POCA Peculiarities:
Failure to Disclose When There’s No Crime

One of the stranger features of the Proceeds of Crime Act 2008 is that you can commit a failure to disclose offence even where no money laundering has actually taken place.

It sounds counterintuitive. (It is counterintuitive.) It has real consequences, and it catches people out.

The mandatory reporting regime

POCA creates a mandatory reporting regime. If you suspect, or have reasonable grounds to suspect, that a predicate offence has occurred or will occur, you have a positive obligation to report to your MLRO. Failure to make that report is itself a criminal offence.

Simple enough in principle. The complications start with the word “suspicion.”

What suspicion actually means

Suspicion isn’t defined in the legislation, but case law has filled the gap. In R v Da Silva, the court held that suspicion sits in the territory of a possibility that is more than fanciful. It doesn’t need to amount to a clear belief, and it doesn’t need to exclude an innocent explanation.

Those of you who’ve sat through any annual AML refresher training will recognise that definition.

Two things follow from it that are worth keeping in mind.

First, suspicion is a subjective test. It’s about what you actually thought or suspected at the time.

Second, the “reasonable grounds to suspect” wording adds an objective element. It asks what a reasonable person in your position ought to have suspected on the facts available.

That combination matters, and we’ll come back to it.

The case of the missing crime

What happens if there are reasonable grounds to suspect, but in reality, no criminal activity has taken place?

The Scottish case of Mohammed Ahmed v Her Majesty’s Advocate answers that question, and the answer isn’t what most people expect.

In Mohammed, the proprietor of a money transmission business had a client who regularly transferred large sums of cash to foreign jurisdictions. The cash arrived in holdalls and carrier bags from the boot of a car. The client was duly prosecuted for money laundering and acquitted on the basis of insufficient evidence. The proprietor then appealed his own conviction for failing to disclose, on the basis that since no crime had ultimately been committed, there was nothing to report.

He didn’t succeed.

The Court of Appeal was clear: there is nothing in the failure to disclose provisions that requires money laundering to actually be taking place. The obligation arises from suspicion, or reasonable grounds for suspicion, not from the eventual outcome of any investigation or prosecution.

I’ll translate that plainly: you can be guilty of failing to disclose even if there was no underlying crime. If the circumstances were such that you ought to have formed a suspicion and didn’t report, no underlying crime is needed for the offence to be made out.

What this means in practice

This is where that combination of subjective and objective comes back to bite you.

Because POCA mixes subjective suspicion with reasonable grounds, you can have liability even where you personally didn’t feel suspicious, if a reasonable person in your role, looking at the same facts, would have been.

Holdalls of cash from a car boot going to foreign jurisdictions is not, let’s face it, a subtle set of facts. But the principle applies in less obvious circumstances too. Unusual transaction patterns, inconsistent explanations, a client whose lifestyle doesn’t match their stated income. None of these require certainty, and none require you to identify a specific crime. A possibility, more than fanciful, is enough to trigger the obligation. Waiting for a neat narrative before you report is a risk. 

The practical takeaway

Make it easy for your people to escalate. The failure to disclose risk sits most heavily on front-line staff who may not recognise when circumstances have crossed the threshold. Not because they’re not paying attention, but because nobody has explained what the threshold actually is in plain language.

Train to the Da Silva test. Use examples from your sector. Make the escalation route to your MLRO simple, documented and genuinely safe to use.

And if you’re in a situation where there is a possibility, more than fanciful, that laundering is or might be occurring, always make a timely report. The consequences of not doing so don’t depend on whether a crime was actually committed.