Being served with a production order under the Proceeds of Crime Act 2002 can be a frightening experience. Paul Bennett explains how your firm can get prepared, and respond effectively and lawfully if you’re served
What would your receptionist do if the National Crime Agency (NCA) or police arrived at your office demanding access to a client file? Give it to them? Or call you in a panic?
What would you do if you got that call? Panic? Cooperate to make it go away? Would you really know how to handle the situation and how to comply with section 345 of the Proceeds of Crime Act 2002 (POCA) and the Solicitors Regulation Authority (SRA) Handbook 2011 obligations?
Experience of advising numerous law firms tells me that when a production order lands, fear strikes the individuals in the firm and mistakes happen around legal privilege and client confidentiality. These mistakes can pose a significant risk to firms.
What is a production order?
Law firms typically get served with two distinct types of production order, and sometimes firms are initially unsure what type of order they have been served with.
The most common type arises under section 345 of POCA, and requires the party on whom it is served to deliver material (typically, documents such as a client’s file, except for legally privileged material) to the law enforcement agency within a specified time period (usually seven days).
Less common is the SRA production order under section 44B of the Solicitors Act 1974 (for solicitors) or section 44BB (in respect of any non-solicitors). These orders apply as a professional obligation on solicitors, and as a High Court order against non-solicitors.
Here I focus on the POCA kind of production order, but in a future article, I will deal with the SRA type. In recent years, servings of this type of order have been on the rise, as the NCA and the police are increasingly seeking to obtain information about clients (or former clients) from law firms.
Which legal areas are high risk?
Based on my client base and advisory work, I have found corporate transactions and conveyancing to be the two highest-risk areas for service of a production order on law firms. This is obviously because these areas handle the most money and are transaction-driven, meaning you see numerous clients; however, any area of practice where money is handled can be the focus of an enquiry under section 345 of POCA.
Production orders under other legislation are possible, but less common. The principles on responding are the same.
Statutory changes contained in the Serious Crime Act 2015 (section 45) were aimed firmly at restricting the actions of the professions (law, accountancy and financial services) in relation to services to criminals. Section 45(2) of the act prohibits:
‘… any activities that the person knows or reasonably suspects –
(b) will help an organised crime group to carry on criminal activities.’
How can we prepare for the potential service of a production order?
Simple steps and planning by the firm’s compliance officers for legal practice and finance and administration, and money laundering reporting officer (MLRO) can help ease the process. In small firms, these roles are often fulfilled by the sole director or partners, but in larger firms, professionals from a risk management background may be the internal leads.
I would recommend that every firm creates and implements a production order response policy to give you structure and ensure that, if someone is out at court or on holiday, you will have a checklist to help respond.
Like any other area of practice, you need to ensure three key things are achieved:
- Training – who needs to be involved and what training do they need?
- Communication – who is going to be responsible for which elements?
- Leadership – who is going to take responsibility for the firm and its response?
The production order response policy should ensure these are dealt with. See below for more details on training.
The key Law Society practice note on this topic is entitled ‘Responding to a financial crime investigation’. You should read it if contacted by the police or law enforcement personnel, even before they obtain a production order.
Who should we train and on what?
- All staff should be trained on anti-money laundering (AML) every two years. This issue should form part of their general awareness training (confidentiality and production orders).
- All staff should be trained on the legislative provisions of section 345 of POCA.
- Public-facing staff should be trained on how to deal with enquiries from the NCA / police officers asking if you act for a particular client.
- Compliance officers and the MLRO should receive more in-depth training focusing on legal professional privilege (LPP) and the SRA confidentiality obligations under outcome 4.1 (see below).
- Your response team should familiarise themselves with the production order response policy.
How does privilege apply?
LPP is a key consideration. There are two categories.
This protects client / solicitor communication when the purpose is seeking or giving legal advice. Broadly speaking, instructions and advice are protected, including documents and draft documents produced for that purpose.
