responding to a financial crime investigation - the law society

16/02/2015 Responding to a financial crime investigation The Law Society

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Responding to a financial crimeinvestigation14 March 2013

Legal status

This practice note is the Law Society's view of good practice in this area. It is not legal advice. [Read more]

Practice notes are issued by the Law Society for the use and benefit of its members. They represent the LawSociety's view of good practice in a particular area. They are not intended to be the only standard of good practicethat solicitors can follow. You are not required to follow them, but doing so will make it easier to account to oversightbodies for your actions.

Practice notes are not legal advice, nor do they necessarily provide a defence to complaints of misconduct or ofinadequate professional service. While care has been taken to ensure that they are accurate, up to date and useful,the Law Society will not accept any legal liability in relation to them.

For queries or comments on this practice note contact the Law Society's Practice Advice Service.

Professional conduct

The SRA has published a Handbook, which sets out all the SRA 's regulatory requirements. It outlines the ethicalstandards that the SRA expects of legal practices and practitioners and the outcomes that the SRA expects them toachieve for their clients.

There are ten mandatory principles which apply to all aspects of practice. They can be found in the SRA Handbook.You should always bear in mind the ten principles and use them as your starting point.

Those which are particularly relevant in this context are as follow:

Uphold the rule of law and the proper administration of justice;Act with integrity;Do not allow your independence to be compromised;Comply with your legal and regulatory obligations and deal with your regulators and ombudsmen in an open,timely and cooperative manner; andBehave in a way that maintains the trust the public places in you and in the provision of legal services.

The SRA Handbook includes a Code of Conduct, which replaces the Solicitors' Code of Conduct 2007. The new Codeestablishes outcomes focused conduct requirements and each chapter outlines outcomes and indicative behaviours.

As detailed below, chapter 4 which pertains to client confidentiality and chapter 5 which pertains to your relationshipwith the court are particularly relevant when responding to financial crime investigations.

SRA Principles

There are ten mandatory principles which apply to all those the SRA regulates and to all aspects of practice. Theprinciples can be found in the SRA Handbook.

The principles apply to solicitors or managers of authorised bodies who are practising from an office outside the UK.They also apply if you are a lawyercontrolled body practising from an office outside the UK.

Contents [show]

1 Introduction1.1 Who should read this practice note?1.2 What is the issue?

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2 Ethical obligations on disclosure2.1 General comments2.2 Confidential information2.3 Information subject to legal professional privilege2.4 Express undertakings of confidentiality to the court

3 Discussing law enforcement requests and orders

3.1 General comments3.2 Discussions with law enforcement agencies3.3 Discussions in house and with third parties3.4 Discussions with clients

4 Powers to obtain material without entry

4.1 General comments4.2 Notice to disclose – s61 Serious and Organised Crime and Police Act 2005 (SOCPA)4.3 Notice to disclose – s2 Criminal Justice Act 1987 (CJA)4.4 Production order – s.345 Proceeds of Crime Act 20024.5 Disclosure order – s357 Proceeds of Crime Act 20024.6 Notice to produce– s20 Taxes Management Act 1970 (TMA)4.7 Production order – s20BA Taxes Management Act 19704.8 Production Order Schedule 1 Police and Criminal Evidence Act 1984 (PACE)

5 Powers to enter and obtain material

5.1 General comments5.2 Your rights and responsibilities

6 Maintaining a complete record

6.1 Copying files6.2 Forwarding files to another solicitor6.3 Voluntary return6.4 Application to the court

7 Powers of arrest

7.1 Arrest without a warrant7.2 Arrest with a warrant7.3 Your rights and responsibilities

8 Answering questions and providing statements

8.1 Questions and statements about the client8.2 Questions and statements about your involvement

9 More information

9.1 Law Society products and services9.2 Other

10 Terminology

1 Introduction

1.1 Who should read this practice note?

All solicitors should read this practice note, particularly managing or senior partners, directors of risk, practicemanagers, money laundering reporting officers or staff appointed to respond to enquiries from law enforcement.

1.2 What is the issue?

Solicitors play a key role in facilitating business and financial transactions that underpin the UK economy.

Because of this important role, criminals may target your services to help them commit financial crimes or to launderthe proceeds of those crimes.



As a result, law enforcement may seek access to client files to investigate whether the client, and possibly you or afellow solicitor, have committed a criminal offence.

While you are required to comply with the law, you are also required to keep your client's information confidential.

This practice note aims to provide practical assistance on how to manage these competing obligations and providesa short overview of the main powers available to law enforcement when conducting financial crime investigations.

If you are the subject of a financial crime investigation, or are still unsure of how to appropriately comply with arequest from law enforcement, you should seek legal advice from a specialist criminal law solicitor.

2 Ethical obligations on disclosure

2.1 General comments

As a solicitor you have a duty of confidentiality to your clients, former clients and in some cases, prospective clients.All references in this practice note to clients, will also include former clients, and where relevant, prospective clients.Some of the information you hold will also be subject to legal professional privilege.

This section covers when those professional and legal obligations apply, how those obligations may be overriddenand how to practically manage requests from law enforcement agencies.

2.2 Confidential information

Chapter 4 of the SRA Code of Conduct provides that you must:

keep the affairs of clients confidential unless disclosure is required or permitted by law or the client consents.

Chapter 5 of the SRA Code of Conduct provides that you must:

comply with court orders which place obligations on you.

The obligation of confidentiality extends to all matters revealed to you, from whatever source, by a client, or someoneacting on the client's behalf.

This means that you must not volunteer information about a client to law enforcement agencies, but you must provideinformation where you are required by law or a court order.

If you are approached by a law enforcement agency for information about a client or transaction they areinvestigating, you must ask if you can either:

seek the client's consent to provide the information orbe served with a notice or order requiring disclosure.

The agency may make reference to section 29 of the Data Protection Act, which provides that you will not be inbreach of that Act when providing information for the purposes of the prevention, detection or investigation of crime.

However this section does not override your obligation of confidentiality under the SRA Code of Conduct.

2.3 Information subject to legal professional privilege

2.3.1 What is legal professional privilege?

Legal professional privilege (LPP) is a privilege against disclosure, ensuring clients know that certain documents andinformation cannot be disclosed at all. It recognises the client's fundamental human right to be candid with his legaladviser, without fear of later disclosure to his prejudice.

