Speak up or go down

Gavin McCartan is the first solicitor to be jailed by the proceeds of crime legislation. It’s easy to see why the profession might be getting paranoid. Jon Robins reports

As solicitors contemplated the mayhem being wreaked by the anti-money laundering regulations at the recent Law Society conference in Birmingham, a Belfast solicitor spent his first weekend at Maghaberry prison, in County Antrim, on suicide watch. If the legal profession required a more vivid example as to what is at stake for failing to take their reporting requirements seriously, then it would be hard to beat the tale of Gavin David McCartan.

McCartan has the dubious honour of being the first solicitor to be sent down under the proceeds of crime legislation. He is presently being detained at Her Majesty’s pleasure for failing to inform police of suspicions that a client was attempting to launder drugs money. McCartan took a £70,250 cash deposit for the sale of a £105,000 new-build bungalow on behalf of a man called Cecil Walsh. He pleaded guilty for failing to disclose information under the Proceeds of Crime Act (POCA) Northern Ireland 1996 and was sentenced to six months. The court heard that although a mortgage broker had alerted police after alarm bells started to ring over the buyer’s ability to pay cash, his solicitor had failed to raise any concerns.

“It really sends the shivers up one’s spine,” says Uel Crothers, a senior legal assistant at Belfast firm Brangam Bagnall & Co. He was taught by McCartan’s father Fergus McCartan, one of the country’s most respected judges, when he studied at Queen’s University. As a fellow conveyancer he feels sorry for McCartan, who, he believes, fell victim to an unfair rule that imposes “almost a strict liability” on lawyers.

“If you don’t pick something up that you ought to then you are in trouble and then you’re in prison,” Crothers says. “It’s a frightening scenario.” His own firm has a policy of reporting cash transactions of more than £1,000 and he points out that other Belfast firms disclose as little as £150. “The legislation has brought a lot of depression into the profession,” he says. “We’re expected to do a huge amount of work and we have this hanging over our heads. The cloud could burst at any time because, with the best will in the world, you can’t pick up on everything.”

Such sentiments are also commonly voiced this side of the Irish Sea. Two weeks ago, the Law Society of England and Wales launched its long-awaited challenge of the POCA 2002 in the Court of Appeal case of Bowman v Fels. That legislation extended solicitors’ obligations to report suspicions beyond major drug money laundering to potentially any crime. Under POCA, to avoid the risk of prosecution, a lawyer must disclose to the National Criminal Intelligence Service (NCIS) any suspicions that a client’s property may be criminal. It was Dame Elizabeth Butler-Sloss’s ruling last October in P v P that unleashed howls of indignation when she ruled that “an illegally-obtained sum of £10 is no less susceptible to the definition of ‘criminal property’ than a sum of £1m”.

According to Chancery Lane, the new appeal is the first time that POCA Part 7 has been considered by the Court of Appeal. A spokesman says: “One of the issues is the correct interpretation of Dame Butler-Sloss’s comments that, once a report or disclosure has been made to the NCIS, a person must not take any further steps in relation to an ‘arrangement’ until notice of consent, deemed consent under POCA, or refusal of consent is obtained from the NCIS.”

It was Ed Nally, the president of the Law Society, who claimed that the controversial legislation was wreaking “mayhem” by catching every possible crime, irrespective of size. From the City firms that are having to report clients which they suspect may have breached highly technical provisions of company law, to family lawyers grassing up their clients who pay the nanny in cash, to conveyancing solicitors whose curiosities are roused by cash sums far smaller than McCartan’s client.

Nally complains that the necessary implementation of European directives has been “gold-plated” in the UK, making it the harshest regime in the world, including the US. “I would like to see the all-crimes test reviewed,” he says. He also wants to see the Government “acknowledge that legal professional privilege should be cherished and not eroded further in the pursuit of grape-shot legislation”.

While the profession feels pretty hard done by, the facts of McCartan appear to be clear cut. The police later found that his client was not a self-employed car sales man as claimed, but a convicted armed robber on remand. McCartan himself admitted that he had never met him and the cash had been brought in by a third party in a bag.

David Corker, a partner at London criminal defence firm Corker Binning, says: “I don’t have any misgivings, from what I’ve heard about the case, that this wasn’t a proper prosecution. He was caught out rather badly.”

Corker specialises in money laundering cases and acted for Jonathan Duff, the solicitor who was jailed for not reporting suspicious transactions in 2002.

He believes there is plenty of work to be done to allay fears in the profession. “They’re terrified that if they put a foot wrong, the wrath of God will come down upon them,” he says. Failing to report an offence has become “the dominant worry for solicitors”, as opposed to getting involved in laundering, he adds. “The NCIS is, of course, probably quite pleased with the number of reports it’s getting, and is pleased it’s put a bomb under solicitors at long last,” he says. “After many years complaining about lawyers [and their lack of cooperation], it’s getting thousands of reports, which, of course, are virtually all useless.”

While there has been much talk of the upcoming Bowmanappeal being a ‘test case’ intervention, Robin Booth, chairman of the Law Society’s money laundering taskforce and a partner at white-collar crime firm Burton Copeland, resists the tag. The challenge is limited to POCA, Section 328, which makes it an offence for anyone to become involved in an unauthorised arrangement that they know or suspect helps the acquisition, retention, or use or control of criminal property by another person. “If our interpretation is accepted, it will not in any way prejudice the objectives of the money laundering legislation, but it would cut down the number of unnecessary reports and reports made early in litigation,” says Booth, who is also a former head of fraud at the Crown Prosecution Service.

“There’s no doubt that the NCIS is receiving what is frankly a load of useless reports,” he continues. “And that’s a straightforward result of the legislation. You can’t blame people, who’d otherwise be committing a criminal offence – and one that carries 14 years – for making reports.”