Smith, R. v [2015] EWCA Crim 333

[2015] EWCA Crim 333Case No 201401153 C5
IN THE COURT OF APPEAL
CRIMINAL DIVISION
Venue Royal Courts of JusticeDate Wednesday, 4 February 2015
Strand
London, WC2A 2LL
B e f o r e:
LADY JUSTICE SHARP DBE
MR JUSTICE GOSS
HIS HONOUR JUDGE KRAMER QC
(Sitting as a Judge of the CACD)
Between
R E G I N ACrownv
Between
LONNIE AUGUSTUS SMITH
Computer Aided Transcript of the Stenograph Notes ofWordWave International LimitedA Merrill Communications Company165 Fleet Street London EC4A 2DYTel No: 020 7404 1400 Fax No: 020 7831 8838(Official Shorthand Writers to the Court)
Mr D Janner QC appeared for AppellantMr A Marshall appeared for Crown
J U D G M E N T

LADY JUSTICE SHARP:

On

[1]20 February 2014, in the Crown Court at Kingston upon Thames, after a trial before HHJ Hopmeier and a jury, the appellant was convicted of conspiracy to cheat the public revenue (Count 1), and entering into or becoming concerned in a money laundering arrangement, contrary to section 328 of the Proceeds of Crime Act ("POCA") (count 2). On 10 April 2014, he was sentenced to concurrent sentences of 6½ years' imprisonment on count 1 and 5 years' imprisonment on count 2. He was disqualified under section 2 of the Company Directors Disqualification Act 1986 for a period of 8 years. Count 3 (use, acquisition or possession of criminal property), contrary to section 329 of POCA which was an alternative to count 2, was ordered to lie on the file against him in the usual terms.[2]There were four co-accused. Ross Bell was convicted on counts 1 and 2 and was sentenced to a total of 8 years' imprisonment. He was granted leave to appeal against conviction on count 2 only by the single judge, but subsequently abandoned his appeal. Brian Murray was convicted on count 1 and count 3 and was sentenced to 7½ years' imprisonment. He was acquitted on count 2. Justin Bensley was acquitted on counts 1 to 3. Garry Salter was convicted on count 1 and sentenced to 6½ years' imprisonment. He was acquitted on counts 2 and 3.[3]The appellant appeals against conviction on count 2 only with the leave of the single judge. The only issue that arises under this appeal is whether the judge should have withdrawn the case from the jury on the money laundering charges (counts 2 and 3) because there was no, or no sufficient, evidence to support the prosecution case that the property in question at trial was criminal property within the meaning of section 343(3)(a) of POCA.[4]It was the prosecution case, to put it very broadly, that a loan of £8 million made in 2005 by Seaside Mediteranea Ltd ("Seaside") to Amber Communications Management Limited ("ACM") (a company of which the appellant was director and equal joint shareholder and the company secretary) was a money laundering arrangement concerning "criminal property" in which the appellant was concerned within the meaning of section 328 and section 340 of POCA.[5]Before coming to the facts in more detail, it is convenient to start with the law. The Law[6]A person commits a money laundering offence under section 328 of POCA if they enter into, or become concerned in:
"an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person."
The material parts of section 340 of POCA provide as follows:
"(2)Criminal conduct is conduct which— (a) constitutes an offence in any part of the United Kingdom, or (b) would constitute an offence in any part of the United Kingdom if it occurred there. (3) Property is criminal property if— (a) it constitutes a person’s benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and (b) the alleged offender knows or suspects that it constitutes or represents such a benefit. (4) It is immaterial— (a) who carried out the conduct; (b) who benefited from it; (c) whether the conduct occurred before or after the passing of this Act. (5)A person benefits from conduct if he obtains property as a result of or in connection with the conduct. (6)If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage. (7)References to property or a pecuniary advantage obtained in connection with conduct include references to property or a pecuniary advantage obtained in both that connection and some other. (8)If a person benefits from conduct his benefit is the property obtained as a result of or in connection with the conduct."
