed, Foiled And Completed
Attacks, 1002 Arrests And 142 Victims Died' (Europol, 15 June
2017)
eu-terrorism-report-142-failed-foiled-and-completed-attacks-
1002-arrests-and-142-victims-died> accessed 6 April 2018.
7 'Serious And Organised Crime Strategy - GOV.UK' (Gov.uk, 7
October 2013)
organised-crime-strategy> accessed 6 April 2018.
8 'National Security Strategy And Strategic Defence And Security
Review 2015' (Gov.uk, November 2015)
176 SLJ 5(2)
the private sector to increase the UK’s hostility towards those
criminals seeking to launder the proceeds of crime or
corruption.9 Proponents advocate that the Criminal Finances
Act 2017 (“CFA”) (“the Act”)10 is key to achieving this
objective.11
The Act,12 given stimulus following the revelations of the
Panama Papers scandal,13 received Royal Assent on 27 April
2017. It symbolises the latest attempt to secure and uphold
the integrity of the UK’s financial sector, 14 representing the
‘largest overhaul of the UK’s anti-money laundering regime
in more than a decade and the largest expansion of corporate
criminal liability since the Bribery Act 2010’.15 The CFA16
ystem/uploads/attachment_data/file/555607/2015_Strategic_Defe
nce_and_Security_Review.pdf> accessed 6 April 2018.
9 Explanatory Notes to the Criminal Finances Act 2017 (n 5).
10 Criminal Finances Act 2017 (CFA 2017).
11 Explanatory Notes to the Criminal Finances Act 2017 (n 5).
12 CFA 2017 (n 10).
13 CMS, 'The Criminal Finances Act 2017: Key Legal Changes'
(CMS, 15 June 2017)
lawnow.com/publications/2017/06/the-criminal-finances-act-
2017> accessed 6 April 2018.
14 Justin du Rivage, 'UK Criminal Finances Act: Are You Ready?'
(Exiger, 13 September 2017)
are-you-ready> accessed 6 April 2018.
15 'The Criminal Finances Act: A Guide for The Financial
Services Sector' (Allen & Overy, 6 November 2017)
Criminal-Finances-Act-A-guide-for-the-financial-services-
sector.aspx> accessed 6 April 2018; hereafter to be referenced as
A&O CFA.
16 CFA 2017 (n 10).
Criminal Finances Act 2017: Analysis 177
comprises of four Parts, ‘all of which seek to strengthen the
law on recovering the proceeds of crime, tackling money
laundering and corruption, and countering terrorist
financing’.17
This Article will critically analyse and evaluate the key
changes introduced by the CFA18 and their likely impact in
combatting financial crime and terrorist financing. In
particular, it will assess provisions implementing
unexplained wealth orders (“UWOs”), amendments to the
Suspicious Activity Report (“SAR”) regime, account freezing
orders, unlawful conduct through human rights abuse
outside the UK, and the creation of corporate offences of
failure to prevent facilitation of tax evasion. Such an
examination will highlight the unsatisfactory state of the
UK’s anti-money laundering (“AML”) and counter-terrorist
financing (“CFT”) regime,19 supporting the conclusive theme
of this Article: legislative changes introduced by the CFA20
have failed to enhance the UK’s ability to effectively combat
financial crime and terrorist financing. Not only does this
necessitate a holistic review of the UK’s AML/CFT regime,21
it reinforces the requirement for a far more effective
framework that penalises and deters money laundering and
terrorist financing whilst simultaneously maintaining the
integrity and viability of the UK’s financial system.
17 N Padfield, ‘The Criminal Finances Act 2017’ (2017) 7 Crim LR
505, 505-06.
18 CFA 2017 (n 10).
19 S Kebbell, ‘"Everybody's Looking at Nothing" - the Legal
Profession and the Disproportionate Burden of the Proceeds of
Crime Act 2002’ (2017) 10 Crim LR 741.
20 CFA 2017 (n 10).
21 Kebbell (n 19).
178 SLJ 5(2)
II. UWOs
From 31 January 2018, the CFA22 implemented UWOs as a
new mechanism23 to recover property using the civil recovery
proceedings under Part 5 of the Proceeds of Crime Act 2002
(“POCA”).24 Laird advocates that UWOs establish the most
important modification made to the POCA regime for many
years. 25
Defined as ‘an order granted by the High Court at the
application of an enforcement authority relating to specific
property,’26 a UWO ‘requires the respondent to explain the
nature and extent of their interest in the property and how
they obtained the property.’ 27 Moreover, ‘UWOs may only be
issued in respect of politically exposed persons’ (“PEPs”) or
‘where the respondent is suspected to have been involved in
serious crime (or is connected to someone who is)’.28 Further,
the High Court possesses the ability to issue interim freezing
orders (“IFOs”) in circumstances where ‘it believes that the
respondent is uncooperative or might frustrate a subsequent
recovery order.’29
22 CFA 2017 (n 10).
23 A&O CFA (n 15).
24 Proceeds of Crime Act 2002 (PCA 2002).
25 K Laird, ‘The Criminal Finances Act 2017 - An Introduction’
(2017) 12 Crim LR 915, 929.
