| BANKING — Bank’s liability — Proceeds of crime — Suspicion of money-laundering — Requirements for authorised disclosure and appropriate consent — Bank’s refusal to pay money out of customer’s account — Whether failure to review issue of authorised consent on customer’s request unlawful — Proceeds of Crime Act 2002, ss 328, 335, 338
R (UMBS Online Ltd) v Serious Organised Crime Agency and another
CA: Ward, Sedley and Hooper LJJ: 2 May 2007
The Serious Organised Crime Agency (SOCA) was a powerful statutory body whose decisions could imperil private and business banking activity on no more than a reported suspicion of money-laundering. However it should not withhold consent to a bank to allow it to operate a customer’s account under s 335 of the Proceeds of Crime Act 2002 without good reason. It had an obligation to keep matters under review and its refusal of a bank customer’s request to revisit the matter was unlawful.
The Court of Appeal so held, inter alia, in reserved judgments giving reasons for its decision on 15 March 2007 to allow an appeal by the applicant, UBMS Online Ltd, from the refusal by Lloyd Jones J on 5 March 2007 to grant permission to apply for judicial review of a decision by SOCA refusing to grant consent to the applicant’s bank, Laiki Bank, to carry out its mandate to a customer who was dealing with funds held on trust for the applicant. Revenue and Customs were joined as an interested party.
Pt 7 of the Proceeds of Crime Act 2002 dealt with money-laundering, ss 327, 328 and 329 making it an offence to engage in activities involving benefiting from criminal property. A bank committed an offence by allowing its banking business to be conducted in respect of funds suspected to be criminal property unless it had made an authorised disclosure under s 328 and received the appropriate consent under s 335 of the Act.
WARD LJ said that by letter of 27 February SOCA refused a request by the applicant to grant consent to its bank to carry out its banking mandate to deal with its funds under s 335 of the Proceeds of Crime Act 2002. To strike the proper balance between undue interference with personal liberties and the need constantly to fight crime, the least that could be demanded was that SOCA did not withhold consent without good reason. But, somewhat unsatisfactorily, as pointed out in K Ltd v National Westminster Bank plc [2007] 1 BLR 26, CA, the court could not require a banker who made a disclosure within s 338 to give further disclosure if to do so would prejudice an investigation. SOCA accepted, however, that it had to keep matters under review and give the bank consent when there was no longer any reason for withholding it. Further a request from a person directly affected by the freezing of an account triggered SOCA’s duty to look at the matter again: it was absurd for SOCA to suggest that it would only do so on a request from the bank. The customer was entitled to ask SOCA to review the matter and SOCA was obliged to do so. Thus SOCA, by refusing to revisit the matter, had erred in law and it followed that its decision of 27 February had to be quashed.
SEDLEY LJ gave a concurring judgment and HOOPER LJ agreed.
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