[7]No issue arises in relation to section 340(3)(b). The only issue on this appeal concerns section 340(3)(a). As can be seen from the wording of that subsection, in order to come within it the property must constitute the benefit from criminal conduct or represent such a benefit in whole or in part whether directly or indirectly. In R v Anwar [2008] 2 Cr App R 38 Latham LJ VP, giving the judgment of the court, explained that there were two ways in which the Crown could prove that the property derives from crime:
"a) by showing that it derives from conduct of a specific kind or kinds and that conduct of that kind or those kinds is unlawful, or b) by evidence of the circumstances in which the property is handled which are such as to give rise to the irresistible inference that it can only be derived from crime." (paragraph 21) In R v Gillies [2011] EWCA (Crim) 2140 Pitchford LJ, giving the judgment of the court, said this at paragraphs 11 and following: "11. Miss Levett, for the appellant, made a submission of no case to answer at the close of the prosecution case. She submitted that there was no evidence from which the jury could infer that the cash was the proceeds of criminal conduct. As to the law, she submitted, relying on R v W(N) & Ors [2008] EWCA Crim 2, [2009] 1 WLR 965 that it was necessary for the prosecution to prove at least the type of criminal conduct which the alleged proceeds represented. At paragraph 38 of the judgment of the court given by Laws LJ the court concluded: 'In short, we do not consider that Parliament can have intended a state of affairs in which, in any given instance, no particulars whatever need be given or proved of a cardinal element in the case, namely the criminal conduct relied on...' 12. Judgment in W(N) was given on 23rd January 2008. In Anwoir [2008] EWCA Crim 1354, [2008] 2 Cr App R 36, heard in May 2008, the Vice-President (Latham LJ) gave the judgment of this court. It was clear that the court in W(N) had not been invited to consider a previous decision of the court in R v Craig [2007] EWCA Crim 2913, in which a contrary conclusion had been reached (see in particular paragraphs 26 to 29) and R v F [2008] EWCA Crim 1868. In Anwoir Latham LJ carried out an examination of the conflicting authorities and concluded at paragraph 21 as follows: 'We consider that in the present case the Crown are correct in their submission that there are two ways in which the Crown can prove the property derives from crime, a) by showing that it derives from conduct of a specific kind or kinds and that conduct of that kind or those kinds is unlawful, or b) by evidence of the circumstances in which the property is handled which are such as to give rise to the irresistible inference that it can only be derived from crime. This in our judgment gives proper effect to the decision in Green, and is consistent with the decisions of this court ...' 13. The court on that occasion certified for the appellant a question for consideration by the House of Lords, that is, whether section 328 and section 340 of the Proceeds of Crime Act 2002 required the prosecution to prove at least the class or type of criminal conduct which it was alleged generated the proceeds of crime. The House of Lords refused leave to appeal in order to consider that question in December 2008. 14. The matter again arose for consideration in R v MK and AS EWCA Crim 952. Hallett LJ said at paragraph 12: '... In our judgment, the law as it applies to this case is now settled. It is conveniently set out in paragraph 21 of Anwoir, to which we have already referred. We declined to hear any further argument from Mr Sharpe, who appeared before us on behalf of AS, to the effect that Anwoir was wrongly decided. We approach this case, therefore, on the basis that it is open to the prosecution to try to prove guilt from the 'evidence of the circumstances in which the property was handled' which it is said 'give rise to the irresistible inference that it can only be derived from crime'. They do not have to prove the specific kind of crime. There was an error of law in court below...' It is instructive to note that the facts in the case of MK and MS concerned police observations of a meeting in a supermarket car park during the course of which a carrier bag containing £22,000 in cash was handed from one defendant to the other. When asked to give an explanation for this conduct, they gave conflicting accounts but there was otherwise no explanation as to the crime or the nature of the crime, which those proceeds may have represented. Nevertheless, the court held, as we have observed, that it was open to the jury to draw an inference that the proceeds were in fact the proceeds of crime. 15. We have earlier described the nature of the prosecution evidence in the present case. In our judgment there was plainly a case to answer. The jury properly directed could conclude that this large quantity of cash in the Euro denomination represented the proceeds of previous criminal conduct. They could infer that is the only reason why a man in the appellant's position would have been entrusted with it. It was not for the prosecution to exclude every other possible inference. The question for the judge at half time was whether upon the evidence the jury had heard, they could properly conclude, so that they were sure, that the prosecution had established its case. 16. In his ruling His Honour Judge Shanks said this: 'I am not going to get involved in seeking to reconcile the case drawn to my attention, namely R v W [2008] EWCA Crim 2. I have been shown a number of other authorities and as far as I am concerned in this court the law is clear that the prosecution can succeed in this case by evidence of the circumstances in which the relevant property is handled which is such as to give rise to the irresistible inference that it can only be derived from crime.' In our view, for the reasons we have given the judge was plainly right. ... 20. At the conclusion of our judgment Ms Levett invited the court to reconcile decisions in the civil jurisdiction as to the application for sections 240 and 242 of the 2002 Act. We declined to do so. The meaning and effect of the offence created by section 328(1) of the Act have been authoritatively settled. Different provisions relating to civil recovery are not, in our view, relevant to this appeal."