26 Calum Macdonald, 'The Criminal Finances Act' (Allen &
Overy, 9 May 2017)
act/> accessed 6 April 2018.
27 Ibid.
28 Ibid.
29 Rivage (n 14).
Criminal Finances Act 2017: Analysis 179
2.1 How will UWOs be used?
It is evident that UWOs are likely to be primarily used for the
purposes of exposing and recovering illicit wealth. 30
However, Macdonald opines that ‘information obtained via a
UWO may be used in “any legal proceedings,” with the only
exception being that information obtained via a UWO cannot
be used in criminal proceedings against the respondent (with
limited exceptions in cases of perjury).’31 Consequently,
information provided via this mechanism ‘may be kept for an
indefinite period and shared with other enforcement
agencies’.32 This demonstrates significant scope for UWOs to
be utilised as a wider mechanism in relation to the
investigation of cases involving money laundering and
terrorist financing,33 providing weight to the notion that
measures implemented by the CFA34 have enhanced the UK’s
ability to combat financial crime and terrorist financing.
However, a number of commentators35 challenge this notion,
pioneering the more appropriate view that ‘UWOs may run
into trouble in the courts on the basis that the reversed
burden of proof infringes human rights relating to privacy
and property.’36 Indeed, it is accepted that in straightforward
30 Macdonald (n 26).
31 Ibid.
32 Ibid.
33 A&O CFA (n 15).
34 CFA 2017 (n 10).
35 Calum Macdonald, 'Unexplained Wealth Orders (and
remainder of the Criminal Finances Act) come into force' (Allen
& Overy, 31 January 2018)
orders-and-remainder-of-criminal-finances-act-come-into-
force/> accessed 6 April 2018.
36 Ibid.
180 SLJ 5(2)
cases where ‘a Respondent has been linked to serious crime,
the likelihood of an UWO application being rejected or struck
down for these reasons appears remote’.37 However, in
circumstances where the nexus to criminality is weaker, 38 for
example ‘where a UWO is sought simply because a
Respondent is a politically exposed person and there is an
unexplained disparity in their income and assets,’ 39 such
arguments could displace the imposition of a UWO,40
reinforcing the more appropriate view that the CFA41 has
failed in its primary aim of strengthening the UK’s AML/CFT
regime.
2.2 Extraterritorial Effect of UWOs
Macdonald emphasises that ‘the international reach of UWOs
is striking’42 due to the fact that ‘a Respondent does not need
to reside in the UK’ 43 and ‘their property does not need to be
located in the UK (POCA applies to property located outside
the UK)’.44 In circumstances where the respondent is a PEP,
they must be located outside of the European Union (“EU”)
to be caught within the scope of the Act.45 Moreover, if the
individual in question is connected to ‘serious crime,’ 46 it is
irrelevant where the crime occurred, provided it would
amount to an offence in the UK.47
37 Macdonald (n 35).
38 Ibid.
39 Ibid.
40 Ibid.
41 CFA 2017 (n 10).
42 Macdonald (n 35).
43 Ibid.
44 Ibid.
45 Ibid.
46 Ibid.
47 Ibid.
Criminal Finances Act 2017: Analysis 181
On the other hand, commentators48 demonstrate that
practical limits exist on the territorial scope of a UWO.49
Evidence supports this as ‘enforcement authorities are
unlikely to expend resources seeking UWOs where neither
the Respondent nor the property has a UK nexus’.50
Moreover, in circumstances where ‘a UK enforcement
authority may seek assistance from foreign authorities to
enforce a UWO (and an interim freezing order) (…) the
willingness of foreign authorities to assist in enforcing this
novel tool will be a key factor in UWOs’ practical
geographical research’.51 Further, ‘state immunity for foreign
officials may also blunt their impact in many jurisdictions,’52
reinforcing the inability of the CFA53 to enhance the UK’s
ability to combat financial crime and terrorist financing.
