In brief
- R v Osmond is the first reported case which considers the elements of the tipping off offence under Part 7 of the Proceeds of Crime Act 2002 ('POCA 2002').
- The judgment is a helpful clarification – and confirmation – of the scope of the offence for individuals and businesses in the regulated sector who may become aware of investigations into their clients.
- Although the judgment leaves open the prospect that a tipping off offence may not be committed where the investigation is already in the public domain, this will be highly fact specific.
- The judgment also confirms that information leading to a tipping off offence is not restricted to information received in the course of providing a regulated service to a client; it is enough that information is received by the individual in their capacity as "a person carrying on business in the regulated sector".
The offence of "tipping off"
Section 333A(3) of POCA 2002 provides that a person commits an offence if:
- The person discloses that an investigation into allegations of an offence under Part 7 of POCA 2002 is being contemplated or is being carried out;
- The disclosure is likely to prejudice the investigation; and
- The information which the disclosure is based on came to the person in the course of a business in the regulated sector.
In regard to (b), it is not necessary that the disclosure actually prejudices the investigation, but only that prejudice is "likely". It is also not a defence if no prejudice is caused by the disclosure.
In regard to (c), the requirement is that information is obtained in the "regulated sector". For the purpose of R v Osmond, the regulated conduct was "the participation in financial or real property transactions", which explicitly includes "the buying and selling of real property […] or business entities".
The mental element required for a tipping off offence is found in section 333D(4): a person does not commit a tipping off offence if the person "does not know or suspect that the disclosure is likely to have the effect mentioned in section 333A(3)(b)", ie. of prejudicing the relevant investigation.
Case background
Mr William Osmond was the senior partner of a law firm, Osmond and Osmond Solicitors. In 2013, Mr Osmond acted for his long-standing client, Mr James Ramsay, when he provided a £4 million loan, which the borrower put towards a purchase of an £8 million residential property in Mayfair. As Mr Ramsay routed this loan through an offshore company, Mr Osmond dealt with the purchase of a new "off-the-shelf" British Virgin Islands company through which to grant the loan. Mr Osmond also prepared the relevant loan documentation. The £4 million was then paid into Mr Osmond's client account and transferred onwards to the borrower and purchaser of the residential property.
Mr Ramsay's £4 million loan came to the attention of the Serious Fraud Office ('SFO') during its investigation into a company called Eurasian Natural Resources Corporation Limited ('ENRC'). This investigation began in 2013 and was prompted by allegations of fraud, corruption and money laundering. During the SFO's investigation, it transpired that the recipient of Mr Ramsay's loan and purchaser of the £8 million Mayfair property was the wife of a senior ENRC official and daughter of one of ENRC's founders.
On 7 June 2018, Mr Osmond received a call from an SFO investigator regarding the Mayfair property purchase; Mr Osmond was requested to provide documents related to the loan transaction, details of his client relationship with Mr Ramsay and details of the explanation given by Mr Ramsay for contributing to the borrower's purchase price. The SFO investigator followed up with Mr Osmond in writing on 15 June 2018, sharing a formal notice under the Criminal Justice Act 1987 (CJA 1987), with more detailed requests and questions which could assist the ENRC investigation. Unbeknownst to the SFO investigator, Mr Osmond had at this stage already telephoned Mr Ramsay on 8 June 2018 about the SFO's enquiries and travelled to Malta (Mr Ramsay's country of residence) on 14 June 2018 and returned to the UK the following day.
At first instance, Mr Osmond was also found guilty of forgery under section 1 of the Forgery and Counterfeiting Act 1981 ('F&CA 1981'). This arose because, when asked by the SFO investigator to provide a copy of the engagement letter provided to Mr Ramsay for the loan transaction, Mr Osmond created a false letter of engagement back-dated to five years prior – 24 October 2013 – and provided this to the SFO. On the contrary, no such engagement letter existed between Mr Osmond and Mr Ramsay at the relevant time.
Trial
The issues at trial in Mr Osmond's case broadly fell under three categories:
- Investigation in public domain: At first instance, an argument was made on Mr Osmond's behalf that his disclosure of information related to the SFO's enquiries was not capable of prejudicing the investigation because the ENRC investigation was already widely publicised and inevitably already known to Mr Ramsay (and anyone connected with ENRC). The prosecution's position was that the "investigation" capable of being prejudiced was not the entire ENRC investigation, but rather a separate investigation in relation to the Mayfair property purchase which Mr Ramsay provided financing for.
HHJ Trowler KC made a pre-trial ruling in favour of the prosecution, finding that "there is no sensible basis on which it can be argued that a person cannot commit the offence of 'tipping off' simply because the broader investigation is already
known to the relevant parties".