[8]In R v Craig [2007] EWCA (Crim) 2913 the court accepted as a correct statement of principle that, whilst the prosecution must prove that the property is "criminal property" within the meaning of the statutory definition, there is nothing in the wording of the section which imports any further requirement that the property emanated from a particular crime, or any specific type of criminal conduct (see paragraph 21). A property can therefore be proved to be criminal property for this purpose both(a) by showing that it derives from conduct of a specific kind and that conduct of that kind is unlawful, or(b) by evidence of the circumstances in which the property is handled which are such as to give rise to the irresistible inference that can only be derived from crime. The Facts[9]Amber Car Management Ltd was incorporated on 11 June 2004. On 12 July 2004, it changed its name to ACM. The company's registered office was in Ramsgate, Kent. The appellant was company secretary between 11 June 2004 and 31 March 2006. Ross Bell was appointed secretary following the appellant's departure. He was also a director of ACM between 5 January 2005 and 15 August 2006. William Bell was appointed as director and company secretary on 15 August 2006. He was named on the indictment as a co-conspirator, but was too ill to stand trial. The further co-accused, Brian Murray, was a director between 11 June 2004 and 11 March 2005.[10]At the outset the appellant and Murray each had a 50% share in the company ownership, although subsequently more shares were issued to other individuals. The appellant invested £30,000 in ACM and later lent the company £500,000 in return for which, under the terms of the agreement, he was to receive £80,000 in interest over a 3-month period. He was paid £2,000 per calendar month, later rising to £4,000, in wages and received a Mercedes car. There were others employed at ACM who were not alleged to have acted fraudulently.[11]The company was registered for Value Added Tax ("VAT") from the outset, it having taken over a VAT number previously assigned to Murray operating as a sole trader. ACM was de-registered for VAT on 31 October 2006. The VAT returns filed by the company were set out in various submissions which were before the court. Between July 2004 and December 2005 HM Revenue and Customs Officers made a total of 11 VAT insurance visits to ACM. The appellant was present at two of those meetings in February and March 2005.[12]Count 1 (in respect of which there is no appeal) concerned a Missing Trader Intra-Community ("MTIC") fraud in which ACM played thepart [?] of exporter. The goods concerned were principally mobile phones, although some Computer Process Units or CP Units were involved as well. The goods had been imported into the UK by various traders who had subsequently defaulted on their VAT repayments. The goods then passed through a number of buffer companies before reaching ACM, who exported the goods to Dubai and Switzerland. The fraud began in June 2004 and the exports continued until November 2005. In that time ACM had been involved in over 200 transactions.[13]ACM received about £10 million from HMRC, reclaimed VAT and had claims outstanding for a further £18 million, principally relating to the months of August and September 2005. Trading stopped, however, as HMRC withheld payments of reclaimed VAT pending enquiries into the large repayments being sought by ACM. ACM issued judicial review proceedings to force a decision on repayments and large scale civil investigation was instigated, which eventually led to the criminal investigation and the prosecution in this case.[14]In consequence of the withholding of the payments, however, ACM had no cash with which to carry out further trades. Evidence adduced by the prosecution against the appellant by the controllers of ACM on count 1 included the following. The sales were contrived with the goods passing through the UK at a rapid speed, each chain beginning with a defaulting trader and the intermediate traders serving no useful purpose other than to mask the fraud. Due diligence investigations were either not conducted at all by ACM or, when they were, they were nothing but a cursory sham. There was evidence of some circularity of goods, otherwise known as a "carousel fraud", (ie the same goods as were exported by ACM and re-imported into the UK and, on occasion, re-exported by ACM) on a minority of ACM's trades.[15]A Spanish registered company called Padani Developments SL ("Padani") was shown to be involved in the overseas stage of many of the transactions resulting in VAT reclaims of £8.6 million, both as the company from which the defaulting trader apparently bought the goods and as the company which engaged the freight forwarder in whose warehouse the goods remained during their short stay in the UK before being exported by ACM.[16]A further key element of the fraud was the making of payments to a third party that was not a participant in any of the trading chains. Of the ACM deal chains a total of 33 payments, mostly in August and September 2005, were made by the buffer companies not to the party from whom they had apparently brought the goods, but instead to an offshore company, Juleo Ltd. Padani was involved in 25 of those 33 deal chains. It was alleged that the purpose of such payment was to place offshore the bulk of the sale price, including the VAT. Consequently the trader in the chain would be unable to discharge their VAT liability and the monies would be taken out of the jurisdiction and thus beyond the reach of HMRC. In total Juleo received 585 payments amounting to £448 million. There was no evidence that ACM made any third party payments.[17]ACM held an account with the First Curacao International Bank ("FCIB") which was based in the Dutch Antilles. The appellant and Ross Bell were signatories to the account between 31 March 2005 and 5 September 2006 when FCIB closed down. The answer to the security question that allowed access to the account was the name of the appellant's daughter. It being an Internet banking account it could be used by persons other than the account holder if those persons were granted access to the passwords.