2.3 Commercial Implications
Issues concerning UWOs and IFOs are not just limited to
their extraterritorial applicability.54 Macdonald pioneers the
view that they will ‘pose new challenges for financial
institutions’ compliance departments’55 due to the
disproportionate burden now placed upon firms.56 Although
UWOs are designed to target individuals and not financial
institutions,57 commentators58 assert that ‘regulators may act
48 Ibid.
49 Ibid.
50 Ibid.
51 Ibid.
52 Ibid.
53 CFA 2017 (n 10).
54 A&O CFA (n 15).
55 Rivage (n 14).
56 Kebbell (n 19).
57 Macdonald (n 35).
182 SLJ 5(2)
against firms that fail to collect accurate source of wealth
information or whose customers are subject to a
disproportionate number of UWOs’.59 Consequently, firms
operating within this sector will be required to maintain
‘robust know your customer (“KYC”) programmes,’60
exemplifying the significance of legislative changes
implemented by the CFA.61 However, commentators62
highlight that this is not an easy task given that ‘many
countries lack centrally held property registers and the
proliferation of assets held by shell companies, trusts and
other anonymising vehicles makes compiling accurate
beneficial ownership information difficult’.63 Additionally,
‘cultural stigma often prevents frontline employees from
enquiring about their customers’ source of wealth’.64 Further,
firms ‘wishing to retain foreign clients should make sure that
their KYC procedures are robust enough to stand up to the
heightened regulatory scrutiny,’65 reinforcing the more
appropriate view that changes made by the CFA66 place a
disproportionate burden on financial institutions operating in
the UK.67
2.4 Comparative Analysis of UWOs
58 Ibid.
59 Rivage (n 14).
60 Ibid.
61 CFA 2017 (n 10).
62 Rivage (n 14).
63 Ibid.
64 Ibid.
65 Ibid.
66 CFA 2017 (n 10).
67 Kebbell (n 19).
Criminal Finances Act 2017: Analysis 183
Furthermore, the Impact Assessment68 that accompanies the
CFA estimates that there will be 20 cases per year that will
rely upon a UWO and that asset recovery will run into the
millions of pounds.69 Laird asserts that such an estimate
could prove ‘over-optimistic’.70 Indeed, a comparative
analysis of jurisdictions that have adopted UWOs concluded
that Ireland has had notable success in utilising them. 71 The
study attributes this success to both the Irish Criminal Asset
Bureau, which is described as an ‘elite, well-resourced unit,
with staff from not only the police and prosecutors, but also
tax and social welfare agencies,’72 and the Irish High Court,
who is ‘assisted by a special registrar, to work solely on
confiscation cases for a period of at least two years’. 73 Indeed,
this combination ensures that Ireland has enjoyed significant
success through the implementation its UWO regime.74
Consequently, Laird emphasises that ‘the success of UWOs in
Ireland seems to be attributable not only to legislative
developments, but also to the expertise and resources of the
enforcement authority’.75 Therefore, UWOs cannot be viewed
in isolation as a panacea; they must be accompanied by
appropriate and effective means of enforcement.76 Given that
68 'Criminal Finances Act – Overarching Impact Assessment'
(Gov.uk, 20 June 2017)
ystem/uploads/attachment_data/file/621192/Impact_Assessment
_-_CF_Act_Overarching.pdf> accessed 6 April 2018.
69 Ibid.
70 Laird (n 25) 916.
71 Ibid.
72 Ibid.
73 Ibid.
74 Ibid.
75 Ibid.
76 Ibid.
184 SLJ 5(2)
the Act77 is ‘not the first time a Government has taken steps
to strengthen the provisions in POCA with a view to
ensuring that those suspected of involvement in crime do not
retain their ill-gotten gain,’78 it is highly doubtful that this
latest amendment will prove successful in strengthening the
UK’s AML/CFT regime.79
III. Amendments to the SAR Regime
With effect from 31 October 2017, the CFA80 implemented
legislative changes81 to the UK’s money laundering reporting
regime which was previously outlined in POCA.82 Prior to
the CFA,83 POCA84 ‘required firms operating in the regulated
sector (including financial services firms) to disclose
knowledge or suspicion of money laundering to the NCA’.85
Disclosures were made by way of SARs. Macdonald opines
that two significant amendments have been made to the SAR
regime under the Act. 86
3.1 Extended Moratorium Period
Under the previous reporting regime,
77 CFA 2017 (n 10).
78 Laird (n 25) 916.
79 Ibid.
80 CFA 2017 (n 10).
81 Ibid s 10-11; PCA 2002 (n 24) s 335-336, s 336A-C, s 339ZB-ZG.
82 PCA 2002 (n 24).
83 CFA 2017 (n 10).
84 PCA 2002 (n 24).
85 A&O CFA (n 15) 20.
86 Macdonald (n 26).
Criminal Finances Act 2017: Analysis 185
A firm that submitted a SAR to the NCA was
deemed to have received the NCA’s consent to
engage in activity relating to property that it
suspected to constitute the proceeds of crime if:
(a) after seven working days, the NCA did not
notify the firm that consent had been refused, or
(b) the NCA notified the firm within seven
working days that it had refused consent, but
had taken no further action in relation to the
matter after a further 31 calendar days.87 This
period of 31 days was known as the moratorium
period.88
During the drafting stage of the Criminal Finances Bill, 89
there had been calls to end the consent-based regime relating
to SARs, with proposals to ‘replace it with an “entity” rather
than “transaction” based reporting system. Such a system
would require SARs to be made in respect of organisations
and individuals, as opposed to each transaction undertaken
by them’.90 Despite this, the Government expressly reinforced
their intention to retain the consent regime during the
publication of the Criminal Finances Bill in 2016.91
As a result, ‘the consent regime under POCA outlined above
has survived and exists in the Criminal Finances Act’.92
Kebbell criticises this development as a wasted chance to
tackle the uneven encumbrance placed upon those operating
within the legal sector.93 Evidence supports this notion as the
87 A&O CFA (n 15) 20.
88 Ibid.
89 Criminal Finances Bill HC Bill (2016-17) [75].
90 Kebbell (n 19) 744.
91 Criminal Finances Bill (n 89).
92 A&O CFA (n 15) 20.
93 Kebbell (n 19) 744.
186 SLJ 5(2)
UK failed to act ‘upon an alternative proposal set forth by the
Law Society whereby a “tiered” reporting system could
apply to the legal sector. Under this system, lawyers would
simply “grade” the importance of the SARs they submit’.94
The limitations of the legislative changes made by the CFA95
are clear; reinforcing the notion that the CFA96 has failed to
enhance the UK’s AML/CFT regime.
However, commentators97 challenge this view, arguing that
the CFA98 ‘makes the legislative changes necessary to give
law enforcement agencies and partners new capabilities and
powers to recover the proceeds of crime, and to tackle money
laundering, corruption and terrorist financing’. 99 Evidence
supports this notion as the CFA100 enables enforcement
authorities to ‘apply to the Crown Court extend the
moratorium period for 31 days on up to six occasions’.101
Fisher QC and Clifford opine that the rationale underpinning
the new regime ‘is to give the NCA more time to consider a
SAR and, where a matter might be more complex, sufficient
space to conduct further investigations and gather the
necessary evidence in support of property freezing’. 102 In
doing so, the aim is that government agencies will be in a
much stronger position to utilise information contained in a
94 Ibid.
95 CFA 2017 (n 10).
96 Ibid.
97 Explanatory Notes (n 5).
98 CFA 2017 (n 10).
99 Explanatory Notes (n 5).
100 CFA 2017 (n 10).
101 A&O CFA (n 15) 20.
102 Jonathan Fisher, 'Suspicions, Privacy & Money Laundering'
(New Law Journal, 2017)
money-laundering> accessed 6 April 2018.
Criminal Finances Act 2017: Analysis 187
SAR. 103 Indeed, ‘the case for giving enforcement authorities
more time to properly consider them and act is strong’.104
3.1.1 Commercial Implications
Although it is accepted that the mechanism for submitting a
SAR has not been modified, 105 Macdonald emphasises that ‘a
potential six-fold increase in the moratorium period for SARs
should cause firms to pause and give careful thought as to
whether the test for filing a SAR has been met,’106 further
exacerbating the disproportionate burden placed upon firms
operating in the regulated financial services sector.107
Evidence supports this as ‘the ability of the NCA (or other
authorities) to extend the moratorium periods may cause
significant issues in relation to large and/or time-critical
transactions’.108 Given that ‘95.78% of all SARs filed between
October 2015 and March 2017 were filed by financial services
firms,’109 the ‘potential for a long moratorium period may
mean that control functions are more routinely challenged by
front line staff as to whether submitting a SAR is absolutely
necessary in a given situation’. 110 As ‘634,113 SARs were filed
between October 2015 and March 2017,’111 greater weight can
be attached to the notion that the enactment of the CFA112
103 Ibid.
104 Ibid.
105 A&O CFA (n 15) 20.
106 Kebbell (n 19).
107 A&O CFA (n 15) 20.
108 Ibid 21.
109 Ibid 20.
110 Ibid 21.
111 Ibid.
112 CFA 2017 (n 10).
188 SLJ 5(2)
represents a wasted chance to tackle the ‘disproportionate
burden’113 imposed on the UK’s financial system.114
3.2 Information Sharing
Heralded as a significant development, 115 the CFA116 ‘allows
for information sharing between firms where there is a
suspicion of money laundering; either on the firms’ own
initiative or at the request of the NCA’.117 Moreover, it
outlines the requirements for such a request and ‘provides
for a joint SAR to be submitted following information sharing
that would fulfil both firms’ reporting obligations’. 118 A
notable advantage of this mechanism is that firms which
collaborate and share information under these measures are
additionally ‘protected from civil liability for breach of any
confidentiality obligations or other disclosure restrictions,
provided that any information shared is provided in good
faith’.119
Although well-placed and utilised in some circumstances, 120
Burnett et al dispute the significance of this development
given that ‘in reality there may be little appetite on the part of
firms to share or request information relating to suspected
money laundering from each other’.121 Despite the power
proving theoretically useful where firms’ interests align,122
113 Kebbell (n 19).
114 Ibid 741.
115 A&O CFA (n 15) 22.
116 CFA 2017 (n 10).
117 A&O CFA (n 15) 22.
118 Ibid.
119 Ibid.
120 Ibid.
121 Ibid.
122 Ibid.
Criminal Finances Act 2017: Analysis 189
firms ‘may wish to take different approaches to an issue and
one firm may feel it is in practice obliged to submit a SAR
simply because the other is intending to’.123 Another
significant criticism that furthers the inadequacy of the power
is that institutions are ‘likely to be reluctant to share client
confidential information with each other, even if doing so
will not attract the risk of civil liability for breaching
confidentiality obligations’.124 The same rationale is
applicable to ‘data that constitutes personal data for the
purposes of the Data Protection Act 1998,’125 reinforcing the
inadequacy of legislative amendments introduced by the
CFA126 to enhance the UK’s AML/CFT regime.