LPP does not extend to all information that lawyers have a duty to keep confidential. LPP only protects thosecommunications falling under either of the two heads of privilege – advice privilege or litigation privilege. LPP onlyapplies to information held by solicitors and their employees, barristers and inhouse lawyers.

Part 7 of the Proceeds of Crime Act 2002 (POCA) introduces the concept of privileged circumstances, which extendsto tax advisors, auditors and accountants, as well as independent legal advisors where they act in the regulated



sector for the purposes of antimoney laundering laws (‘relevant professionals'). Privileged circumstances mayprovide an exemption from the requirement to make a disclosure under POCA, but this exemption does not provideany protection for the purposes of responding to the orders and notices covered by this practice note.

Read more about privileged circumstances in the Law Society's antimoney laundering practice note.

2.3.2 Advice privilege

Communications between a lawyers, acting in his capacity as a lawyer, and a client, are privileged if they are both:

confidential, andfor the purposes of seeking legal advice from a solicitor or providing it to a client

Communications are not privileged merely because a client is speaking or writing to you. The protection applies onlyto those communications which directly seek or provide advice or which are given in a legal context, that involve thelawyer using his legal skills and which are directly related to the performance of the lawyer's professional duties.[Passmore on Privilege 2 nd edition 2006]

All communications between a lawyer and his client relating to a transaction in which the lawyer has been instructedfor the purpose of obtaining legal advice are covered by advice privilege, not withstanding that they do not containadvice on matters of law and construction, provided that they are directly related to the performance by the solicitorof his professional duty as legal adviser of his client. [Three Rivers District Council and others v the Bank of England[2004] UKHL 48 at 111]

This will mean that where you are providing legal advice in a transactional matter (such as a conveyance) the adviceprivilege will cover all:

communications with,instructions from, andadvice given tothe client, including any working papers and drafts prepared, as long as they are directly related to yourperformance of your professional duties as a legal adviser.

Case law helps further define what advice privilege covers.

Communications subject to advice privilege include:

A solicitor's bill of costs and statement of account [Chant v Brown (1852) 9 Hare 790]Information imparted by prospective clients in advance of a retainer will attract LPP if the communicationswere made for the purpose of indicating the advice required [Minster v Priest [1930] AC 588 per Lord Atkin at584]

Communications not subject to advice privilege:

notes of open court proceedings [ Parry v News Group Newspapers (1990) 140 New Law Journal 1719 ] are notprivileged, as the content of the communication is not confidential.conversations, correspondence or meetings with opposing lawyers [ Parry v News Group Newspapers (1990)140 New Law Journal 1719 ] are not privileged, as the content of the communication is not confidential.a client account ledger maintained in relation to the client's money [ Nationwide Building Society v VariousSolicitors [1999]P.N.L.R. 53. ]an appointments diary or time record on an attendance note, time sheet or fee record relating to a client [ R vManchester Crown Court, ex p. Rogers [1999] 1 W.L.R. 832 ]http://www.bailii.org/ew/cases/EWHC/Admin/1999/94.htmlconveyancing documents are not communication so not subject to advice privilege [ R v Inner London CrownCourt ex p. Baines & Baines [1988] QB 579 ]

2.3.3 Litigation privilege

This privilege, which is wider than advice privilege, protects confidential communications made after litigation hasstarted, or is reasonably in prospect, between either:

a lawyer and a clienta lawyer and an agent, whether or not that agent is a lawyera lawyer and a third party

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These communications must be for the sole or dominant purpose of litigation, either:

for seeking or giving advice in relation to itfor obtaining evidence to be used in itfor obtaining information leading to obtaining such evidence

2.3.4 Crime/fraud exception

LPP protects advice you give to a client on avoiding committing a crime [ Bullivant v AttGen of Victoria [1901]AC196 ] or warning them that proposed actions could attract prosecution [ Butler v Board of Trade [1971] Ch 680 ]. LPPdoes not extend to documents which themselves form part of a criminal or fraudulent act, or communications whichtake place in order to obtain advice with the intention of carrying out an offence [ R v Cox & Railton (1884) 14 QBD153 ]. It is irrelevant whether or not you are aware that you are being used for that purpose [Banque Keyser Ullman vSkandia [1986] 1 Lloyds Rep 336 ].

It is not just your client's intention which is relevant for the purpose of ascertaining whether information wascommunicated for the furtherance of a criminal purpose. It is also sufficient that a third party intends the lawyer/clientcommunication to be made with that purpose (eg where the innocent client is being used by a third party) [ R vCentral Criminal Court ex p Francis & Francis [1989] 1 AC 346].

If you know the transaction you're working on is a criminal offence, you risk committing anoffence yourself. In these circumstances, communications relating to such a transaction are notprivileged and should be disclosed.

If you merely suspect a transaction might constitute a money laundering or other offence, the position is morecomplex. If the suspicions are correct, communications with the client are not privileged. If the suspicions areunfounded, the communications should remain privileged and are therefore nondisclosable.

If you suspect you are unwittingly being involved by your client in a fraud, the courts require prima facie evidencebefore LPP can be displaced [ O'Rourke v Darbishire [1920] AC 581 ]. The sufficiency of that evidence depends onthe circumstances: it is easier to infer a prima facie case where there is substantial material available to support aninference of fraud. While you may decide yourself if prima facie evidence exists, you may also ask the court fordirections [ Finers v Miro [1991] 1 W.L.R. 35 ].

2.3.5 Can privileged material ever be requested?

LPP information can be disclosed if:

the client consents or has waived privilege;the crime/fraud exception applies; orit is inextricably linked to seizable material.The power to request or seize documents does not extend to material that is subject to LPP and this shouldbe stated on the face of the relevant notice or order.If the order is silent, you should comply with the order on the basis that LPP material is not included, but raisethis with the investigating officer.If the court is satisfied that either the crime/fraud exception applies this should be recorded on the face of thewarrant.

If LPP material is inextricably linked to seizable material and it is not reasonably practicable to separate it out,investigating officers may seize and retain all of the material to examine it elsewhere. However, the use of this poweris subject to the provisions in the Criminal Justice and Police Act 2001, which, among other things, give you the rightto be present at a review of the material and apply to a judge for the material to be returned.

