Course correction: The Supreme Court’s decision in El-Khouri and its impact on extraterritoriality in money laundering cases

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18 February 2025

6 min read

The UK Supreme Court has handed down its decision in El-Khouri (Appellant) v Government of the United States of America (Respondent).¹

Amongst other things, the judgement has overturned the often-criticised Court of Appeal decision in R v Rogers,² which had become regarded as binding authority for the proposition that sections 327 to 329 of the Proceeds of Crime Act 2002 ("POCA") have extraterritorial effect (the case has also informed a number of subsequent extradition decisions).

Sections 327 to 329 of POCA set out the 'primary money laundering offences', namely: concealing, disguising, converting, transferring or removing criminal property (s327); entering into or becoming concerned in an arrangement which facilitates money laundering by another person; and acquiring, using or possessing criminal property (s329).

Since POCA came into force, the English appellate courts have made decisions relating to POCA that make sense in the context of the case but can have significant (and perhaps unforeseen) knock-on effects for businesses, particularly those in the regulated sector. Some historical court judgements regarding POCA have been very complex and difficult or contentious to apply, but in recent times this seems to have improved. El-Khouri is a clearly articulated and reasoned judgement that course-corrects a previous decision.

The El-Khouri case

El-Khouri is an extradition case involving allegations of insider dealing. The Appellant was accused of paying to obtain confidential inside information relating to US-listed companies, which he then used to make trades for profit.
In the lower courts, the US had argued that the effects of the Appellant's actions were likely to have been "felt on US markets" meaning the alleged conduct occurred "in" the United States and therefore came within s137(3) Extradition Act 2003 ("EA 2003"). This sets out a double-criminality test, which states that conduct constitutes an extradition offence if:

(a) the conduct occurs in the category 2 territory; (b) the conduct would constitute an offence under the law of the relevant part of the United Kingdom … if it occurred in that part of the United Kingdom …; (c) the conduct is so punishable under the law of the category 2 territory.' (our emphasis)
At trial, the court agreed with the US position and found that the double criminality test in s137(3) was satisfied.
On appeal, the High Court accepted the US view and dismissed the Appellant's appeal. However, a point of law of general public importance was referred to the UK Supreme Court: Was the High Court's approach to whether the Appellant's alleged conduct constituted an 'extradition offence' correct, having regard to the requirements of section 137(3)(b) of the Extradition Act 2003?

What happened in Rogers

Unlike the Bribery Act 2010, POCA does not provide a lot of guidance on the relevant UK nexus. The Court of Appeal in Rogers looked at the definition of money laundering found at s340(11) POCA, which (as pointed out in El-Khouri) is intended to relate to the failure to disclose offences under sections 330 to 332.
The Court stated (in relation to section 327): 'The offence of money laundering is par excellence an offence which is no respecter of national boundaries. It would be surprising indeed if Parliament had not intended the Act to have extraterritorial effect (as we have found it did)' [52].
In Rogers, the appellant had laundered the money in Spain. There was no act of money laundering in England, but the underlying fraud generating the criminal property took place in England and there were English victims. This was regarded as sufficient by the CoA, who therefore took a very broad approach to jurisdiction.
The case has since been used as authority that sections 328 and 329 have similar effect.

The UK Supreme Court's decision in El-Khouri

In a unanimous decision, the UKSC allowed the appeal and quashed the extradition order, holding that the correct test of double criminality was the one at s137(4)(b) EA 2003. The conditions which make conduct an extradition offence under s137(4) are:

(a) the conduct occurs outside the category 2 territory; (b) in corresponding circumstances equivalent conduct would constitute an extra-territorial offence under the law of the relevant part of the United Kingdom…; (c) the conduct is so punishable under the law of the category 2 territory. (our emphasis)
The interpretation of s137(3)(a) as extending to conduct that occurs outside the requesting state's territory so long as its intended effects are felt within the territory was mistaken for three reasons: it does not accord with the statutory language; it renders unworkable the distinction between the mutually exclusive categories in sections 137(3) and 137(4); and it is based on an unjustified assumption that the extradition scheme must be construed in the context of the common law rules governing territorial jurisdiction in criminal cases (paras 49 to 64).
The question whether the conduct specified in the extradition request occurred in or outside the territory of the requesting state for the purposes of section 65(3) and 65(4) is a question of fact to be answered simply by considering where the acts of the requested person specified in the extradition request are alleged to have occurred (ignoring mere narrative background and focusing on the substance of the criminality alleged) (para 64).
The Court also considered the interpretation of s137(3)(a) EA 2003 in the case of Cando Armas³ and found it to be wrong. The suggestion in Cando Armas that rules of UK domestic law which govern the exercise of extraterritorial criminal jurisdiction are relevant to whether the conduct specified in the extradition request occurred in or outside the territory of the requesting state for the purposes of s137(3) EA 2003 was erroneous (para 64).
The Court found that the substance of the Appellant's alleged criminality occurred in the UK and therefore this was 'a plain case where the conduct occurred outside the territory of the requesting state. It falls within subsection (4)(a) and not subsection (3)(a).' (para 67)
The conduct would therefore fall outside the territorial scope of the offence of insider dealing as set out at s62(1) CJA 1993, because the Appellant 'was not within the United States at the time when he is alleged to have done any act constituting or forming part of the alleged dealing; the dealing is not alleged to have occurred on a market regulated in the United States; and the professional intermediary allegedly relied on by [the Appellant] was not within the United States when the alleged dealing occurred' (para 71).
The US had contended that an offence under s329 POCA 2002 carries extraterritorial jurisdiction, relying on Rogers. The UKSC pointed out that, "To come within the territorial scope of section 329, however, the acquisition, use or possession of the proceeds of the criminal conduct must itself occur in the United Kingdom" (para 75).
The Court held that the decision in Rogers had been wrongly decided. In that case, the Court of Appeal had failed to recognise that s340(11)(d) POCA 2002 'merely defines "money laundering" and does not either create an offence itself or extend the territorial scope of the offences created by sections 327, 328 and 329 to acts done abroad … its language is positively inconsistent with the notion that Parliament intended those provisions to apply to acts done abroad … The only extra-territorial effect of section 340(11) is to bring within the scope of the offences created by sections 327, 328 and 329 relevant acts of dealing in the United Kingdom with criminal property that represents the proceeds of criminal conduct committed abroad; and that it does not extend the scope of those provisions to acts of dealing with criminal property which occurred abroad' (para 81).

The UK Supreme Court's helpful press summary is available here, and the full judgement is available here.

_{1 [2025] UKSC 3}
_{2 [2014] EWCA Crim 168;}_{https://uk.westlaw.com/Document/I8C4B20E0230511E4A508F5321F092DE1/View/FullText.html}
_{3 Office of the King's Prosecutor, Brussels v Cando Armas [2005] UKHL 67;}_{King's Prosecutor, Brussels v Armas & Anor [2005] UKHL 67 (12 October 2005)}

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}