IV. Corporate Failure to Prevent Facilitation of
Tax Evasion
Sahota emphasises that the UK Government has often re-
iterated its intention to combat those that facilitate tax
evasion.127 For this reason, Part 3 of the CFA128 has inevitably
attracted the most attention and commentary.129 Indeed, the
creation of two new criminal offences of corporate failure to
prevent a tax evasion facilitation offence – either domestic130
123 Ibid.
124 Ibid.
125 Ibid.
126 CFA 2017 (n 10).
127 Roger Sahota, 'Criminal Finances Act 2017' (Law Society
Gazette, 22 May 2017)
updates/criminal-finances-act-2017/5061170.article> accessed 6
April 2018.
128 CFA 2017 (n 10).
129 A&O CFA (n 15) 6.
130 CFA 2017 (n 10) s 45.
190 SLJ 5(2)
or foreign131 - has been described as ‘one of the most
significant elements’132 of the CFA.133 Further, ‘the foreign tax
evasion carries a dual criminality requirement (i.e. the
offence must also be a crime under English law) and ‘it is a
defence to both offences to prove that a firm had in place
“reasonable prevention procedures”’.134
However, commentators135 highlight that these new tax
offences have received much scrutiny and criticism.136 This is
because prior to the CFA,137 ‘to hold a company liable for the
illegal acts of directors, employees or agents it was necessary
to show that the individuals responsible represented its
“directing mind or will”’. 138 However, critics highlighted that
this approach made it ‘too difficult to prosecute companies,
particularly large or medium-sized ventures where the
directors are some distance removed from the day-to-day
actions of employees’.139
Although the CFA140 aims to ameliorate this issue through
the expansion of the scope of criminal liability for companies
accused of facilitating tax evasion, opposing commentators 141
131 CFA 2017 (n 10) s 46.
132 ‘The Criminal Finances Act 2017' (Grant Thornton, 2017)
firms/united-kingdom/pdf/publication/the-criminal-finances-
act-2017.pdf> accessed 6 April 2018.
133 CFA 2017 (n 10).
134 A&O CFA (n 15) 6.
135 Sahota (n 127).
136 Ibid.
137 CFA 2017 (n 10).
138 Sahota (n 127).
139 Ibid.
140 CFA 2017 (n 10).
141 Sahota (n 127).
Criminal Finances Act 2017: Analysis 191
assert that ‘the Government has swung the pendulum too far
the other way’.142 Instead of ‘focusing on attributing the
criminal act to the company, the offences focus on and
criminalise the company’s failure to prevent those who act
for or on its behalf from facilitating tax evasion’.143 Due to the
broad drafting of the CFA, it is widely applicable and
therefore possesses the potential ‘to criminalise inadvertent
facilitation in cases where senior management were unaware
of and uninvolved in any criminal conduct by employees’.144
Additionally, Sahota asserts that ‘liability arises even where
no benefit has accrued to the company,’145 strengthening the
argument that measures implemented by the CFA 146 are
wholly misplaced. Evidence supports this as the legislative
changes add further to the disproportionate burden imposed
on firms operating within the UK’s financial system147 and
represents a ‘wasted opportunity’148 to adequately strengthen
the UK’s AML/CFT regime.149
V. Account Freezing Orders (“AFOs”)
142 Ibid.
143 Ibid.
144 Ibid.
145 Ibid.
146 CFA 2017 (n 10).
147 Kebbell (n 19).
148 Ibid 741.
149 Ibid.
192 SLJ 5(2)
Although the CFA’s150 provision of UWOs and two new
criminal offences of corporate failure to prevent a tax evasion
facilitation offence have sparked significant debate, little
focus has been given to what may prove to be its most
significant legacy: AFOs.151
The CFA 152 inserts provisions into Part 5 of POCA.153 It
provides that, ‘on an application by an “enforcement officer,”
a magistrates’ court may make an AFO if it is satisfied that
reasonable grounds exist for suspecting that money held with
a bank or building society: (i) is recoverable property; or (ii)
is intended by any person for use in unlawful conduct’. 154
The effect of an AFO is that ‘funds held in a bank account can
be frozen for an initial period of up to 6 months, that period
extendable on a six-monthly basis up to a maximum of two
years.’155
Although the provisions appear robust, Nakhwal and Querée
assert that the scheme ‘is objectionable in terms of the
overarching principle of the scheme, and its practical
application’.156 In an attempt to strengthen the UK’s
AML/CFT regime, the UK Government has hastily
150 CFA 2017 (n 10).
151 'The Criminal Finances Act 2017: Account Freezing and
Forfeiture Provisions' (Criminal Law and Justice, 2017)
Finances-Act-2017-Account-Freezing-and-Forfeiture-Provisions>
accessed 6 April 2018.