For example: investigating officers may retain a whole computer hard drive that contains a document which isevidence of an offence, if the rest of the hard drive is needed to prove when that document was created, amended ordeleted.

Finally, parliament can override LPP in statute, by the use of express words or necessary implication. Parliament hasnot decided to adopt this course with any of the powers considered in this note.

If the law enforcement agency claims that the statute they are acting under entitles them to LPP material:

this should be expressly stated on the face of the notice and the order, and

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the agency must be able to identify the relevant statutory provision to you.

2.3.6 What happens if there is a dispute over privileged material?

There may be occasions where you believe that certain material is subject to LPP and the law enforcement agencydisagrees. Different approaches to managing this dispute may be more appropriate depending on the circumstances.

Client consent

Legal professional privilege belongs to the client, not to the lawyer, so the client can always consent to privilegebeing waived. However there are issues to consider about whether it is appropriate to discuss a notice or order withthe client. (see speaking with clients for more information)

If LPP material is provided to a law enforcement agency without the client's consent, the client can challenge the useof that material in any subsequent trial, bring an abuse of process application against the agency and either make aregulatory complaint or take civil action against you as the solicitor.

Notice to produce

If you have been served with a notice or order to produce information where:

the court has not indicated that they are satisfied that the crime/fraud exception does not apply, andthe investigating officer believes that none of the information on the file would be LPP material or that theyshould have access to the LPP material,

the investigating officer may either:

ask that you provide the material to an independent counsel to determine whether it is covered by LPP, orobtain a further order to specifically state that the crime/fraud exception applies to material in this case.

You may also suggest that the material is reviewed by independent counsel in event of a disagreement.

You will not be in breach of your confidentiality obligations or of LPP if you voluntarily agree to have independentcounsel review the material.

If independent counsel is used, the costs will usually be shared between law enforcement and the legal practice.

If you disagree with independent counsel as to whether LPP applies to particular material, you may have to apply tothe court for return of the material to resolve the issue.

If a further order is obtained, you should be given the opportunity to attend and make representations to the court.

If the law enforcement agency maintains that they should be given access to all the LPP material and has failed toensure that this was included on the face of the order, you should not have to bear the costs for the application torectify this.

However, if the application relates to whether a specific document is privileged or not, the agency may seek costsagainst you for the application, especially if you declined the opportunity to have independent counsel review thematerial.

Search warrants

If material is seized pursuant to a warrant, investigating officers may instruct independent counsel to be availableduring a search to provide an opinion on whether a document is subject to LPP.

Independent counsel must not actively participate in the search or arbitrate disputes over matters such as the scopeof the warrant or what material should be provided. Their role is limited to providing an opinion, when requested by theinvestigating agency that has instructed them, on whether material is or may be subject to LPP. This process wasapproved by the court in R v HMCE, ex parte Popely & Anr [ 1999] STC 1016.

The law enforcement agency bears the cost of instructing counsel.

Where there is a dispute about LPP that is not resolved during the search, the material will be placed in a blue plasticbag and sealed. This process may be useful where:

independent counsel is in attendance during the search and you disagree with their view on LPPindependent counsel is not in attendance and there is a dispute about whether a document is subject to LPP,



orLPP material is inextricably linked to nonprivileged material.

The material will be taken by the agency and will remain sealed until the dispute is resolved, or in the case ofinextricably linked material, until it can be separated by independent counsel.

You have the right to be present at the review of the material and apply to a judge for the material to be returned.

If LPP material is inadvertently seized during a search, it must be returned as soon as reasonably practicable. If youbelieve this has occurred, you should raise this with the investigating officer initially, although if this is disputed, youmay need to initiate court proceedings for its return.

Where an application to the court is made, the investigating officers in possession of the material have a dutypursuant to the Criminal Justice and Police Act 2001 to secure it pending the outcome of the application. This dutywill arise whenever it is claimed that seized material contains material protected by LPP and means that the seizedmaterial can't be copied, examined or otherwise used without the applicant's consent or without directions from thecourt.

2.4 Express undertakings of confidentiality to the court

If you have been involved in acting for clients in litigation, you may have received documents on disclosure in thoseproceedings, which are subject to an express undertaking to the court not to use those documents other than forthose civil proceedings.

An order obtained by a law enforcement agency from a criminal court does not override your obligation to the civilcourt.

You should consider seeking legal advice on your obligations in such circumstances and on the appropriateness ofmaking an application to the relevant civil court to discharge you from the undertaking for the purpose of complyingwith the criminal court order.

3 Discussing law enforcement requests and orders


In addition to meeting your obligations of confidentiality, there may be a number of other restrictions on your ability todiscuss the law enforcement investigation with others.

You should have clear processes in place for managing requests from law enforcement agencies, dealing with clientswho are the subject of investigations and liaising with relevant third parties.

You should look at any court order or notice you are given to see whether there is a ‘nondisclosure' provision. Youmust comply with such a provision.

You should consider whether any discussion you are about to have regarding the order or notice is likely to prejudicea confiscation, civil recovery or money laundering investigation, contrary to section 342 of the Proceeds of Crime Act2002.

You should document all such discussions in a file held separately to the main client file.

3.2 Discussions with law enforcement agencies

You should ensure that all staff are aware of who in the office is responsible for receiving and responding to requestsfrom law enforcement agencies. Staff should direct all queries to that person immediately, rather than engage in anydiscussions with the agencies themselves.

3.2.1 Preorder enquiries

It is not unusual for a law enforcement agency to contact legal practices in order to discuss whether they hold fileswhich are relevant to an investigation and the likely timeframes for complying with any notice or order.

This presents a challenge for legal practices, who will want to ensure that time frames included within initial notices or



orders are realistic, but who must keep their client's details confidential.

Where the client is aware that they are the subject of an investigation and has specifically instructed you to interactwith the law enforcement agency on their behalf, you should have discussions with the agency within the remit ofyour instructions.

