Accused of Money Laundering but I Didn’t Know the Money was Criminal: What Is the Defence?

The Three Principal Money Laundering Offences

The Proceeds of Crime Act 2002 is the main legislation governing money laundering in England and Wales. It sets out three principal offences under sections 327, 328 and 329.

• Section 327 covers concealing, disguising, converting or transferring criminal property, or removing it from England and Wales.
• Section 328 concerns entering into or becoming involved in an arrangement that a person knows or suspects facilitates another person’s acquisition, retention, use or control of criminal property.
• Section 329 covers using, or having physical or constructive possession of criminal property for yourself or someone

All three offences carry an imprisonment on conviction.

Money laundering allegations are not limited to organised crime or substantial sums. Funds obtained through criminal conduct may constitute criminal property, regardless of the amount involved.

What the Prosecution Must Prove in a Money Laundering Case

The prosecution must prove each element of the alleged offence beyond reasonable doubt.

For the principal money laundering offences, this generally involves establishing that the property was criminal and that the defendant knew or suspected its criminal origin.

Proving the property is criminal property

The prosecution must establish that the funds or assets represent a .

The offence that generated the property is often called the predicate offence. However, a separate conviction for that offence is not required before a money laundering prosecution can proceed. The prosecution may establish the type of criminal conduct involved or rely on circumstances giving rise to an irresistible inference that the property could only have come from crime.

This means the prosecution does not always need to identify a particular offender or a specific underlying crime.

Proving knowledge or suspicion

The prosecution must also establish that the defendant knew or suspected the property was criminal.

This is a subjective test. The question is what the defendant actually knew or suspected, rather than what another person might reasonably have thought.

Knowledge involves awareness of the property’s criminal origin. Suspicion requires less certainty, but it must still be genuinely held by the defendant.

The distinction is important because the prosecution does not need to establish both.

How the prosecution establishes mental state

In many cases, knowledge or suspicion is established through circumstantial evidence rather than a direct admission.

Investigators may examine how the money was received, the relationship between the parties, financial records, communications and subsequent transactions.

For example, unexplained transfers, inconsistent accounts of a payment or unusual instructions from the payer may be considered.

However, the significance of such evidence depends on the circumstances. The prosecution must still prove that the defendant had the required knowledge or suspicion.

Can You Be Guilty of Money Laundering Without Knowing?

The distinction between knowledge and suspicion is important where someone believed they were handling legitimate funds.

A person may deny knowing the money came from crime but still face prosecution if the evidence suggests they suspected its origin.

What suspicion means in law

A vague feeling of unease is not enough.

However, suspicion does not require certainty, a firmly established belief or an objectively reasonable basis.

The question is whether the defendant genuinely suspected that the property represented the proceeds of crime.

Why “I did not know” does not automatically succeed

For offences under sections 327, 328 and 329 of POCA, knowledge is not the only relevant mental element.

If the prosecution proves that a person suspected the money was criminal, the absence of actual knowledge may not prevent a conviction.

For example, someone may receive funds without knowing precisely where they came from. If the evidence suggests they nevertheless suspected a criminal origin, that suspicion may be legally significant.

However, a genuine absence of both knowledge and suspicion remains relevant to the defence.

The prosecution must establish the defendant’s state of mind through the available evidence. An allegation cannot be proved solely because a transaction appears suspicious in hindsight.

How Can You Challenge Money Laundering Evidence?

A money laundering defence may involve challenging whether the prosecution has proved the elements of the offence.

This is different from relying on a statutory defence or exception. The prosecution remains responsible for proving the charge beyond reasonable doubt.

Challenging whether the property is criminal

The defence may examine whether the prosecution has established that the funds were obtained through criminal conduct.

Where the case relies on inference rather than direct evidence, the surrounding circumstances may be challenged.

For example, financial records or documents showing a legitimate source of payment may provide an alternative explanation.

The question is whether the prosecution can establish the criminal origin of the property to the required standard.

Challenging whether the defendant knew or suspected

The prosecution may rely on transactions, communications or behaviour to argue that the defendant knew or suspected the funds were criminal.

Defence evidence may include records showing why the money was received, previous legitimate dealings with the payer or other circumstances explaining the transaction.

The absence of suspicious communications or unusual behaviour may also be relevant.

However, no single document or explanation automatically establishes a defence. The evidence must be considered as a whole.

The defendant does not have to prove their innocence. The burden remains on the prosecution.

The role of your own account

Your explanation of how and why you received the funds may be important.

An account supported by documents created at the time of the transaction can help clarify its purpose.

Investigators may also examine inconsistencies between statements, financial records and subsequent conduct.

It is therefore advisable to obtain legal advice before giving a formal account during a police interview.

What Legal Defences Apply to Money Laundering?

POCA includes statutory exceptions and protections that may apply to money laundering allegations.

Their availability depends on the offence charged and the circumstances. They should not be assumed to apply simply because someone believed a transaction was legitimate.

The consent defence (authorised disclosure)

Under POCA, a person may avoid liability for certain money laundering acts where they make an authorised disclosure and the statutory requirements are satisfied.

This process may involve submitting a Suspicious Activity Report (SAR) and requesting a Defence Against Money Laundering (DAML) from the National Crime Agency.

Where disclosure is made before the proposed act, the person must generally obtain the appropriate consent before proceeding. This may be actual or deemed consent under the statutory process.

The legislation also recognises disclosures made after an act in specified circumstances, subject to strict requirements. It therefore does not follow that every disclosure made after a transaction is automatically ineffective.