152 CFA 2017 (n 10) s 16.
153 PCA 2002 (n 24) pt 5.
154 CMS (n 13) 15.
155 Ibid.
156 'The Criminal Finances Act 2017: Account Freezing and
Forfeiture Provisions' (n 151).
Criminal Finances Act 2017: Analysis 193
implemented a highly confusing and questionable regime. 157
Therefore, it is submitted that the CFA 158 has failed to
implement measures that enhance the UK’s ability to combat
financial crime and terrorist financing.
VI. The Magnitsky Amendment
The Magnitsky amendment was inserted less than two
months prior to the enactment of the CFA.159 In short, the
amendment ‘expands the civil recovery powers for unlawful
conduct under Part 5 of POCA to property obtained by or in
connection with a gross human rights abuse’. 160 Qureshi et al
opine that ‘the amendment’s roots lie in news of the alleged
torture and subsequent death in police custody in 2009 of the
lawyer Sergei Magnitsky, who made a complaint of a $230m
fraud against Russian public officials in 2007 only to be
arrested himself on corruption-related charges’.161
As the Criminal Finances Bill162 made its way through
Parliament, ‘Dominic Raab MP tabled an amendment that
would enable the Government and private parties to apply to
the High Court to freeze assets within the UK that belong to
those involved in or profiting from gross human rights
abuses in any country’.163 The rationale underpinning the
amendment was to ensure that ‘people with blood on their
157 Ibid.
158 CFA 2017 (n 10).
159 Ibid.
160 A&O CFA (n 15) 26.
161 CMS (n 13) 13.
162 Criminal Finances Bill (n 89).
163 FT, 'UK MPs Vote For Power To Freeze Assets Of Human
Rights Abusers' (Financial Times, 2017)
2d969e0d3b65> accessed 6 April 2018.
194 SLJ 5(2)
hands for the worst human rights abuses should not be able
to funnel their dirty money into the UK’.164
The corresponding provisions can now be found in section 13
of the Act,165 which amends section 241 of POCA166 and
inserts a new definition at section 241A. 167 Although it is
universally accepted that these provisions permit the
‘recovery of property that is obtained as a result of conduct
which constitutes gross human rights abuses or violations,’ 168
commentators169 envisage the possibility of ‘a dispute arising
as to whether the property that is sought to be recovered was
obtained as a result of the conduct that is described below,
even if it is established that the respondent is someone who
has engaged in such conduct’.170 Laird furthers this notion,
emphasising that ‘the evidential difficulty in establishing a
causal link between the conduct and the property has the
potential to undermine the effectiveness of these
provisions,’171 adding weight to the argument that their
impact is ‘more symbolic than substantive’.172 Further, ‘the
Impact Assessment to the Criminal Finances Act 2017
provides no estimate of the assets expected to be recovered
pursuant to these provisions,’173 which lends weight to the
notion that the CFA174 fails to implement legislative changes
164 Ibid.
165 CFA 2017 (n 10) s 13.
166 PCA 2002 (n 24) s 241.
167 Ibid s 241A.
168 Laird (n 25) 929.
169 Ibid.
170 Ibid.
171 Ibid.
172 A&O CFA (n 15) 27.
173 Laird (n 25) 929.
174 CFA 2017 (n 10).
Criminal Finances Act 2017: Analysis 195
that enhance the ability of the UK to combat financial crime
and terrorist financing.
As inserted by the CFA,175 the definition of ‘unlawful
conduct’176 now incorporates conduct which: ‘i) occurs in a
country or territory outside the UK; ii) constitutes, or is
connected with, the commission of a gross human rights
abuse or violation; and iii) if it occurred in a part of the UK,
would be an offence triable on indictment only or is an either
way offence’.177 Recovery proceedings can be commenced
once these conditions are satisfied.178 Moreover, ‘there is no
need for the conduct to be a criminal offence in the country in
which it occurred, but it must be an offence in the UK’.179
Laird emphasises the significance of this as ‘generally
speaking, property is only recoverable if the principle of dual
criminality is satisfied’180 and ‘the amendments introduced
by the CFA constitute an exception to this rule’.181 Indeed, the
amendment aims to have a deterrent effect, 182 demonstrating
that the UK remains a hostile place for those criminals who
undertake human rights violations abroad, 183 reinforcing the
viability of provisions implemented by the CFA 184 in
combatting financial crime and terrorist financing.
175 Ibid.
176 PCA 2002 (n 24) s 241A.
177 Laird (n 25) 929.
178 Ibid.
179 Ibid.
180 Ibid.
181 Ibid.
182 Ibid.
183 Ibid.
184 CFA 2017 (n 10).
196 SLJ 5(2)
6.1 What Constitutes the Commission of a Gross
Human Rights Abuse or Violation?
