The Criminal Money Laundering Offence: Knowledge, Wilful Blindness, Belief and Recklessness; What Does it All Mean? How Can Regulated Entities Protect Themselves?
Previously, I wrote about the meaning of the newly-added fault requirement of recklessness to the criminal money-laundering prohibition and how it differs from knowledge, wilful blindness as its legal equivalent, and belief:
462.31(1) Every one commits an offence who uses, transfers the possession of, sends or delivers to any person or place, transports, transmits, alters, disposes of or otherwise deals with, in any manner and by any means, any property or any proceeds of any property with intent to conceal or convert that property or those proceeds, knowing or believing that, or being reckless as to whether, all or a part of that property or of those proceeds was obtained or derived directly or indirectly as a result of
(a) the commission in Canada of a designated offence; or
(b) an act or omission anywhere that, if it had occurred in Canada, would have constituted a designated offence.
Recently, the B.C. Court of Appeal in R. v. Edwards was required to distinguish between knowledge, wilful blindness and recklessness within the context of ss.252(1.3) of the Criminal Code. Along with previous decisions, it provides substantial insight into the scope of the money-laundering offence, revealing, perhaps, a surprising breadth.
Like the money laundering offence, ss.252(1.3) (failing to stop at the scene of an accident) relies on the fault requirements of knowledge and recklessness. The Appellant was convicted at trial of failing to stop after the car he was driving struck a pedestrian, knowing that bodily harm had been caused and being reckless with respect to whether death resulted. The collision occurred in the early morning on a dark Vancouver Island highway. The Appellant heard a loud bang and saw that the passenger-side windshield of his car was shattered but kept driving. The pedestrian was later found, deceased.
The Appellant testified that, after the collision, he pulled into a driveway a short way down the highway in order to collect himself. He got out of his vehicle and walked back along the road to see what he had hit. His only source of light was a flashlight on his cell phone. In some of his accounts of what followed, he says he said he saw a deer, or a flash in the bushes, or noise or movements that suggested a deer. He believed he was outside of his vehicle for roughly five minutes. The trial judge rejected this evidence.
The Crown argued that the Appellant was wilfully blind (in law, a substitute for knowledge) to the existence of bodily harm and, therefore, knew it had been caused by the collision. The trial judge accepted this submission, finding that he was wilfully blind to the fact the accident had involved a person and deliberately avoided obtaining “actual” knowledge of the bodily harm that had resulted, in that he took no steps whatsoever to determine whether someone had been injured.
On appeal to the B.C. Court of Appeal, the Appellant submitted that the trial judge had erred in; (1) Failing to recognize the requirement of “heightened suspicion” as part of the doctrine of wilful blindness; and, (2) By engaging in a flawed analysis when he addressed the question whether the appellant was reckless as to whether death ensued as a result of bodily harm.
As to Issue One, the Appellant argued that because wilful blindness fulfills the legal requirement that the accused has actual knowledge of a fact or state of affairs, culpable wilful blindness will only be present where there is heightened suspicion as opposed to one that is mere. In other words, the accused’s mental state must be close enough to actual knowledge that liability for knowledge‑based offences can fairly be anchored in it.
As to Issue Two, the appellant submitted that, given the that recklessness presupposes knowledge of the likelihood of the prohibited consequences, an accused cannot be reckless if he is wilfully blind to a risk or danger.
After a rigorous review of the applicable case law, the Court rejected both submissions, upholding the Appellant’s conviction.
On April 1, the Supreme Court of Canada refused the Appellant leave to appeal his conviction.
Ten takeaways from the Court’s case law review and analysis:
(1) In the criminal law, wilful blindness, is, in itself, never a fault requirement. However, it can substitute for knowledge when the latter is prescribed as the fault requirement in a particular prohibition;
(2) Wilful blindness is accepted as a substitute for knowledge in law. This does not mean, however, that it equates to knowledge of a fact, or even that a fact is “probably” true. Rather, all that wilful blindness requires is a subjective awareness in the form of a heightened suspicion on behalf of the accused that a fact is true;
(3) Heightened suspicion is satisfied when an accused’s suspicion is aroused to the point where he or she sees the need for further inquiries but deliberately chooses not to make those inquiries. Nothing more;
(4) It is the state of deliberate ignorance that attracts liability; that is, the accused wanted to leave or put herself or himself in a position of being able to deny knowledge at some later point in time;
(5) In that sense, wilful blindness is the criminal law’s answer to an accused who attempts to circumvent a criminal law provision incorporating knowledge as its fault element by exposing the accused to the same liability as those with knowledge of the circumstances of the prohibited act. Noteworthy, the trial judge stated that he believed the Appellant when he testified that did not know he had hit a person. However, the facts were sufficient to create a suspicion in the mind of the Appellant requiring further inquiry; that is, the suspicion was heightened. The Court of Appeal agreed.
(6) The test for heightened suspicion is not objective, but subjective, meaning that under the circumstances the accused had a heightened suspicion, not ought to have had or should have. Rather, that she or he did, inferred from the facts proved to have been true at the operative time;
(7) Recklessness is also a subjective state of mind, but one characterized by an accused consciously adverting to the risk of committing the prohibited act, but proceeding nonetheless. It compares to but differs from the concept of penal negligence, now accepted as the fault requirement for a number of criminal offences (but not ss. 252(1.3) or ss.462.31(1));
(8) Unlike recklessness which requires a subjective inquiry, penal negligence is an objective measure of conduct intended to determine whether the accused’s actions or omissions fell markedly below the standard of care one could reasonably expect to be met in the same circumstances by another in the accused’s shoes. By including recklessness as opposed negligence in ss.252(1.1), Parliament was clearly stating that a person’s negligent failure to stop is not enough to justify her or his conviction;
(9) There is a connection between recklessness and wilful blindness in that the former requires a consciousness of risk which would not be without heightened suspicion; but,
(10) The inquiry required of each is different. When the inferred facts prove consciousness of risk, recklessness focuses on the accused’s failure to address the risk through action. That compares to wilful blindness that focuses on the deliberate failure to inquire or ask questions.
