November 16, 2017

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Carry Cash Risk Your Reputation!

- Kartik Mittal, Senior Solicitor [ Zaiwalla & Co. ]

Kartik Mittal

As a rule, individuals should only travel with large amounts of cash when it is absolutely necessary, otherwise using the banking system wherever possible

While we are in the age of digital payments, many individuals and Small and Medium Enterprises (SMEs) continue to conduct business in cash. This is more prevalent in cases where business dealings are carried out abroad, as a means of circumventing the notorious exchange fees of card and bank transactions. This is not illegal, and there are no strict requirements to declare large amounts of cash when traveling within Europe. However, it is unsurprising that authorities have a heightened sensitivity to the potential of cash being ill-gotten from criminality or being used to fund criminal conduct.

Chapter 3 of part 5 of the UK’s Proceeds of Crime Act, 2002, provides for ‘recovery of cash in summary proceedings’, by clearly stating, “A customs officer, a constable or an accredited financial investigator may seize cash if he has reasonable grounds for suspecting that it is… recoverable property [derived from criminal conduct], or intended by any person for use in unlawful conduct.”1

Matters which may cause or increase an officer’s ‘suspicion’ and lead to seizure of cash include concealing the cash, the amount of cash (if large), any weak reasons for not using the banking system to transfer the money, any lack of cogency of the explanation provided at the time, and most importantly, what documentary evidence is carried with the cash to show its provenance and intended purpose.

Following seizure, the seized cash may be initially detained for up to 48 hours after which, detention may be authorized by a Magistrates’ Court for a period of no more than three months2 while its origin is investigated or consideration is given to bringing (in the United Kingdom or elsewhere) proceedings against any person for an offense with which the cash is connected. That period can be subsequently extended by further application to the Court for no more than three months at a time up to a maximum of two years from the date of the first order. Within two years, any application for forfeiture must be brought.

"By way of advice, we suggest first that proper and contemporaneous business records are kept for cash transactions in a cash account and accountants kept informed of the level of cash business

By way of case study, in early 2016, Mr. A (a respectable businessman with no previous convictions or cautions) was on his way to Italy where his family lived and where he had legitimate business interests. Whilst in Italy, he was due to undertake some transactions related to his business. Perhaps unusually by reference to common British business dealings but not in the region of Italy he was visiting, the transactions were to be carried out in cash. Having previously had money stolen from him in an inattentive moment by (most likely) another passenger, Mr. A decided to conceal the cash he was carrying in confectionery containers. It is noteworthy that the concealment could only ever have been effective against a fellow passenger and not against authorities as the cash would be obvious and visible to the authorities – as it was here and for which reason he was stopped. The money was seized from him. What then followed were litigation proceedings over a period of some 15 months which ultimately resulted in having his money returned.

This case was very important to Mr. A as obviously, he stood to lose the cash concerned. However, more significantly (and a matter often overlooked), was the reputational damage which would flow from a forfeiture order, and consequential damage to business interests.

It is important to consider the nature and consequence of the proceedings and the operative legal provisions. Cash forfeiture applications are not criminal proceedings, nor are they pure civil proceedings in that though the civil jurisdiction of the Magistrates Court (and on appeal the Crown Court) is engaged and the Civil Evidence Act applies, the Civil Procedure Rules do not. As a consequence, the rules in the CPR relating to evidence, disclosure and – importantly – costs, do not apply.

It can easily cost as much or more than the money in question to recover the cash. Importantly, and in contrast to civil proceedings generally, costs do not follow the event. Costs may be granted by the Crown Court pursuant to Rule 12 of the Crown Court Rules 1982. InR. (on the application of Perinpanathan) v City of Westminster Magistrates’ Court [2010] 1 WLR 1508, the Court held that it does have jurisdiction to make a costs order only where the Respondent has acted unreasonably and/or on grounds which are not sound. The starting point is therefore that a party who successfully resists a forfeiture application will not recover their costs. It may cost more to secure the return of the cash, than the amount of cash itself.

Most importantly, the allegations are necessarily made within the applicant’s case. To succeed, the applicant must prove to the civil standard that the cash recoverable property (derived from criminal conduct), or intended by any person for use in unlawful conduct.

The ramifications of such a finding, albeit the civil standard3 is that the individual carrying the money is connected to criminality. This obviously impacts that individual’s reputation as they would essentially be accused of criminality without criminal trial protections. Further, that individual may hold an important role or may have been traveling on behalf of a company which may only trade by reason of a license. That license may be affected by connection with the criminal nature of cash, according to the finding of the Court.

By way of advice, we suggest first that proper and contemporaneous business records are kept for cash transactions in a cash account and accountants kept informed of the level of cash business. Individuals should only travel with large amounts of cash when there is an absolute necessity to do so. Otherwise, use the banking system wherever possible. Where it is necessary to carry cash, try to make arrangements at the destination before traveling so that you are expected (thereby being able to confirm what your intentions are). Do carry with you as much documentation as you can (i.e. a bank withdrawal receipt) to support the origin of the cash. Consider the nature of how that money is being carried and do not conceal it from authorities, a course which would create a high degree of suspicion, which would be hard to overcome if stopped.

If the authorities do seize the cash, engage early with as much documentary support as possible. If any issue arises as to record keeping and accounting regularity, engage a forensic accountant promptly to analyze any business record and model.

1 Section 294. The amount must be at least £1,000. A customs officer or constable may also seize cash part of which he has reasonable grounds for suspecting fall into these categories if it is not reasonably practicable to seize only that part so long as the part in question is above the minimum amount.
2 Section 295(1).
3 Although it is well established that where criminal allegations are made in a civil case, the evidence must be examined “critically and anxiously” to ensure it meets the necessary standard of proof: Re D [2008] 1 WLR 499.

Disclaimer – The author of this article is Mr. Kartik Mittal, Senior Solicitor at internationally renowned London-based law firm, Zaiwalla & Co.

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