In all other cases you should advise the investigator that:

you are professionally prevented from confirming or denying that you act for the client (unless this is already amatter of public record) and that you cannot provide them with any details without a relevant notice or order;if an order is sought and there are relevant files held in your office, you should be able to comply with the orderwithin the standard seven day period (or suggest a longer period if you think the files are likely to be extremelyvoluminous); andif relevant files are archived, it will take you an additional X working days to obtain such files.

You should provide the investigator with the name of the person to whom any notice or order is to be addressed.

You may ask the investigator whether, if the person under investigation is your client, they would object to youseeking consent from that person to provide the information. However, this discussion is likely to be morestraightforward once you are actually in receipt of the order.

3.2.2 Discussions after receiving an order

Even once an order is provided, confidentiality will still apply to information held outside of the scope of the order andyou should be careful about volunteering your opinions about your client's conduct or the facts of the case, especiallywithout specific instructions from the client.

For more information see section 8 Answering questions and making statements.

3.2.3 Making a suspicious activity report

A law enforcement agency cannot transfer to you their suspicion that a client is involved in money laundering.

However, once they have advised you that they are investigating a client for a criminal offence where there is abenefit accruing to the client, you have a warning sign that a client may be involved in money laundering.

The money laundering reporting officer (MLRO) at your practice should review the files you hold on the client toassess whether they now have a suspicion of money laundering.

Once an order is served, you should bear in mind that the threshold required by law enforcement agencies to obtain acourt order or warrant is higher than that required for a report on money laundering.

However, there may be reasons why your MLRO would still not submit a suspicious activity report at this stage, suchas information on the file which demonstrates that the client's funds are from a legitimate source.

Even if you decide you now have a relevant suspicion, you should carefully consider the issue of privilege and whatinformation is able to be provided within any suspicious activity report.

3.3 Discussions in house and with third parties

3.3.1 Discussions within the legal practice

You should restrict access to information regarding law enforcement investigations to those staff who need to beinvolved.

You should ensure that the compliance officer for legal practice (COLP) is aware of the investigation.

You may seek advice from others in the legal practice who specialise in criminal law, legal professional privilege orother relevant areas, to assist in complying with any notices, orders or warrants.

Depending on the facts of the situation you may discuss the matter with senior management, marketing and/or HR toensure the legal practice is able to appropriately deal with any reputational or internal disciplinary matters that arise.



3.3.2 Discussions with the Law Society or the SRA

You may contact the Law Society's Practice Advice Service to seek advice on this or other related practice notes.

You may contact the SRA Ethics Helpline to seek advice on your ethical obligations.

In both cases, you should not provide details which identify the client or send a copy of the relevant notice or order.

3.3.3 Discussions with lawyers

You may seek legal advice from a specialist criminal law solicitor on how to:

comply with any notices or orders,respond to the investigation, andmanage your relationship with your client.

The Law Society's Find A Solicitor Service can assist you in locating an appropriate specialist.

3.3.4 Discussions with insurers

You should consider whether the police investigation is a notifiable incident for the purposes of your professionalindemnity insurance coverage. If it is, you should consider carefully how to provide the relevant information to yourinsurer so that it is treated with appropriate confidentiality.

3.4 Discussions with clients

3.4.1 Deciding whether to discuss orders with clients

You should consider who in the firm will engage with the client in relation to their ongoing retainer and, if appropriate,the investigation.

Under Outcome 4.2 of the Code of Conduct you must:

make the client aware of all information material to that retainer of which the individual has personalknowledge.

When a law enforcement agency is engaged in the covert part of an investigation, they will generally not want theclient to be aware of the investigation.

However, a simple request from an investigator or a letter marked confidential is not, of itself, enough to override yourduty of disclosure to the client.

As outlined at 3.1 above, you will be precluded from having discussions with your client if:

the order, notice or warrant specifically prohibits disclosure, orthere is a specific provision in the legislation which creates an offence, such as s342 of the Proceeds of CrimeAct.

You should carefully consider the wording of any specific provisions.

Generally to commit such an offence you would have to know or suspect that your disclosure is likely to prejudice aninvestigation of the relevant type. While there may be an exemption for providing legal advice, that exemption will notapply if your advice is furthering a fraud or criminal purpose.

The views of the investigator will be relevant as to whether you are likely to prejudice the investigation, but they arenot determinative. You should consider obtaining specialist legal advice before having discussions with the client.

If you decide that you are precluded from discussing the police investigation with the client, you should considerwhether this now puts you in a position of conflict and whether you should terminate your retainer with the client. Youshould still make assertions of privilege where necessary over information held in relation to the client and continue torespect their confidentiality.



3.4.2 Providing legal advice

Where it is appropriate to have discussions with the client, you should explain

the law enforcement request or order to them and your obligations to comply andthat it is a criminal offence for them to destroy evidence or seek to intimidate witnesses.

You should consider whether the serving of the order on you and the possibility that you may be a witness againstyour client now means that a conflict exists such that you cannot continue to represent the client.

You should consider encouraging them to seek independent legal advice on the investigation, including on issuesaround waiving privilege and providing information in the absence of an order.

3.4.3 Charging for compliance with an order

Compliance with a notice, order or search warrant may in some cases take a significant amount of time andresources.

Who bears that cost may depend on the terms of your engagement letter, especially where you cannot discuss theexistence of the notice or order with the client.

Firms should consider including within their terms of engagement a provision which states that the firm will charge theclient for responding to all lawful notices and orders from law enforcement agencies relating to this retainer. Theprovision should also note that the firm may not be able to discuss their compliance with the notice or order with theclient.

If you have not included such a term in your terms of engagement and you are unable to discuss the order with theclient to seek their instructions to comply with the order, you will not be able to pass the costs of compliance on tothem.

Where there is a risk of prejudicing an investigation, careful consideration should be given to how the charge on thebill is worded so as not to alert the client to the existence of the order.

4 Powers to obtain material without entry


There are a number of powers allowing investigating officers to request documents and other information in relation toan investigation.

Generally these powers allow investigating officers to issue notices or apply for court orders which require you to:

produce documents and/ordisclose information, including answering questions.

In most cases, the notice or order will:

be applied for without notice, although investigating officers may make some preorder enquiriesnot cover LPP materialneed to be complied with in seven days.