[18]On 1 November 2005, ACM were informed by a letter from HMRC about HMRC's concerns as to the nature of the activity of ACM. The outstanding £18 million in claimed VAT repayments were being withheld by HMRC. At the same time ACM owed in excess of £13 million. By way of a loan agreement, dated 15 November 2005, Seaside agreed to lend ACM £8 million. A repayment of the loan was due by 31 January 2006. On the face of the document the names of the lender and the borrower had been entered the wrong way round, ie ACM was stated to be the lender and the appellant signed the agreement on behalf of ACM.[19]On 17 November 2005, seven credits totalling £7,896,000 were received into ACM's account at FCIB from Seaside. The narrative contained on the statement for each of the seven credits was "LOAN". Each of the credits came from an FCIB account held in the name of Seaside. That account was in fact a sub-account of a main account held in the name of Padani, of which a Maria Suarez was recorded as the signatory. She was recorded as the signatory on another Padani sub-account held in the name of ACM, notwithstanding there was no ostensible connection between Padani and ACM. A number of other companies linked to the MTIC fraud chain held accounts with FCIB and monies were moved between those companies by way of electronic Internet transfers, which sometimes took place within half an hour of the money entering a company's account.[20]Prior to the loan there was no known link between ACM and Seaside. There was no documentary evidence of any negotiations having taken place before the loan agreement, other than a fax sent by a Mr Gerard Souza to Salter referring to "recent discussions". There was no evidence of any due diligence enquiries being undertaken by ACM in respect of Seaside. Seaside was in fact registered in Hong Kong and had been incorporated seven months prior to the loan. The sole director and shareholder of the company was one Maurice Aboujdid: a 23-year-old French national based in Israel where he worked in a sushi restaurant. He was subsequently investigated and charged with fraud and money laundering offences. The bank account opening document for Seaside described the company's trade as "Import & Export Mobile Accessory".[21]Each of the transfers from Padani's Seaside account was funded from an FCIB account held by Juleo: the off-shore company to which 33 payments had been made from trading chains in which ACM had been the exporter. Juleo in turn was funded by credits from four separate companies: Full Moon Holdings Ltd, A-Z Office Equipment Ltd, Kwik Projects Ltd and Imex Communications.[22]The monies received from Seaside were paid straightaway by ACM to two FCIB accounts in the name of Zain Communications Ltd ("Zain") and Goldex International Ltd ("Goldex"). Both companies were mobile phone suppliers to ACM and documentary evidence suggested the payments were made to discharge earlier trading liabilities arising from September 2005. However, the money was ultimately paid back to Juleo after passing through a series of buffer companies. The first three payments totalling over £2.5 million were returned to Juleo within one hour of Juleo's initial transfer to Seaside. A similar pattern was demonstrated with the four remaining payments with the monies not only being returned to Juleo, but then passed on again to ACM and treated as new money, ie an additional component to the loan rather than money that had simply been recycled. In this manner the illusion was created that loan monies of about £7.8 million had been paid to ACM when in fact much of it was the same money recycled. The vast bulk of these loan monies were returned to Juleo. The monies transferred never stayed in the ACM account for any longer than nine minutes.[23]Both A-Z Office Equipment and Kwik Projects, who provided funds to Juleo, were mobile phone traders who had been involved in trade chains in which a trading company had defaulted upon its VAT payments to HMRC. The payments by A-Z and Kwik to Juleo, with whom neither company had any trading link, therefore amounted to third party offshore payments which prevented the defaulting trader having funds to pay VAT due to HMRC.[24]Juleo was originally formed in the British Virgin Islands but had subsequently been based in Israel. Its sole director was one Michael Touitou, who in turn was linked to Padani's Aboujdid by way of an address in Israel that was common to both of them. Of the £448 million shown to have been paid into the Juleo account, all had been paid out again to other companies and individuals including Padani.[25]Padani's Seaside sub-account had made loans to nine other UK traders in mobile phones, including three who appeared in the same trading chain as ACM. There was no evidence that Seaside had ever chased ACM for the repayment of the loan which was long overdue, and no attempt had been made to realise the security for the loan, ie the assets, if there were any, of ACM. It was accepted by the officer in the case that had ACM been paid the £18 million VAT reclaim, then the company would have been in a position to repay the £8 million loan. The Criminal Proceedings[26]The appellant was arrested on 14 December 2010. In interview, he said he was aware of the loan, but knew nothing about who was responsible for arranging it with ACM. He knew nothing about Seaside. He signed the loan agreement and the security agreement on Ross Bell's instructions. Although he was a signatory, he was not familiar with the FCIB account. He had no control over the loan monies. When further interviewed in June 2011 he made no comment to all questions asked.[27]The prosecution case on count 2 was that the loan money was criminal property as it derived directly or indirectly from third party payment, which had been made to Juleo in the course of MTIC fraud for the purpose of cheating the Revenue. The receipt and transfer of the monies into and out of ACM's account, and the antecedent agreement, amounted to a money laundering arrangement. The loan was a sham, as evidenced by the circularity of the transfers of the funds, which allowed an otherwise insolvent ACM to continue trading and maintain its position within the MTIC chain. The defendants must have at least suspected that the monies derived from the accounts of the organisers, or those linked to the organisers of an MTIC fraud, and must have included such third party payments. The appellant knew of the loan and of the origins of the money. He was at the heart of ACM as a company officer, shareholder, bank signatory and investor. He was the Company Secretary and he signed the loan agreement. His account that he did not read the agreement and knew nothing as to its nature was simply not credible.