A separate exception may apply where a person intended to disclose the matter but had a reasonable excuse for not doing so.

Authorised disclosure is particularly relevant to banks, solicitors, accountants and other professionals handling potentially suspicious transactions, although the statutory framework is not limited to the regulated sector.

The timing and contents of any disclosure are important and should be assessed by a solicitor.

The adequate consideration defence

POCA provides an exception where criminal property is acquired, used or possessed for adequate consideration.

This generally concerns situations where a person gives proper value in exchange for property or receives payment for legitimate goods or services.

For example, a tradesperson who receives payment at an ordinary commercial rate for lawful work may be able to rely on this provision, even if the payment later proves to have come from criminal conduct.

It is also restricted where goods or services are provided with knowledge or suspicion that they may help another person carry out criminal conduct.

The legal assessment is therefore not simply whether the person knew or suspected the money was criminal. It also concerns the value and nature of what was provided in return.

What these defences do not cover?

Statutory exceptions do not provide general protection against every money laundering allegation.

An authorised disclosure must meet the requirements governing its timing and content. 

Other statutory exceptions may also be relevant in particular cases, including certain conduct occurring outside the United Kingdom.

Where no exception applies, the prosecution must still prove the underlying offence, including the criminal nature of the property and the defendant’s knowledge or suspicion.

What Evidence Can Support a Money Laundering Defence?

Evidence explaining where the funds came from, why they were received and how they were used can be important.

Its relevance depends on the specific allegation and what the prosecution seeks to establish.

Financial records

Bank statements, payment confirmations, invoices and contracts may help explain the source and purpose of a transaction.

For example, records showing that money was received as salary, a loan, an inheritance or payment for a legitimate sale may support an innocent explanation.

Documents created at the time of the transaction can be particularly useful because they provide an independent record of the arrangements.

Communications

Emails, text messages, letters and other correspondence may help establish why funds were transferred.

Relevant communications could include payment instructions, contractual discussions or messages confirming an agreed transaction.

Records created before the payment may support the explanation given for receiving it.

A solicitor can assess which communications are relevant and whether they should be presented as part of the defence.

Third-party evidence

Independent evidence from an employer, accountant, solicitor or business partner may help establish the circumstances of a payment.

For example, an employer may confirm that funds represented legitimate earnings, while business records may demonstrate that a payment was made under an existing agreement.

Such evidence can help support an account with information from sources other than the defendant.

Conduct after receipt

How funds were used after receipt may also be considered during an investigation.

Ordinary transactions consistent with the stated purpose of the payment may support the defendant’s explanation.

Conversely, unexplained cash withdrawals, rapid transfers or attempts to conceal the movement of money may raise questions.

Can Your Bank Account Be Frozen Without a Charge?

A money laundering investigation may also involve an Account Freezing Order (AFO).

An AFO is separate from a criminal prosecution. It allows law enforcement authorities to seek a court order restricting access to money held in an account while its origin or intended use is investigated.

Under Part 5 of POCA, a magistrates’ court may grant an AFO where it is satisfied that there are reasonable grounds to suspect that money in the account is recoverable property or is intended for use in unlawful conduct.

A criminal charge or conviction is not required.

The threshold for obtaining an AFO is therefore different from the criminal standard of proof needed for a money laundering conviction.

Although AFO proceedings are civil in nature, the test for making the freezing order is reasonable grounds for suspicion. It should not be confused with the balance-of-probabilities test relevant to forfeiture proceedings.

Challenging an AFO requires consideration of the basis for the order, the source of the funds and the evidence available.

Where an individual faces both a money laundering investigation and an AFO, legal advice should address both matters because decisions in one proceeding may affect the other.

If your account has been frozen, our team can advise on the order, the evidence required and the available options for challenging it.

What Should You Do Before a Money Laundering Interview?

A police interview under caution is a formal part of a money laundering investigation.

Your answers may become evidence, so it is important to understand the allegation and your legal rights before questioning begins.

The right to legal advice

Anyone arrested and detained at a police station, or attending a voluntary interview under caution, is entitled an independent legal advice.

Requesting a solicitor is not an admission of guilt.

A solicitor can explain the police interview process, review available information about the allegation and advise you before questioning.

Why preparation matters for your account

What you say during an interview may affect subsequent proceedings.

Under the Criminal Justice and Public Order Act 1994, a court may draw an adverse inference in certain circumstances where a defendant later relies on a fact they did not mention during questioning.

This does not mean that remaining silent automatically establishes guilt.

A solicitor can consider the evidence disclosed by police and advise whether you should answer questions, provide a prepared statement or make no comment.

The appropriate approach depends on the circumstances of the investigation.

Gathering your evidence before you speak to a solicitor

Before your first consultation, identify the documents and communications relating to the funds under investigation.

These may include:

• Bank statements and payment records.
• Contracts, invoices or loan agreements.
• Messages and emails with the payer.
• Records explaining the purpose of the transaction.

Preserve relevant material without deleting or altering it.

Your solicitor can advise on which documents are most useful and whether further evidence should be obtained.

How Can a Solicitor Help with Money Laundering Allegations?

If you are under investigation for money laundering, have been invited to a police interview or are subject to an Account Freezing Order, obtaining legal advice early can help you understand your position.

A criminal defence solicitor can review the allegation, examine the available financial evidence and advise whether the prosecution can establish the relevant legal requirements.

They can also explain whether a statutory exception may apply and assist with a separate challenge to an Account Freezing Order where appropriate.

Speak to our fraud and financial crime team for advice about your circumstances and the next steps.