Conduct constitutes the commission of a gross human rights
abuse or violation if:
the conduct constitutes the torture of a person
who has sought: (i) to expose illegal activity
carried out by a public official or a person acting
in an official capacity; (ii) to obtain, exercise,
defend or promote human rights and
fundamental freedoms; or (iii) the conduct
otherwise involves the cruel, inhuman or
degrading treatment or punishment of such a
person; the conduct is carried out in consequence
of that person having sought to do anything in (i)
or (ii) in the first condition (above); and the
conduct is carried out by a public official, or a
person acting in an official capacity, in the
performance or purported performance of his or
her official duties (or at their instigation or
consent/acquiescence while acting in such
capacity).185
Although the legislation fails to define the term ‘torture’186
with explicit reference to an international convention,187 Laird
advocates that ‘conduct that involves the intentional
infliction of severe pain or suffering on another person is
conduct that constitutes torture for the purposes of
s.241A(2)(a)’.188 Furthermore, it is irrelevant whether the
185 CMS (n 13) 13.
186 PCA 2002 (n 24) s 241A(2)(a).
187 Laird (n 25) 930.
188 Ibid.
Criminal Finances Act 2017: Analysis 197
pain or suffering is either mental or physical or whether it is
caused by an omission or an act.189 Proponents welcome the
inclusion of mental suffering.190 Notwithstanding the fact that
the terms ‘cruel, inhuman or degrading treatment’ are not
defined, such conduct is prohibited by the European
Convention on Human Rights.191 In light of this, ‘case law
provides a useful interpretative aid if a dispute arises as to
whether the conduct in question constitutes cruel, inhuman
or degrading treatment’.192
Furthermore, ‘the extent to which the provisions have
retrospective effect depends upon the conduct it is alleged
the respondent has engaged in’.193 If the action ‘constitutes or
is connected with torture, then they apply irrespective of
whether the conduct occurs before or after the coming into
force of the provisions,’194 reinforcing the robust nature of the
provisions implemented by the CFA195 in strengthening the
UK’s AML/CFT regime.
However, commentators196 note that proceedings must be
brought within a 20-year period of the torture occurring.197
Moreover, Laird asserts that ‘if the conduct involves, or is
connected with the cruel, inhuman or degrading treatment or
punishment of a person, then the new provisions only apply
189 Ibid.
190 Ibid.
191 Convention for the Protection of Human Rights and
Fundamental Freedoms (European Convention on Human
Rights, as amended) (ECHR) Art 3.
192 Laird (n 25) 930.
193 Ibid.
194 Ibid.
195 CFA 2017 (n 10).
196 Laird (n 25) 930.
197 Ibid.
198 SLJ 5(2)
if the conduct occurs after they come into force’. 198 Crucially,
authorities will be required to ‘pay particular attention to the
relevant limitation period when invoking these new
provisions,’199 strengthening the argument that the success of
these new provisions is dependent not only on legislative
developments but also on the expertise and resources of the
relevant authority. These provisions are therefore not a
panacea and must be accompanied by effective
enforcement.200
6.2 Impact
With respect to the effectiveness of the provisions
implemented by the Act, 201 Wallace asserts that they will
send ‘send a “major signal” around the world that the UK
could not be used as a base to hide ill-gotten gains’.202
Further, Browder emphasises the ‘historic and ground-
breaking’203 nature of the provisions as they provide the UK
Government with the ability to breathe ‘the fear of God into
every torturer and murderer from dictatorships that all have
houses in London’.204
Although the provisions appear to be robust at first glance,
their ‘potential effectiveness is undermined, however, by the
fact that they only allow for the recovery of property that is
obtained as a result of conduct which constitutes a gross
198 Ibid.
199 Ibid.
200 Kebbell (n 19).
201 CFA 2017 (n 10).
202 FT (n 163).
203 Ibid.
204 Ibid.
Criminal Finances Act 2017: Analysis 199
human rights abuse or violation’.205 Laird furthers this
notion, asserting that ‘proving the causal link could be very
difficult’.206 Even in circumstances where the enforcement
agency is able to demonstrate that an individual’s conduct
constituted a gross human rights abuse or violation, ‘proving
that the house they own in Belgravia was obtained as a result
of that conduct could prove impossible’. 207 Consequently, the
provisions may be viewed merely as a ‘politically symbolic
change,’208 reinforcing the inadequacy of legislative changes
implemented by the CFA209 in combatting financial crime and
terrorist financing.
VII. Terrorist Financing
The Home Office emphasises that ‘countering terrorist
finance is an important part of the Government’s response to
terrorism and financial investigation is a key tool in the
investigation of a number of terrorism offences’.210 Moreover,
‘the vulnerabilities in the financial sector which are at risk of
being exploited are broadly the same as those for the
proceeds of crime’.211 In light of this, the CFA212 extends the
following powers to investigations undertaken under the
Terrorist Act 2000 (“TACT”)213 in relation to terrorist
205 Karl Laird, ‘UK "Magnitsky Provisions" - Time For A
Change?’ (The 6KBW Blog, 14 March 2018)
change> accessed 6 April 2018.