[28]The defence case generally was that the appellant was an innocent dupe in what transpired to be a fraud. It was William Bell and not him that had been responsible for running the company, and the appellant did not know the company was involved in any fraudulent activity.[29]Specifically in relation to count 2, the case for all defendants was that they denied entering into an arrangement as alleged, they disputed that such arrangement, as did exist, facilitated the laundering of criminal property, and they denied that they knew or suspected that the monies paid into the FCIB account constituted criminal property. The defendants had no way of knowing what was happening to the monies after they had been transferred out of the ACM account.[30]The appellant's case, in particular, was that he knew nothing of the loan and did not access the FCIB account. He did not do anything in respect of the loan other than to simply sign the loan agreement, which he did not read. There was no other evidence of him being involved in the arrangements that were made in respect of the loan, or the repayment of it either before or after the agreement was signed.[31]The issue for the jury on count 2 was whether or not the appellant had any knowledge of the loan agreement and, if so, whether the monies that were transferred under the agreement were derived directly or indirectly from third party payments that had been obtained in order to cheat HMRC, and, if so, whether the appellant knew or suspected that to be the origin of the funds. The Submission of No Case[32]At the close of the prosecution case the defence, for the appellant, adopted the submissions made on behalf of Ross Bell that there was no case to answer on counts 2 and 3 on the basis, as we have said, that there was insufficient evidence that the loan constituted an arrangement concerning "criminal property". In the alternative, there was insufficient evidence that the appellant knew or suspected that the monies provided under the loan were criminal property.[33]As we have said, we are only concerned in this appeal with the primary way in which the submission was put. As to that, it was submitted that unless the prosecution could prove that the third party payments to Juleo (the apparent source of the loan monies) included directly, or indirectly, particular VAT repayments successfully obtained and paid pursuant to fraudulent repayment claims, then the money could not amount to relevant criminal property within the meaning of POCA. It was accepted that a jury could properly infer that payments to Juleo from which loan monies derived were third party payments made in the context of MTIC fraud trading where there were defaulting traders. However, it was said that such monies were the working capital of the fraud and might be entirely legitimate, ie it could be simply money that fed the fraud and was not criminal property as defined under POCA. In this respect the defence relied on some observations made in the case of R v Ahmad [2012] EWCA (Crim) 391 and R v Khan [2013] EWCA (Crim) 317. The appellant through Mr Janner QC, who appears before us today, essentially repeats those submissions in this appeal.[34]The judge rejected those submissions in the course of two rulings. The second was an expansion of the first at the request of defence counsel for Ross Bell. We should add that the judge had offered in his first ruling to give a more detailed ruling if asked to do so. His reasons in the first and shorter ruling were these: 1) It was accepted by the parties that there was evidence that supported the contention that the loan monies had derived from Juleo which had received £400 million in MTIC trading over 4½ months. There was sufficient evidence for a jury to conclude that the source of the loan money on the facts amounted to "criminal property" within the meaning of section 340 of POCA, even if they were not sure that the sum which formed the source of the loan included whether in whole or in part any VAT repayment. The inclusion of repayments within the monies advanced as a loan, whether in whole or in part, is not, contrary to defence submissions, an essential necessary element in the ingredients of "criminal property". Beside the receipt of £400 million, there was evidence that Juleo itself was the recipient of third party payments in ACM's own trading where a sum of £13.8 million was said to have been lost following default by initial traders. 2) There was ample evidence on which a jury could properly conclude that the monies received by Juleo were wholly or in part, directly or indirectly, received by that company and thereafter by ACM in the context of substantial, continued illegitimate trade. They could conclude that the source money amounted to criminal property, it having been paid to and/or received by Juleo in the context of cheating the Revenue and MTIC fraud, which resulted from, or in correction with, an offence or offences committed mainly by Juleo and/or defaulting traders.[35]There was ample evidence from which to conclude that the purpose of the loan was as a cash injection to enable ACM to continue trading fraudulently for the purpose of obtaining fraudulent reclaims from HMRC for the benefit of ACM and the organisers of the fraud. Whether HMRC were, by reason of the third party payment, cheated of VAT from a defaulting trader, or were deprived of being able to recover a debt in the same or similar sum, made no difference in the context of money laundering and the provisions of section 340. 3) There was also evidence of money, the subject of an arrangement for a loan, that had attained the status of criminal property independently of the operation of the arrangement in count 2. Whether the jury concluded that the relevant property was criminal property was a matter for them on the evidence.[36]In his second ruling the judge's starting point was the acceptance by counsel, for all the defendants, that without prejudice to their individual defences there was a case to answer on count 1, which was, as the judge said, the main charge. It therefore followed, as he said, that it was accepted that there was sufficient evidence fit to go to the jury that:(1) ACM was involved factually in MTIC fraud chains;(2) ACM was knowingly and criminally involved in MTIC fraud chains;(3) That the other four defendants on trial (that is Ross Bell, Brian Murray, Garry Salter and this appellant) knowingly participated in ACM's criminality as conspirators as alleged under count 1.