The main notices and orders used in financial crime investigations are:

Notice to disclose – s61 Serious and Organise Crime and Police Act 2005Notice to disclose – s2 Criminal Justice Act 1987Production order – s345 Proceeds of Crime Act 2002Disclosure order – s357 Proceeds of Crime Act 2002Notice to produce – s20 Taxes Management Act 1970Production order – s20BA Taxes Management Act 1970Production order – Schedule 1 Police and Criminal Evidence Act 1984

Each is discussed in more detail below.

When you receive a notice or order to provide information to law enforcement you should check the following:



What statutory provision is the notice or order issued under?What does the notice or order require you to do?You should ensure that the notice or order is specific about what is being asked for. If the notice or order isdrafted too widely, this could be grounds for quashing it. [Gittins v Central Criminal Court [2011] EWHC 131(Admin); PowerHynes v Norwich Magistrates Court and the Chief Constable of Norfolk [2009] EWHC 1512(Admin)]When do you need to comply by?Is LPP material covered?

4.2 Notice to disclose – s61 Serious and Organised Crime and Police Act2005 (SOCPA)

4.2.1 Key features

A notice to disclose under s61 of SOCPA may be issued where the investigating authority:

has reasonable grounds for suspecting that a relevant offence is being committed,knows the person to whom it is directed has information, andhas reasonable grounds for suspecting that information is likely to be of substantial value to the investigation.

The relevant offences include: bribery, POCA lifestyle offences, terrorism offences and certain tax offences.

The notice will require a person to answer questions, provide information or produce documents to a constable,Serious Organised Crime Agency (SOCA) officer or HM Revenue & Customs (HMRC) officer.

Once those documents are produced, the investigating authority may:

take copies or extracts from those documentsrequire you to provide an explanation of them

If you cannot produce the documents, the investigating authority may require you to state, to the best of yourknowledge and belief, where they are.

LPP material is not able to be requested by the notice to disclose, however as a solicitor you may specifically berequired to give the name and address of your client.

4.2.2 Who can use this power?

A notice to disclose may be issued by the:

director of public prosecutions (or delegated staff)Lord Advocate (or delegated staff from the Procurator Fiscal)director of public prosecutions for Northern Ireland (or delegated staff)

4.2.3 Notice

As this is not a court order, the decision to issue the notice to disclose is made without notice to the person requiredto disclose the information.

4.2.4 Time frames

The notice to disclose will contain information on how to provide the information requested and by when.

4.2.5 What happens if I don't comply?

If you fail to comply, the investigator can obtain a warrant to enter and seize the relevant material.

4.2.6 Can I challenge the notice?

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The process for challenging the notice is judicial review.

4.3 Notice to disclose – s2 Criminal Justice Act 1987 (CJA)

4.3.1 Key features

A notice to disclose under s2 of the CJA may be issued if the Serious Fraud Office (SFO) has reasonable grounds forsuspecting that an offence involving serious or complex fraud has been committed.

The notice to disclose will require you to produce specified documents that appear to be relevant to an investigation.

Once those documents are produced, the SFO may:

take copies or extracts from those documentsrequire you provide an explanation of them

If you cannot produce the documents, the SFO may require you to state, to the best of your knowledge and belief,where they are.

LPP material is not able to be requested by the notice to disclose, however as a solicitor you may specifically berequired to give the name and address of your client.

The notice to disclose may also allow the SFO to ask you to answer questions or provide information on any matterrelevant to an investigation.


A notice to disclose may be issued by the Director of the SFO and any investigator authorised by him to exercisethese powers on his behalf.

4.3.3 Notice

As this is not a court order, the decision to issue the notice to disclose is made without notice to the person requiredto disclose the information.

4.3.4 Time frames

The notice to disclose will contain information on how to provide the information requested and by when.


If you do not comply with a section 2 notice the SFO may apply for a search and seizure warrant using section 2(5)of the Criminal Justice Act 1987.

You may be prosecuted if you:fail to comply with a section 2 notice,give false or misleading information (either knowingly or recklessly), or,falsify, conceal, destroy or dispose of documents that would be relevant to an investigation.

If convicted you may be fined or sentenced to a term of imprisonment.


The process for challenging this notice is judicial review.

4.4 Production order – s.345 Proceeds of Crime Act 2002

4.4.1 Key features



A production order may be granted as part of a confiscation, money laundering or civil recovery investigation.

A production order requires you to give specified material to an investigating officer to take away, or to give aninvestigating officer access to that material.

If the information specified in the order is stored on a computer, you must produce the information or give access to itso that it is visible and legible (eg print the information). Costs cannot be claimed for doing this.

Once the information has been produced, it may be retained as long as is necessary, or (if the material is needed forlegal proceedings and would otherwise be unavailable) until those proceedings are concluded.

A production order cannot require you to produce, or grant access to, LPP or excluded material.

A production order may be used in conjunction with an order to grant entry under s347 of the Proceeds of Crime Act2002.


Section 378 of POCA sets out who is an appropriate officer for each type of investigation.

In relation to a confiscation investigation, any of the following may apply for a production order:

an accredited financial investigatora police constablean officer of HMRCSOCA

In relation to a money laundering investigation, the following may apply for a production order:

an accredited financial investigatora police constablean officer of HMRC

In relation to a civil recovery investigation, the following many apply for a production order:

SOCAthe director of public prosecutionsthe director of the Serious Fraud Office, his staff, andaccredited financial i nvestigators employed by the SFO.

4.4.3 Notice

Production orders will normally be applied for without notice, although preorder enquiries may be made.

4.4.4 Time frames

The time limit for complying with production orders is usually seven days, unless the judge granting the orderspecifies a longer or shorter period for compliance.


Failure to comply with a production order may result in proceedings against you for contempt of court and could leadto a fine, prison sentence or sequestration of assets.

If you do not comply with a production order, an appropriate officer may also apply for a search and seizure warrantunder section 352(6) of POCA.


You may apply to the court to have the order varied or discharged if it relates to either aconfiscation ormoneylaundering investigation.



You cannot apply if it relates to a civil recovery investigation.

The order can be varied on several grounds, such as inadequate description of the material sought, seeking accessto unauthorised material (such as LPP material) or not identifying the correct client.

4.5 Disclosure order – s357 Proceeds of Crime Act 2002

4.5.1 Key features

A disclosure order may be made during confiscation, civil recovery and exploitation or proceeds investigations.