This protects confidential communications made after litigation has started or when it is reasonably in prospect, linked to the proceedings and the obtaining and giving of evidence.
These two categories of LPP are fact-sensitive – you have to interpret them in the context of the production order served on you or your firm. Again, this emphasises the importance of having a clear production order response policy, which should contain reminders of the points to consider.
The starting point for law firms is the duty of confidentiality. Outcome 4.1 of the SRA Code of Conduct 2011 states that you must ‘keep the affairs of clients confidential unless disclosure is required or permitted by law or the client consents’.
The key to this obligation is ‘permitted by law’. If you are going to share the information, you must have a lawful reason, such as a clear and unambiguous production order. When applying LPP, you therefore have to consider and apply outcome 4.1.
What can we tell the police?
In the absence of evidence of consent from the client or a production order from a Crown Court, you should not even confirm if your law firm has acted for the client when the police or NCA ask. Outcome 4.1 forces you not to breach confidentiality.
If you receive an enquiry from the police or NCA, simply explain that your duties under the SRA Handbook preclude you from confirming even if you act or not for a particular client, but that you would be willing to confirm whether or not your firm acted if the police / NCA has a production order or a signed consent from the individual subject of the enquiry.
What do we need to do to comply with a production order?
Once you are served with a production order, you will typically have seven days to comply.
It is possible to challenge, amend and vary the production order, but beware: you need to give two clear days’ notice of this. Many firms which have sat on the document for some days have found that they have left it too late to query or vary production orders.
Breaching a production order is a criminal offence, so you need to be taking steps immediately upon receipt. It should not go into the ‘too hard’ or ‘deal with later’ pile, as you may hinder your position and reduce your options to respond to it or to seek clarification if it is poorly drafted.
The form of the order that should be used by the Crown Court is simple: it gives a clear summary of the client information sought and the dates under investigation, confirms the seven days to comply, and explains how to query or vary the order.
Unfortunately, like all precedents, it can occasionally be misused, either by judicial error or, more likely, by the police asking a judge to sign it and missing key information off the draft order. To protect you and your firm, it is worth checking that the order meets the criteria set out in section 345 of POCA.
Do I need legal advice?
Some firms will be able to deal with a production order in-house through their compliance officers or MLRO, with the assistance of the Law Society’s free resources, while other firms will need step-by-step guidance on complex or unusual matters.
If you are unsure of something in relation to responding to an order, you should seek specialist advice. Get this wrong and you risk criminal prosecution, an SRA investigation into your ‘misconduct’ (by which the SRA means your failing to apply the SRA Code of Conduct 2011 appropriately), and client complaints and challenges.
The Law Society operates the AML Directory, comprised of law firms which specialise in advising firms on responding to AML and POCA investigations and issues.
Under the AML Directory, the first 30 minutes of advice is free.
The key things to remember in responding to a production order are:
- Preserve confidentiality until you have a lawful reason to disclose anything.
- Train your team.
- Take advice from the AML Directory members if you are unsure of anything.
Case study: querying a defective production order
The police attended the offices of a conveyancing firm based in the north of England, seeking immediate access to a client’s file, saying there was an ongoing money laundering investigation and the information was needed that day. The officer produced a production order which was specific to a single conveyancing transaction, and which failed to meet the terms of section 345 of POCA, as it did not give the time limit for production.
The officer was insistent that he was not leaving the law firm’s office without the file. The law firm took urgent telephone advice from my firm, and I told the officer:
‘The production order is defective and my client does not have to give you the file. If you go and get it amended by the Crown Court judge and give my client time to respond, the file will be ready for tomorrow. Alternatively, I will write to the judge and ask him to revoke your defective order.’
The officer cooperated and secured a revised order, so the firm had a ‘lawful’ reason for breaching client confidentiality. The firm had acted for the same client in five other transactions (it was a small developer), but the production order did not necessitate (or lawfully allow) the sharing of this information.