The judge then went on to say that it was accepted by the defence that:

[37](1) Juleo was engaged in substantial MTIC fraud and in deals where there were defaulting traders. It had received £400 million in 4½ months by way of third party payments linked to MTIC fraud, and some of that money may have been "carouselled";(2) There was evidence of third party payments to Juleo in MTIC chains in which ACM were involved;(3) Seventeen of the traders involved in Juleo's third party payments, not directly related to ACM deals chains, also in fact appeared as traders in the ACM deal chains.(4) The funds used by Juleo to pay the loans were in whole or in part third party payments, which had been diverted from MTIC deal chains by importers or suppliers who were liable to HMRC either for VAT or for a debt in the same or similar sum;(5) The intention and effect of the third party payments was to cheat HMRC and that by receiving such monies a jury could conclude that Juleo had committed such an offence;(6) The funds advanced to ACM were required by ACM and the organisers of the fraud so that ACM could constitute the fraud and continue to make fraudulent VAT reclaims;(7) That Juleo and Padani, or those behind those companies, were organisers of, or closely linked to organisers of, the MTIC frauds;(8) The loan agreement was a sham with the payment being dressed up as being a genuine loan from a genuine company (Seaside) to a genuine trading company (ACM) when it was in fact sourced from cash or credits circulating in the context of other MTIC fraud. Seaside was a Hong Kong company with no visible assets with a 23-year-old sole shareholder, and only named director, working as a sushi chef in Israel purporting to lend to a company which was itself solvent.[38]The judge said that the jury could conclude there were monies circulating in the context of an MTIC fraud and the monies in credits which derived from the third party payments, whether in whole or in part and whether directly or indirectly, constituted criminal property. It did not have to be proven successful repayment claimed for there to be an offence of cheating the Revenue. It could be concluded on the facts that the third party payments represented the benefit, even if partial or indirect, of Juleo and all defaulting traders' criminal conduct.[39]By way of the cheat employed in the case at least two pecuniary advantages were obtained: firstly, criminals deliberately retained monies which would otherwise be paid at least in part to HMRC; and secondly, by diverting the monies offshore the criminals retained monies that could be recycled in the operation of the MTIC fraud. In the present case there was evidence of such a "carouselling" of money as well as goods. Such monetary advantage was properly obtained as a result of, or in connection with, the cheat and constituted benefit under section 340 of POCA.[40]The position might be different if the monies subject of the third party payments could be shown, or may be shown, to be the monies legitimately earned and simply funding the working capital of a fraud. In this case the evidence supported the contention that Juleo and/or Padani were substantially involved in a substantial MTIC fraud over a significant period of time.[41]The definition of "benefit" under section 340 should be given a similar interpretation as is given to the same word under the confiscation provisions in section 76, unless there were positive reasons not to do so. The Court of Appeal in Ahmed was not intending the case to be an authority for the meaning of "criminal property" in a money laundering offence. Although the court held that costs of committing an offence, monies that were referred to as "priming the pump", did not amount to the defendant's particular benefit for confiscation purposes, the Court was merely considering a defendant's own benefit from his offence and not the benefit of another. The facts in Ahmed were quite different from the present case and the CACD in that case was not considering the money laundering provisions which arose in the present case.[42]The case of Khan did not seek to set down any particular principles of law, but was decided upon its facts. It did say that legitimately earned incoming capital used to facilitate a fraud did not become the proceeds of crime by reason only of its transfer in furtherance of crime. Whether such money could amount to criminal property did not need to be decided in the present instance as the prosecution case was fairly and squarely that the monies which formed the sources of the loan were already criminal property. The concessions made by the Crown in Khan, namely that a particular payment in a particular deal chain did not represent the proceeds of cheat, were not concessions that had been made by the Crown in the present case. The issues of criminal property, knowledge and suspicion were matters of fact for the jury to determine. Discussion[43]The question for the judge, as he recognised, was whether the evidence viewed overall was such that the jury could properly convict on counts 2 and 3 (see R v Galbraith [1981] 1 WLR 1039, R v Goring [2011] EWCA (Crim) 2 and R v F [2011] EWCA (Crim) 1844). In our judgment there was, in truth, an abundance of such evidence and we think the judge was right to reject the submission of no case for the reasons he gave, which we have summarised above and need not repeat.[44]The prosecution provided a very detailed argument before the judge, which has, in substance, been repeated in the written arguments put before us today. It is unnecessary to set out the detail of that written argument, although as a point of reference, paragraphs 49 to 70 should be attached as an appendix to this judgment since they set out the essential parts of the case against the appellant. Suffice to say that we agree with the judge's characterisation of the evidence that was available on the essential parts of the prosecution case, as set out in those paragraphs, as ample. There was, as he rightly said, an enormous amount of evidence as to the movement of funds and the criminal nature of the monies both paid to Juleo and then on to ACM via Padini and Seaside, which justified the conclusion that the loan monies fell within the definition of criminal property for the purposes of section 328(2), and therefore that the case should be left to the jury on counts 2 and 3.[45]The essence of the point was that the third party payments to which the judge referred, for the reasons he gave, were tainted by criminality. This was not simply a case in which the prosecution alleged that there were mere third party payments; their case was much more particular than that. They were able to point to evidence relating to the particular criminality of payments into ACM's account. They were able to point to the criminal involvement of defaulting traders and what lay behind the payments that were made by way of loan into ACM's account. As it was put on behalf of the respondent today, the whole spectrum of Anwar was available, but the prosecution were able to rely on both limbs of the case in the way that they presented their case before the jury.[46]We have set out the facts at some length, but in the end we think the answer to this appeal is that the judge, as we have indicated, was entitled to reject the submission of no case for the reasons that he gave. In our judgment, the case against the appellant was properly left to the jury. Mr Janner today has presented his argument with a characteristic succinctness and clarity, but we are unpersuaded by it. The appeal against conviction is dismissed.

