Scottish court gives investigators ‘time and space’ in financial crime cases

Alistair Wood of Pinsent Masons said the Sheriff Appeal Court judgment showed the emphasis placed by courts on “allowing law enforcement the time and space to complete their inquiries”. It comes after the Appeal Court unanimously held that Cristian Picco had been validly excluded from a hearing on whether his bank account should remain frozen while investigators probed suspected money laundering.

The court heard that Picco, an Italian chef, first had his TSB account frozen in April 2019, after he received €181,000 from the sale of a property in Italy. TSB reported suspicious activity to the National Crime Agency (NCA), which refused to allow transactions on the account. Under the terms of the 2002 Proceeds of Crime Act (POCA), investigators then had a 31-day moratorium in which to examine the account before it was unfrozen.

In May 2019, the NCA successfully requested an extension to the moratorium at a Sheriff Court hearing that excluded Picco and his legal representatives. While Picco was told that investigators were seeking an extension to the moratorium period, the NCA had refused to provide further details on the material that would be discussed at the hearing. 

At his appeal, Picco maintained that the court had no power to issue a blanket exclusion that prevented him from appearing at any part of the hearing and argued that the wording in the relevant section in POCA on such exclusions was unclear and ambiguous. Picco said that his rights under the European Convention of Human Rights (ECHR) had been infringed and that he was at least entitled to be provided with "the general gist of the allegations against him sufficient to allow him to instruct representation in opposition."

But the court held that the wording of POCA was clear and gave it power to exclude an interested party “from any part of” a hearing, including the whole proceedings if necessary. The sheriffs said that the hearing had been “proportionate in balancing the rights of the appellant and the interests of the state in avoiding money laundering” and had not contravened Picco’s ECHR rights.

The court added that Picco had “sufficient information to understand the gist of what was being investigated”, and that parliament’s aim to support complex investigations of money laundering, where confidentiality is important, justified the exclusion of Picco and his representatives from the hearing.

Wood said: “It might seem unfair for the appellant to have their accounts frozen for such a long period of time and to be unable to contribute to the hearing on the extension of the moratorium period. But the blanket exclusion of the appellant in this case demonstrates the emphasis being placed by the court on protecting confidentiality and allowing law enforcement the time and space to complete their inquiries.”

Andrew Sackey of Pinsent Masons added: “The 2017 Criminal Finances Act introduced section 336B(8) to POCA in order to provide law enforcement agencies with an appropriate amount of time to undertake investigations and to ensure that the proceeds of crime are not dissipated when there is a suspicion that money laundering has taken place.”

“The government has acknowledged in the legislative intention notes for the Criminal Finance Act that there could be concerns about the length of time for which an individual’s property could be withheld from them. But the court’s decision in this case emphasises its willingness to extend the moratorium period if it can be shown that the relevant authorities are progressing matters ‘diligently and expeditiously’,” Sackey added.

The court made it clear that an interested party must be given “satisfactory notice” of an application to exclude them from a hearing, whether in whole or part, so that they can make “meaningful representations” and “appear at a hearing with a view to consideration of whether exclusion should take place for the whole hearing or simply for the part of the hearing where sensitive information was disclosed.”

Wood said: “What amounts to ‘satisfactory notice’ remains to be seen. But at the very least, as in this case, it must include an indication of basis of the allegations. Interestingly the court also took the opportunity to comment on the admitted practice of the prosecuting authorities to routinely seek a blanket exclusion from such hearings, noting that it could ‘see force in the submission that the appellant could have been represented for at least part of the hearing especially to address the sheriff on the question of exclusion.’”

He added: “The case is the first to deal with an appeal under these provisions of POCA and as such there will be a widespread interest. The court’s acceptance that, in effect, the investigators’ ends justified the means on the facts of this case is worth noting, but that acceptance did not take place in a vacuum. The court relied on established principles of interpretation in reaching its conclusions and, crucially, on the obligation on the Crown to demonstrate that its investigation was being carried out diligently and expeditiously. Any delays are likely to make things far more difficult to justify.”