A disclosure order may require you to do any of the following:

answer questions at a specified time and placeprovide specified information in a time and manner specifiedproduce documents in a specified manner and within a specified time.

A disclosure order can only be made if there are reasonable grounds for believing that the information provided will beof substantial value to an investigation and that it is in the public interest for the information to be given.

A disclosure order cannot require you to provide any answers, information or documents that would be subject toLPP. However, you may be required to provide confidential information, such as the name and address of your client.


The following people may apply for a disclosure order:

the director of SOCAthe director of public prosecutionsthe director of public prosecutions for Northern Irelandthe director of the Serious Fraud Officethe director of Revenue & Customsthe director of Revenue & Customs prosecutions for Northern Ireland

4.5.3 Notice

A disclosure order may be applied for without notice or on notice.

Where it is applied for on notice, you may attend the court and make representations about the appropriateness ofissuing the order or about the content of the order.

4.5.4 Time frames

The investigating officer will set the time limit for compliance with a disclosure order. You may request more time tocomply with a requirement in a disclosure order.

The circumstances in which an extension will be granted will vary from case to case, but may include:

the need to obtain professional advicedifficulty in obtaining the required information or documentsan interviewee's availability

For further information on when an extension will be granted see the Attorney General's guidance (PDF)


If you do not comply with a disclosure order, an appropriate officer may also apply for a search and seizure warrantunder s352 of the Proceeds of Crime Act 2002.

If you do not comply with a disclosure order or knowingly or recklessly make a misleading statement in response tosuch an order, then you commit an offence under section 359 of POCA.

http://www.attorneygeneral.gov.uk/SiteCollectionDocuments/Code%20of%20Practice%20Issued%20Under%20Section%20377A%20of%20the%20Proceeds%20of%20Crime%20Act%202002.pdf



Noncompliance with a disclosure order can lead to up to six months' imprisonment or a £5000 fine.

Knowingly or recklessly making a false or misleading statement can lead to two years' imprisonment and an unlimitedfine.


You may apply to the court to have the order varied or discharged if it relates to either a:

confiscation ormoney laundering investigation

You cannot apply if it relates to a civil recovery investigation.

The order can be varied on several grounds, such as inadequate description of the material sought, seeking accessto unauthorised material (such as LPP material) or not identifying the correct client.

4.6 Notice to produce– s20 Taxes Management Act 1970 (TMA)

4.6.1 Key features

A notice to produce issued under s20 of TMA (as amended by the Finance Act 2008) will require you to provideinformation or produce documents in order to investigate the tax position of another person. 'Documents' includeselectronic records.

You may produce a copy of the document requested unless you are asked to produce the original document. HMRCofficers may copy or make extracts from the documents. They may also remove and retain the document for areasonable period where necessary.

HMRC cannot require you to produce any information that is subject to LPP.

HMRC has issued guidance on the use of these powers in its compliance handbook.


Inspectors and officers of HMRC.

4.6.3 Notice

As this is not a court order, the decision to issue the notice to produce is made without notice to the person requiredto produce the information.

4.6.4 Time frames

The time frame for complying will be specified in the notice.


If you fail to comply with an information notice without a reasonable excuse, you may be liable to a £300 penalty plusdaily penalties of up to £60 a day if the failure continues.

Failure to comply includes concealing, destroying, disposing of a document after an information notice has beenreceived or after being given informal notification that a document is required. Concealing, destroying or disposing ofa document following an information notice is an offence and may lead to a fine or imprisonment.

If you are given a penalty, you may appeal to the First Tier Tribunal against the decision to impose a penalty or theamount of the penalty. If you appeal, you must give written notice of your intention to do so to HMRC within 30 daysof the penalty being imposed and state your grounds for appeal.

http://www.hmrc.gov.uk/manuals/chmanual/CH20000.htm




If you are given an information notice, you may appeal against the notice itself or any requirement in the notice if itwould be unduly onerous to comply with it. Appeals must be made to the First Tier Tribunal.

However, you may not appeal if the notice relates to statutory records or if the notice was approved by the First TierTribunal.

You must give written notice of your appeal to the HMRC officer who gave you the information notice within 30 daysof the date on which it was given to you, stating your grounds for appeal. The First Tier Tribunal may confirm, vary orset aside the information notice or a requirement within it.

4.7 Production order – s20BA Taxes Management Act 1970

4.7.1 Key features

A circuit judge may issue an order under s20BA of TMA requiring you to deliver documents to HMRC if there arereasonable grounds for suspecting serious tax fraud has occurred. The documents are limited to those which mayprovide evidence of the fraud.


Authorised officers of HMRC.

4.7.3 Notice

You must be given written notice of HMRC's intention to apply for such an order. This notice must be given to you noless than five working days before the hearing of the application.

You are entitled to appear and be heard at the hearing of the application unless the judge is satisfied that this wouldprejudice the investigation.

The notice must specify:

the date, time and place for hearing the applicationthe documents which are the subject of the applicationa description of the suspected offence to which the application relatesthe name of the person suspected of the offence.

If you are given notice of HMRC's intention to apply for an order, you must not conceal, destroy, alter or dispose ofany document to which the application relates without permission from the judge or written permission from HMRC.

You are permitted to discuss the fact of the application with your client, for the purpose of providing legal advice.

4.7.4 Time frames

You will generally have 10 working days from the date the order is served on you to comply, unless the orderspecifies a longer or shorter period.


If you do not comply with an order to deliver documents, you may be prosecuted for contempt of court.


The process for challenging the order is judicial review.

4.8 Production Order Schedule 1 Police and Criminal Evidence Act 1984



(PACE)

4.8.1 Key Features

A judge may issue an order under Schedule 1 of PACE 1984 requiring you to produce special procedure material if heis satisfied that the documents are likely to be relevant evidence or of substantial value to an investigation into anoffence.

Special procedure material is defined by section 14 of PACE 1984. It includes:

material acquired or created in the course of any trade, business, profession or other occupation for thepurpose of any paid or unpaid office which is held:subject an express or implied undertaking to hold it in confidence, orsubject to a restriction or obligation such as those mentioned in section 11 (2)(b) for example a legislativeobligation of secrecy.journalistic material that is not excluded material under section 11.