206 Ibid.
207 Ibid.
208 A&O CFA (n 15) 27.
209 CFA 2017 (n 10).
210 Explanatory Notes (n 5) 10.
211 Ibid.
212 CFA 2017 (n 10).
213 Terrorism Act 2000 (TA 2000).
200 SLJ 5(2)
property and financing, 214 and ‘to the civil recovery of
terrorist property under the [Anti-terrorism, Crime and
Security Act 2001] (“ATCSA”), as well as POCA: i) disclosure
orders; ii) information sharing; iii) the powers to enhance the
SARs regime; and iv) seizure and forfeiture powers – for
bank accounts and moveable stores of value’.215 The
extension of such powers reinforces the view that the CFA 216
implements changes to ensure government agencies are
provided with the necessary investigatory powers to
effectively tackle terrorist financing.217
Furthermore, the CFA218 ‘provides the power to designate
civilian staff employed by the police as Counter Terrorism
Financial Investigators (“CTFIs”) and extends a number of
investigatory powers under TACT and civil recovery powers
under ATCSA, which are currently only available to
constables, to CTFIs’.219 This is significant as indications show
that the extension of these powers to CTFIs ‘will increase the
capacity of the police to apply for the orders in question by
over 50%’.220 Lastly, the Act221 ‘amends TACT to create a
power so that court orders made in one part of the UK, for
the purposes of or in connection with the investigation of
terrorist financing, can be enforced in another part,’222
meaning relevant court orders made in England can be
enforced by courts in Scotland or Northern Ireland and vice
214 Ibid.
215 Explanatory Notes (n 5) 10; CFA 2017 (n 10) s 35-43; TA 2000
(n 213).
216 CFA 2017 (n 10).
217 Explanatory Notes (n 5) 5.
218 CFA 2017 (n 10).
219 Explanatory Notes (n 5) 10.
220 Ibid.
221 CFA 2017 (n 10).
222 Explanatory Notes (n 5) 10.
Criminal Finances Act 2017: Analysis 201
versa,223 further strengthening the viability of measures
implemented by the Act224 in respect of enhancing the UK’s
CFT regime.
Clearly, the main focus of these amendments is to provide
enforcement agencies with new capabilities to tackle terrorist
financing. In this respect, it is difficult to see how the CFA 225
adds materially to the inadequacies of the existing CFT
regime.226 Indeed, during a period where combatting the
financing of terrorism has risen to the forefront of the
security agenda,227 even a superficial examination of the UK’s
contemporary CFT regime reveals that ‘the Government is
failing to harness the full potential that financial intelligence
has to offer, necessitating an urgent reassessment of how
precisely terrorist finance should be most effectively
tackled’.228
VIII. Conclusion
Proponents advocate that the CFA229 represents the ‘latest in
a number of aggressive measures to fight tax evasion, money
laundering, and terrorist financing, shifting the UK to the
223 Ibid.
224 CFA 2017 (n 10).
225 Ibid.
226 Tom Keatinge, 'Tackling Terrorist Finance Starts at Home'
(RUSI, 22 January 2016)
finance-starts-home> accessed 6 April 2018.
227 Ibid.
228 Ibid.
229 CFA 2017 (n 10).
202 SLJ 5(2)
forefront in the fight against global financial crimes’. 230
However, an evaluation of the substantive provisions of the
Act231 reveals that the CFA 232 fails to make the ‘the legislative
changes necessary to give law enforcement agencies and
partners new capabilities and powers to recover the proceeds
of crime, and to tackle money laundering, corruption and
terrorist financing’.233 Consequently, it is submitted that the
CFA234 fails to add materially to the unsatisfactory state of the
UK’s existing AML/CFT regime,235 necessitating an urgent
review of how precisely financial crime and terrorist
financing should be most effectively tackled.236 Nevertheless,
it is advocated that a far more effective AML/CFT framework
is required to penalise and deter money laundering and
terrorist financing whilst simultaneously maintaining the
integrity and viability of the UK’s financial system.
230 'UK Criminal Finances Act 2017 Commences With New Tax
Evasion Offences, Anti-Money Laundering Rules, And Asset
Forfeiture Provisions' (Cadwalader, 10 October 2017)
memos/uk-criminal-finances-act-2017-commences-with-new-
tax-evasion-offences-anti-money-laundering-rules-and-asset-
forfeiture-provisions> accessed 6 April 2018.
231 CFA 2017 (n 10).
232 Ibid.
233 Explanatory Notes (n 5) 5.
234 CFA 2017 (n 10).
235 Kebbell (n 19).
236 Keatinge (n 226).
Criminal Finances Act 2017: Analysis 203
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memos/uk-criminal-finances-act-2017-commences-with-new-
tax-evasion-offences-anti-money-laundering-rules-and-asset-
forfeiture-provisions> accessed 6 April 2018
216 SLJ 5(2)

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