- Context of receiving information: An argument was also made at first instance that the information about the investigation into the property purchase was not received by Mr Osmond "in the course of his business in the regulated sector" – rather, he had received information about an already well-known investigation from a prosecuting authority exercising its powers under section 2 of the Criminal Justice Act 1987 ('CJA 1987'). The prosecution's position was that Mr Osmond received the information in the course of his business as a lawyer, being a business in the regulated sector, and asked questions in his capacity as Mr Ramsay's solicitor.
On this point, HHJ Trowler KC made a pre-trial ruling in favour of the prosecution's position. To the question whether the information came to Mr Osmond in the course of a business in the regulated sector, she ruled: "in my view […] the only possible answer to this question is 'yes'."
- Duty of recipient of forged letter: With regards to the forgery offence, Mr Osmond's counsel argued that the engagement letter was not received by the SFO investigator "in connection with his performance of any duty" (a requirement of the offence under section 10 of the F&CA 1981); rather, the SFO had a power to carry out an investigation but no duty to do so. This was rejected by the Judge at first instance on the basis that the SFO investigator had a duty to his employer to carry out the investigation.
In relation to the tipping off offence, the jury were then directed that a tipping off offence will have occurred if the jury was sure that: (i) Mr Osmond disclosed an SFO investigation into the Mayfair property purchase to Mr Ramsay; (ii) the disclosure was likely to prejudice the investigation; (iii) Mr Osmond knew or suspected prejudice was likely to be caused; and (iv) the information related to the disclosure was likely to have the prejudicial effect in question.
The jury convicted Mr Osmond on both counts of tipping off and forgery. He was later sentenced to nine months' imprisonment suspended for 18 months.
Appeal
The application for leave to appeal on Mr Osmond's behalf argued that the following matters for the jury were unfairly narrowed by HHJ Trowler KC:
- The information had come to Mr Osmond from the prosecuting authority – not in the course of a business in the regulated sector. This was contrary to the purpose of Part 7 of POCA 2002, which was intended to criminalise a situation where Mr Osmond himself made a report to a designated authority and thereafter informed Mr Ramsay of his own report.
- It was for the jury to decide what the SFO investigation was and whether the Mayfair property purchase investigation was merely a part of the already well-known ENRC investigation. Had the jury found that the property purchase investigation was part of the wider ENRC investigation, then the jury's decision as to the likelihood of prejudice arising as a result of the investigation would have been different.
Regarding (a), the Court of Appeal found that "there is no reason why an investigation should not be capable of being the subject of a disclosure under section 333A(3) even if that investigation is also an aspect of (or strand within) a wider investigation"; (a) therefore did not give rise to any issue of fact for the jury. Regarding (b), the Court of Appeal found that Mr Osmond was "undoubtedly" a business in the regulated sector and the source of the information given to Mr Osmond was immaterial to the tipping off offence:
"51. The fact that the information about the SFO investigation came from the SFO does not assist the defence. That is precisely what paragraph (c) of subsection (3) is directed towards. Its objective is to prevent a person carrying on business in the regulated sector from tipping off their client that an investigation by the SFO or other agency is under way. The subsection is not concerned with the source of the information (which will typically be the SFO or other investigating agency) but with the capacity in which the defendant receives it."
In relation to the forgery conviction, the Court of Appeal also rejected an argument on Mr Osmond's behalf that it should have been open to the jury to conclude that the SFO investigator was not performing any relevant duty when he received the engagement letter.
Accordingly, the Court refused leave to appeal, but, as the case represented the first occasion the tipping off provisions had been considered by the Court of Appeal, gave leave for the judgment to be cited and reported.
Key observations
The tipping off offence in the regulated sector under s.333A POCA, together with the broader offence of prejudicing a money laundering investigation under s.342 POCA, has long created a difficult tension for professionals who have submitted a Defence Against Money Laundering (DAML) request or Suspicious Activity Report (SAR) and are subsequently unable to explain the resulting delay to their client. The judgment in R v Osmond serves to underscore the importance of the risks associated with disclosure to a client in the context of a potential money laundering investigation.
Although individuals in regulated sectors may take comfort from the finding in the judgment that a tipping off offence may not be committed where the investigation is already in the public domain, this should be approached with caution. The reality of money laundering investigations is that it will seldom be possible for any third party to be confident as to the scope or substance of the investigation, particularly in complex or long-running investigations with multiple strands.
In practice, the safest course remains to assume that any disclosure of an investigation to a client carries a risk of prejudice, however public the wider matter may appear, and to seek advice before communicating with a client whose conduct is under scrutiny.
Contacts
If you have any questions about the UK SAR regime or would like to speak to someone about the Proceeds of Crime Act 2002, please do not hesitate to contact our White Collar Crime & Investigations team.