Special procedure does not include material that is subject to legal professional privilege or excluded material.


Police constablesSOCA staff that are authorised under section 43 of SOCPA 2005

4.8.3 Notice

You will be given notice of an application for a Schedule 1 order and the application will be inter partes.

Once you have received notice of an application, you must not destroy, conceal, alter or dispose of the material thatthe application relates to without a leave from a judge or written permission from a constable.

4.8.4 Time frames

The time frame for complying with a Schedule 1 order is usually seven days from the date of the order, unless theorder specifies otherwise.


If you do not comply with a Schedule 1 order, a judge may issue a search warrant authorising a police constable tofind and seize the material. You may be prosecuted for contempt of court.


The process for challenging the order is judicial review.

5 Powers to enter and obtain material


There are a number of powers allowing investigating officers to obtain orders or warrants to enter premises in order tosearch for and/or seize material that is relevant to an investigation or evidence of an offence.

The main orders and warrants used in financial crime investigations are:

Entry order – s347 Proceeds of Crime Act 2002Magistrates' Warrant – s8 Police and Criminal Evidence Act 1984Search and Seizure Warrant – s66 Serious and Organised Crime and Police Act 2005



Search and Seizure Warrant – s352 Proceeds of Crime Act 2002Search and Seizure Warrant – s2 Criminal Justice Act 1987Search and Seizure Warrant – schedule 5 Terrorism Act 2000Search and Seizure Warrant schedule 1 PACE 1984

Where one of these powers is used, it will either be because you have failed to comply with an earlier notice or order,or the law enforcement agency concerned has reasonable grounds to suspect that you are complicit in the criminalactivity.

In such circumstances you need independent specialist legal advice.

For this reason the practice note does not discuss the different powers in detail, but outlines your general rights andresponsibilities should an entry order or warrant be executed against your office or home.

There is detailed advice for law enforcement on conducting searches in the PACE Code of Practice B which can beobtained from the Home Office website.

5.2 Your rights and responsibilities

The legal practice should identify senior staff who will be responsible for liaising with law enforcement officers in theevent of a search.

Reception staff should be aware of who those staff members are and upon being shown an order by the investigatingofficers, should contact the relevant staff members.

The following advice in 5.2.1 – 5.2.3 is directed at the staff members who are responsible for liaising with lawenforcement during the search.

Initial entry

When a law enforcement officer seeks entry to your office you should be polite and cooperate within the parametersof the requirements. Anything you say or do not say to the officers may be used in later court proceedings.

You should check the order or warrant for the following:

the statutory power that the order or warrant is issued underthe date of issuethe premises to be searchedwho may enter the premises, for example if the SRA is to accompany law enforcement during the search, therelevant SRA staff should be named on the order or warrantwhat material is covered by the warrantwhether material subject to LPP is covered.

If you are satisfied that the warrant gives the investigating officer the power to enter and search the premises, youshould not obstruct the investigating officers in their search or prevent access to material.

If the above is not satisfactory (for example if the warrant schedule of documents to be searched for has beendetached from the copy of the warrant provided to occupier), the search is unlawful and there is no right for theofficers to retain anything seized.

You should then make representations to that effect and make sure that they are recorded pending any later courtapplication. If you have any concerns about the warrant, raise it with the officers and document it.

Legal representation

You should ask the officers whether they will wait for your lawyers to arrive.

The officers are not legally obliged to wait, but may do so, if you can provide a timeframe and waiting will notunreasonably delay the search.

If the investigating officers want to ask questions of staff, you should establish the basis on which they propose toask questions. During the search this should be restricted to questions to assist in complying with the terms of thewarrant or order, such as identifying where relevant material is kept.

http://www.homeoffice.gov.uk/publications/police/operational-policing/pace-codes/



Any other questioning of staff should be done in the presence of the legal practice's lawyers. See section 8 for moredetails.

During the search

You should ask the investigating officers what they are looking for and, where possible, decide together theprocesses by which the search will take place.

You should consider taking steps to have clients leave the office and to cancel other appointments during theexpected duration of the search.

You should email all staff to inform them of the search and advise them of the need to cooperate with theinvestigation and to not destroy any documentation.

You should allocate a number of senior staff members to shadow the investigating officers, to ensure that theinvestigation is carried out lawfully and to take a record of documents / articles seized.

A lawful investigation requires that the premises be searched only to the extent required for the purpose for which thewarrant was issued.

This means that a search cannot be made in places where the documents/articles specified in the warrant could notpossibly be found or for longer than necessary to find them.

A senior member of staff can direct officers to where documents/articles listed in the warrant are kept and direct themaway from irrelevant rooms or privileged material.

Senior members of staff can ensure that the search is being carried out with minimal disturbance to the premises andonly reasonable force is used if necessary, for example, to open locked filing cabinets.

You should keep a written record of:

all the officers' requests and questionsany answers provided andany documents/articles seized or copied.

If you believe a document is privileged, you should make the investigation officer aware of this and, in case of adispute, use the blue bag process detailed in section 2.3.5.

6 Maintaining a complete record

6.1 Copying files

Seizure and retention of documents and other material by investigating officers can pose significant problems forsolicitors.

It may prevent you from maintaining a complete client file, or in the case of computers being seized, from runningyour office in the intervening period.

It also could lead to difficulties if you are required to account for your actions to your regulator or others in the futureand you no longer have the information you need to defend yourself.

You should make copies and keep records of any files or documents that have been disclosed following receipt of anotice or order to produce.

When documents are seized following a search, the investigating officers must make a detailed record of the search,including a list of documents/articles seized, upon return to the police station. The officers must provide the firm thislist upon request.

Should the documents/articles be retained, you have the right to request a record of those seized which must then beprovided within a reasonable time frame.

You also have a right to access the documents/articles seized and/or to photographs or photocopies of thosedocuments/articles.

Additionally, the officers must only retain an original document/article when a photograph or copy is not sufficient.



After the investigation, you should collate copies of all documents/articles seized and provide this to the legalpractice's lawyers for review who will begin to assess the strength of the allegations.

6.2 Forwarding files to another solicitor

If your client changes their solicitor and requests that their file be sent to their new firm, you should send them a copyof the file.