Not a factor in Edwards was the meaning of belief (one of the four fault requirements in ss.462.31(1)). It has been defined by the Court of Appeal for Ontario (CAO) as the acceptance of the truth of something, without necessarily having personal knowledge of its truth.
Application to the Money Laundering Offence:
One commentator has recently interpreted ss.462.31(1) as requiring that the Crown prove the property or proceeds the accused was intent on concealing or converting were obtained or derived by crime. One reason for that conclusion is that the required intention of the accused to conceal or convert the property or proceeds at issue infers that it is proceeds of crime. Another may be the frequent use by both judges and lawyers using “actual knowledge” synonymously with “knowledge” (Edwards and myself being examples).
Apparently, law enforcement is of the same view. Having to prove that the property is the proceeds of crime is seen as a major difficulty in prosecuting money-laundering offences. It may explain why Parliament in 2020 added recklessness as one of the fault requirements
Respectfully, this conclusion is mistaken. The analysis in Edwards and other cases supports the contrary; that it is not an essential element which must be proved by the Crown. If correct, the potential scope of ss.462.31(1) is much broader than many appear to have concluded.
In its 2018 judgement in R. v. Barna, the CAO said, in passing, that the criminal origin of the property or proceeds at issue is an essential element of the offence which must be proved beyond a reasonable doubt. But, in legalese, this was non-binding obiter. Whether there is a legal requirement to prove the criminal origins is an issue that has never been squarely framed and placed before a Canadian appellate court in the form of a question requiring resolution.
All four forms of fault (knowledge/ heightened suspicion, belief, and conscious advertence to risk) relate to the accused’s state of mind about the source of the property or proceeds. By definition, they do not require that the accused be correct that the source is criminal in nature.
Even in the case of knowledge, there is room for the accused’s error. In 1997, the Supreme Court in U.S.A. v. Dynar found that knowledge includes untrue belief. Following Dynar, Parliament added belief to knowledge as the fault requirement for ss.462.31(1), making explicit that belief is part of the faut requirement of the offence.
For that reason, in 1999 the CAO in R. v. Tejani, interpreting a provision comparable to ss.463(1.1) in the now-repealed Narcotic Control Act, found that, despite the one fault requirement (knowledge), the Crown needed only to prove that the accused believed the property was derived from the commission of the criminal offence of drug dealing. The Crown did not have to prove that the accused’s belief was correct. Noteworthy, the provision included the phrase: “with intent to conceal or convert that property or those proceeds…”.
It may very well be that knowledge includes “actual” knowledge. But all four forms of fault are alternatives to each other. In order to secure a conviction, the Crown can rely on something less than actual knowledge, like belief.
Regulated Entities & Recklessness:
The addition of recklessness to ss.463(1.1) poses a challenge for entities regulated under the PC(ML)TFA. That is because regulated entities are required to equip themselves with written procedures that are intended to permit them to identify and report transactions that are money-laundering risks.
The threshold for reporting is reasonable suspicion, meaning transactions that may, objectively considered, constitute money-laundering. It is a threshold substantially less than knowledge, heightened suspicion, belief, and consciousness of risk. But, with the means to consider and detect risk comes the expectation that organizations will be able to separate the wheat from the chaff; that is, in addition, to reporting, they will decline any involvement in transactions that they conclude are greater risks because they are more than reasonably suspicious and likely an actual attempt to launder money.
Subsection 463(1.1) is a prohibition and is not intended to not create a statutory duty of care like those created by the PC(ML)TFA. However, regulated entities should respond as they would if it was a duty of care, by considering how their systems can be improved to include mechanisms intended to detect and stop higher risk transactions that could criminally corrupt their operations.
This is a suggestion and not a legal requirement in the sense that it is something, unlike like the PC(ML)TFA written policies and procedures, that is not required by legislation. Rather, it is a risk-mitigating strategy, the complexity of which will depend on the size of the organization and its business lines.
No matter how complex, the strategy should be a reflection of how organizations in Canada can become exposed to criminal liability. It is a complicated area of the criminal law, but insulates the organization absent the involvement of one or more serious officers. If an employee engages in money-laundering, the organization can only be exposed if, a senior officer, with the intent of at least partially benefitting the organization:
(1) Is a party to the offence, meaning that the senior officer and employee are one and the same or the senior officer aids or abets the employee dealer in the commission of the offence;
(2) With the requisite fault (knowledge/heightened suspicion, belief or conscious advertence to risk), and acting within the scope of his/her authority, the senior officer directs the employee-dealer to conduct the unlawful transaction; or,
(3) Knowing or believing that the employee-dealer is about to conduct an unlawful transaction, the senior officer does not take all reasonable measures to stop the employee.
The use of the term “senior officer” is somewhat deceiving. It is defined to include the senior positions one would typically expect, but also less-senior positions; specifically, those responsible for managing an important aspect of the organization’s activities. Not too many organizations would consider any of their activities to be unimportant. For that reason, perhaps, the Ontario courts have accepted that, in the right circumstances, a construction foreman can be a senior officer for the purpose of establishing his employer’s criminal liability.