LADY JUSTICE SHARP:

[47]Thank you very much, Mr Janner, and thank you very much, Mr Marshall. The amount of work that was done outside court by both of you has been very helpful to the court in reaching the decision today. Appendix: Particular evidence demonstrating the bank credits represent the proceeds of criminal conduct. 49. There were seven credits in total to the ACM bank account in respect of the loan. 50. All bank credits show on ACM's FCIB account (JB855) as having been received on 17th November 2005 and, in order as set out on the statement, area. £346,000 - Final Loan 1 There is evidence to suggest that there was some trade in furniture from a certain point but this had nothing to do with the loan.b. £1,000,000 - Loanc. £2,000,000 - loan.d. £2,000,000 - loane. £2,100,000 - loanf. £400,000 - loang. £50,000 - loan 51. Reference to the transaction data shows that the order of payments was as follows (see schedule (Pooke 135, JB/Schedules p184-5 ·and FCIB account JB954) a. 16/11/05 22:54:01 £50,000 b. 16/11/05 23:00:24: £400,000 c. 16/11/05 23:15:02: £2,100,000 d. 17/11/05 16:06:08: £2,000,000 e. 17/11/05 18:24:01 £2,000,000 f. 17/11/05 19:00:27 £1,000,000 g. 17/11/05 19:09:04 £346,000 52. The evidence in relation to each of these payments demonstrates that the payment emanated from the Seaside sub-account of the Padani Developments SL account with the FCIB (JB954). Padani is nominally based in Spain. The signatory on that account is Maria Theresa Jimenez Suarez (see JB949 and 953) and no director of Seaside is mentioned on the account details. 53. The money paid by Padani in turn came from Julee Ltd based in Israel and no documentation or bank narrative explains these movements. 54. Monies received into the Julee account at the FCIB (generally) are the proceeds of criminal conduct a. In the five month period (only) between 1st July 2005 to 30th November 2005 there were a total of 585 receipts and totaling some £448m into the Julee FCIB account from a multitude of traders -traders principally in the UK. The clearest possible inference can be drawn that these are principally third party payments from UK MTIC chains with defaulting traders. (see Exhibit Pooke 161,JB Schedules p196-206; Pooke statement p288 §64) b. This is demonstrated particularly by reference to the destination of third party payments in ACM's own trading chains. Julee Ltd is a recipient of third-party payments in ACM's trading chains (see schedule POOKE 159 JB/Schedules/193-4 .i. It receives third-party payments to the value of total £93.2m (being the net price and VAT of the transaction - see penultimate column) ii. In each such chain in respect of which Julee received a third-party payment, there was a defaulting trader. iii. The value of VAT lost by the failure of the defaulting trader to pay their VAT liability was £13.8m (final column) c. The particular defaulting traders were Fane Rack followed by Fix Electrics (see columns -4 and -5 of Pooke 159 ante) i. Mr Adeyemi of Fix Electric has been convicted of Cheating the Revenue in this period (August & September 2005) and specifically in relation to these deals ii. On the same indictment, Mr Butt has been convicted of Cheating the Revenue in relation to Fane Rack in relation to these deals. 55. Therefore the source money for the loan came from Juleo and Juleo receives its money by being the recipient of third-party payments in UK defaulting trader MTIC chains. 56. As third party payments in defaulting MTIC chains are designed to place the VAT due (due from the defaulting importer to HMRC) outside the control of the defaulter and out of the jurisdiction, these funds can properly be seen as the proceeds of criminal conduct (or representing such proceeds directly or indirectly, in whole or in part). a. The criminal conduct concerned would include cheating the public revenue as well as VAT offences. b. The third-party payment system prevents a High Court freezing order attaching to the money where it ought to be located - in the 11missing trader's" bank account. c. First generation MTIC frauds were susceptible to High Court ex parte civil action and those behind the frauds rapidly learnt the means of avoiding it - by sending the money offshore to an account entirely unconnected with the trading chain. d. There is no good and honest reason why a trader would divert, or allow diversion of, their proceeds of sale to the offshore account of another company. It ought to leave them unable to purchase any further goods and certainly prevents them from accounting for their VAT. 57. However, there is no need to rely solely on the above proposition - however strong - since Juleo can be demonstrated to have received the proceeds of crimes that have been proven before an English court to the criminal standard: the convictions in respect of Fix Electronics and FoneRack. 58. Thus Juleo holds property that is criminal property because it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or part, and whether directly or indirectly). It is a person's benefit from criminal conduct because 11he obtains property as a result of or in connection with the conduct" (per s.340(5) POCA) 59. As Juleo is the provider to Padani of the money for the 11Seaside loan" to ACM then it is necessarily providing criminal property to ACM. Whilst there is no evidence of dilution of the criminal proceeds with legitimate funds, it would not matter if there had been since the monies that passed through to ACM would represent such proceeds at least 11in part". The money is tainted with criminality. 60. Thus the money received by ACM represents (directly or indirectly, in whole or in) part) a person's benefit from criminal conduct. Indeed, by reference to JB/schedules/193-4, it is clear that ACM receives criminal property in connection with its own fraudulent chains and actions. Evidence in respect of the funding of the particular credits to the ACM account 61. In the passages above, it has been demonstrated that the money received by ACM - derived from Julee Ltd - is criminal property. 62. Further evidence in support of these propositions comes from looking at the particular payments into the Julee account and tracing them back beyond Julee to identify criminality with even greater particularity. 