You should not ordinarily include a copy of a warrant, order or notice served on you unless you could be sure that indoing so you were not doing an act likely to prejudice the investigations contrary to s342 POCA or other similarlegislative provision.

Where the client is unaware of the warrant, order or notice, you should not include it in the file, and you should keepall correspondence and attendances relating to the order separate from the client file. See section 3.4 Discussionswith clients.

You should retain copies of anything disclosed under a notice to produce or seized during a search / or the whole filein case you need to account for your actions in future.

6.3 Voluntary return

Depending on the circumstances, the seized material may be returned to you at the end of the investigation byinvestigating officers.

6.4 Application to the court

Anyone with a relevant interest in seized property may apply to the Crown Court (or in some instances, the HighCourt) for the property to be returned.

Among other things, the court can order that the material be returned or examined by an independent third party. Youcan also apply to the magistrates court for the return of the property under section 1 of the Police (Property) Act1897.

7 Powers of arrest

7.1 Arrest without a warrant

Under s 24 of the Police and Criminal Evidence Act 1984 a police constable may arrest you without a warrant if hereasonably suspects you of being guilty of an offence, or if he reasonably believes you are committing an offence orabout to commit one.

The constable must reasonably believe that it is necessary to arrest you for any of the following reasons:

to ascertain your name and addressto prevent you causing or suffering physical injury, loss or damage to property or committing an offenceagainst public decencyto allow prompt and effective investigation of an offenceto prevent you disappearing and thus avoiding prosecution.

If you are arrested, a police constable may enter and search any premises occupied and controlled by you if hesuspects that there is evidence on the premises relating to the offence for which you have been arrested.

The constable may seize and retain any evidence he finds as a result of that search.

Unless your presence at the search is necessary for the effective investigation of the offence, such a search must beauthorised in writing by a police inspector.

7.2 Arrest with a warrant

Under section 1 of the Magistrates Court Act 1980 a magistrate may issue an arrest warrant for any person who has,or is suspected to have, committed an offence.



If you are arrested, a police constable may enter and search without a warrant any premises occupied and controlledby you if he suspects that there is evidence on the premises relating to the offence for which you have been arrested.

The constable may seize and retain any evidence he finds as a result of that search.

Unless your presence at the search is necessary for the effective investigation of the offence, such a search must beauthorised in writing by a police inspector.

7.3 Your rights and responsibilities

Upon arrest, a police constable must inform you of your arrest and also of the ground which exist for your arrest.

You must be told in simple language that you are being deprived of your liberty and the reasons for it, including thenature of the suspected offence and where and when it was allegedly committed.

If there are reasonable grounds to suspect you have committed an offence, the officer must caution you beforeasking any questions about the offence if your answers or silence may be given in evidence to a court in aprosecution.

There is no right to a lawyer at the time of arrest, but if you are held in police custody or any other premises, youhave the right to independent legal advice and to consult a solicitor privately at any time.

Further advice for law enforcement on using their powers of arrest are contained in PACE Code of Practice G whichis available from the Home Office website.

8 Answering questions and providing statements

8.1 Questions and statements about the client

The requirement to maintain confidentiality and protect legal professional privilege extends to voluntarily answeringquestions from law enforcement officers and providing witness statements to them about your client's involvement.

You may answer questions about a person who is not a client of your firm, as this will not breach the confidentialityrule, but only to the extent that such answers do not reveal confidential information about a client.

A client may give you instructions to engage with law enforcement agencies on their behalf. You should seek clearinstructions on how you are to engage with law enforcement and whether the client is agreeing to a waiver of legalprofessional privilege.

Alternatively, a notice, order or warrant may require you to answer questions put by investigators. This will extend toinformation which is confidential, but not to information which privileged. You may only discuss information which wassubject to LPP if the client consents or you have prima facie evidence that the crime/fraud exception applies and theinformation is no longer subject to LPP.

If you are asked to provide a witness statement, you should request that you be summonsed as a witness.

Where you are required to provide answers to questions or witness statements and either:

you are not permitted to discuss this with the client, oryou have prima facie evidence that the crime/fraud exception appliesyou must consider whether you are in a conflict position and whether you can continue to act for the client.

Where you no longer act for the client you must consider the questions subject to your obligations of privilege andconfidentiality as set out below.

8.2 Questions and statements about your involvement

The requirement to maintain confidentiality and protect legal professional privilege extends to voluntarily answeringquestions from law enforcement and providing witness statements to them about your own involvement.

You should seek specialist legal advice where law enforcement is asking questions about your involvement with aclient or in relation to a specific retainer, as there may be potential criminal, regulatory, and civil consequences.

http://www.homeoffice.gov.uk/publications/police/operational-policing/pace-codes/



9 More information

9.1 Law Society products and services

For advice on how to comply with an investigation by the SRA read our practice note on Investigatory powers.

9.2 Other

Most notices, orders and warrants are covered by provisions of Schedule 1 of the Police and Evidence Act 1984. TheHome Office has issued guidance to law enforcement agencies on how to apply for and use these powers.

10 TerminologyMust A specific requirement in legislation or of a principle, rule, outcome or other mandatory provision in the SRAHandbook. You must comply, unless there are specific exemptions or defences provided for in relevant legislation orthe SRA Handbook.

Should Outside of a regulatory context, good practice for most situations in the Law Society's view. In the case ofthe SRA Handbook, an indicative behaviour or other nonmandatory provision (such as may be set out in notes orguidance).

These may not be the only means of complying with legislative or regulatory requirements and there may besituations where the suggested route is not the best possible route to meet the needs of your client. However, if youdo not follow the suggested route, you should be able to justify to oversight bodies why the alternative approach youhave taken is appropriate, either for your practice, or in the particular retainer.

May A nonexhaustive list of options for meeting your obligations or running your practice. Which option you chooseis determined by the profile of the individual practice, client or retainer. You may be required to justify why this wasan appropriate option to oversight bodies.

Client the person for whom you act and includes prospective and former clients.

http://www.homeoffice.gov.uk/publications/police/operational-policing/pace-codes/?view=Standard&pubID=1052968

http://www.lawsociety.org.uk/advice/practice-notes/investigatory-powers/