63. This can be done on two levels a. Identification of sources where there is a very strong inference of engagement in MTIC fraud. b. Identification of sources where the particular fraudulent MTIC chain can be proved. 64. Identification of sources where there is the strong inference of engagement in MTIC fraud: 65. Receipts into the Julee account (which pays the Padani sub-account of Seaside Mediteranea) derive in part from a. Full Moon Holdings Ltd (Cyprus) This company is considered to be a recipient of third party payments from UK defaulting MTIC chains. See schedule of loan, JB Schedules p185, (top left box) and page 184 (top left box) b. A-Z Enterprises Ltd. This UK company had no trading relationship with Julee yet made a total of 16 payments to Julee's FCIB account. These are considered to be third­ party payments from UK defaulting MTIC chains. JB/Docs/1065-6 c. Kwik Projects Ltd. Equally with Kwik, Kwik has no trading relationship with Julee yet made £84m total payments to Julee's FCIB account. Pooke 149, xp15309 See also Pooke 161,JB Schedule p196- (payments from Kwik can be seen on p196 etc) d. It is submitted that the only reason for these payments to these traders (Full Moon, A-Z and Kwik) is that they are third party payments. No credible alternative to MTIC third-party payments can be suggested to explain these payments. Payments from these traders to Julee have no commercial underpinning;the inference can readily be drawn that this is criminal money in Julee's hands - which then is passed to ACM. 66. Identification of sources where the particular fraudulent MTIC chain can be proved. In relation to some credits to ACM, it can be seen that these are funded from credits into the Juleo account that can be shown to be the proceeds of MTIC fraud arising out of particular UK defaulting traders: a. UK defaulter is Art Enterprises Limited; third party payment of £277,000 by A-Z Enterprises Ltd to Juleo Ltd See schedules p185 (top left hand box, lower entry) See schedules p189 b. Defaulter: VS Phones Limited; third party payment of £1,910,000 by A-Z Enterprises Ltd to Juleo Limited See schedules p 185 (top row, by second hole punch, 17:21:03 hrs) In this chain additionally it can be shown that the exporter (Team) made a supply to the Isle of Man based Aird re - who are likely to have exported the phones and, thereby, made a VAT reclaim. There are no records proving the latter point. See schedules p190 (Comment: the population of the Isle of Man was about 80,000 and thus a supply of 10,000 phones.........) c. Defaulter: Vollitone Ltd; third party payment of £1,186,867.50 by Kwik Projects Ltd to Juleo Limited. See schedule p185, (middle row, centre page, 18:45:14 hrs) The transaction chain showed the purported importer to be Vollitone who sold to Ideas 2 Go Ltd (see below) who sold to Kwik Projects Ltd. See schedules p191 Necessarily the third party payment instruction was "provided" to Ideas 2 Go Ltd who passed it in turn to Kwik Projects. 67. Vollitone Limited was a hijacked trader and therefore there was a fraud ab initio 68. In relation to Ideas 2 Go Ltd ,Nigel Cranswick, Tom Murphy, Darren Smyth Brian Olive and Andrew Marsh were convicted of conspiracy to cheat the Revenue in relation to Ideas 2 Go Ltd between 1/6/05 and 15/2/06 (and therefore during the period of the deal providing the funds to Juleo Ltd on or about 17th November 2005). 69. A feature of this particular case is the circular nature of the bank credits - a credit received into the ACM account becomes a payment to Zain which makes its way back to Juleo to Padani and back to ACM as the next payment (in part at least). This means that what is already criminal property may be yet again be used in crime such that an additional layer of criminality attaches to it by the time it arrives back into ACM's bank account as a further loan payment. 70. By reference to Schedule Pooke 135 at JB/Schedules 185, the following can be seen a. 17/11/05 16:06:08: £2,000,000 This payment derives from Full Moon and A-Z Office/Juleo/Padani and is therefore criminal property as received by ACM. The payment of £277,000 by A-Z Office to Juleo can be demonstrated to I be a third party payment from a fraudulent MTIC transaction chain in which the defaulter was Art Enterprises Ltd: See Schedule POOKE 146 at JB/SCHEDULES/189 By following the schedule it can be seen that this is paid through a number of accounts but forms the principal constituent of the following payment b. 17/11/05 18:24:01 £2,000,000 By the time of this payment, the money (tainted with general and specific criminality already) has additionally been used to effect a fraudulent MTIC transaction as demonstrated on schedule POOKE 146 at JB/Schedules/190. This is where the defaulting trader is VS Phones and A-Z Office makes a third-party payment to Juleo of £1.9m Thus by the time it leaves ACM's account it is by now the proceeds of general and two specific MTIC chains. NB: The £2m received at 18:24:01 becomes the principal constituent of the following two payments made to ACM having travelled in a circle of accounts. When paid to Zain (middle row, rhs), Zain makes three separate payments with it c. 17/11/05 19:00:27 £1,000,000 This payment, by the time it is received has an additional layer of specific criminality namely a fraudulent MTIC Trading chain in which Vollitone is the missing trader (hijacked) - see Schedule POOKE 146 at JB/Schedules/191. The fraudulent third party payment by Kwik Projects to Juleo of £1,186,687.50 is the source of the £1m received by ACM some 15 minutes later. This bank credit can therefore be shown to comprise general MTIC proceeds and three specific MTIC chains) d. 17/11/05 19:09:04 £346,000 This is derived from the £2m received by ACM at 18:27:02. Though it plainly passes through a number of accounts and the clear inference can be drawn about how it has been used, the specific details cannot be ascertained. The direct evidence therefore is sufficient only to show this is the proceeds of general MTIC fraud and two specific MTIC chains.

Cited in 2 later judgments