Confiscation Of The Proceeds Of Crime In The UK

Article by Monty Raphael, Full Time Special Counsel Peters & Peters Solicitors.

Under the UK legislative scheme different instruments for the restraint and recovery of the proceeds of crime are available at different stages of the criminal proceedings. Criminal confiscation is only available after an offender has been convicted. However civil recovery, cash forfeiture, restraint and freezing orders are available prior to conviction and often pre-charge. The paper provides an overview of the UK legislative scheme on the recovery of the proceeds of crime with particular reference to criminal confiscation. It also includes a short survey of the civil regime and international co-operation measures in the UK. The outline of the paper is as follows:

1. Criminal confiscation

   1.1 Criminal lifestyle

   1.2 Benefit from criminal conduct

   1.2.1 Particular criminal conduct

   1.2.2 General criminal conduct

   1.2.3 Benefit

   1.3 Recoverable amount

   1.4 Ancillary orders

   1.5 European Convention on Human Rights

   1.6 Abuse of process

   1.7 Attrition in confiscating the proceeds of crime

2. Civil recovery

3. Cash: search, seizure and forfeiture

4. International co-operation

   4.1 Action on receipt of external request

   4.2 Action on receipt of external order

   4.3 Giving effect to external orders by means of civil recovery

   Introduction

1. The key UK legislative measure deployed in the pursuit of criminal property is the Proceeds of Crime Act 2002 (POCA). The Act originates in the June 2000 Report by the government's Performance and Innovation Unit, "Recovering the Proceeds Crime".1 This concluded that the pursuit and recovery of criminal assets in the UK was "failing to deliver the intended attack on the proceeds of crime". More specifically the Report identified that the legislation existing at the time contained a number of 'anomalies' and that there were problems in its use:

   "In the last five years, confiscation orders have been raised in an average of only 20 per cent of drugs cases in which they were available, and in a mere 0.3 per cent of other crime cases. The collection rate is running at an average of 40 per cent or less of the amounts ordered by the courts to be seized. Specially tasked law enforcement officers struggle to investigate the financial aspects of crime to support this effort, but their effectiveness is limited by their numbers and modest training."

2. The report offered some 68 'conclusions' which formed the basis of the Act. The principal changes introduced by POCA were:

   1) consolidation and extension of previous legislation, Drug Trafficking Act 1994 and Criminal justice Act 1988, on post-conviction confiscation;

   2) creation of the Assets Recovery Agency tasked with the implementing the Asset Recovery Strategy and conducting criminal confiscation and civil recovery proceedings. In 2008 the Agency has merged with the Serious and Organised Crime Agency. Its civil recovery powers were distributed among other prosecuting authorities in the UK;

   3) transfer of powers over restraint and management receivership from the High Court to the Crown Court;

   4) introduction of civil proceedings in the High Court for the recovery of assets "obtained through unlawful conduct" irrespective of whether any persons were convicted of a crime;

   5) introduction of stricter money laundering offences based on negligence.

3. Since coming into force POCA has been heavily amended, in particular by the Serious Organised Crime and Police Act 2005 and the Serious Crime Act 2007. This paper discusses POCA as amended.

4. In its 2008/09 Annual Report, the Serious Organised Crime Agency was able to boast the following outcomes:2

   2006/07

   2007/08

   2008/09

   2008/09

   £

   £

   £

   % increase on previous year

   Cash seizure

   3.3m

   8m

   9.2m

   15

   Cash forfeiture

   2.3m

   2.9m

   4.5m

   55

   Restraint orders

   27.2m

   46.8m

   128.8m

   175

   Confiscation

   14.5m

   11.6m

   29.7m

   156

   Civil recovery

   n/a

   n/a

   16.7m

   n/a

5. The figures across all the relevant agencies with POCA powers are likely to be substantially higher. For example, in the period April 2007–February 2008 the courts in England and Wales made 4504 criminal confiscation orders in sums totalling £225.87 million.3

1. Criminal confiscation

6. A confiscation order does not necessarily entail the confiscation of the defendant's property. Rather it requires him to pay a sum of money, as Lord Bingham explained in May:

   "Although "confiscation" is the name ordinarily given to this process, it is not confiscation in the sense in which schoolchildren and others understand it. A criminal caught in possession of criminally-acquired assets will, it is true, suffer their seizure by the state. Where, however, a criminal has benefited financially from crime but no longer possesses the specific fruits of his crime, he will be deprived of assets of equivalent value, if he has them. The object is to deprive him, directly or indirectly, of what he has gained. "Confiscation" is, as Lord Hobhouse of Woodborough observed in In re Norris [2001] 1 WLR 1388 , para 12, a misnomer."4

7. Section 6 POCA prescribes the process for the making of a confiscation order:

   The defendant must be convicted of an offence before the Crown Court or be committed to the Crown Court by the magistrates' court to consider whether to make a confiscation order. The prosecution must ask the court to proceed or the court itself believes it is appropriate to do so. Section 6 is mandatory and therefore the court has to proceed to make a determination once asked by the prosecution.5 Under section 6(5) the court's duty to proceed with the order becomes a power only where the court believes "that any victim of the conduct has at any time started or intends to start proceedings against the defendant in respect of loss, injury or damage sustained in connection with the conduct". If the first two conditions are met, the court must then proceed to determine: (a) whether the defendant has a "criminal lifestyle";

   (b) whether the defendant has benefited from his criminal conduct. POCA differentiates between general and particular criminal conduct. The former applies where the court has determined that the defendant has a criminal lifestyle; the latter where he does not;

   (c) the "recoverable amount" and make a confiscation order for that amount.

8. Any questions that may arise at the third stage must be addressed under the civil standard of proof – on the balance of probabilities (Section 6(7) POCA).

   1.1 Criminal lifestyle

9. "Criminal lifestyle" is central to the operation of the POCA criminal confiscation scheme. Where established on the facts, the concept will significantly affect the quantum of the "recoverable amount" primarily for two reasons. First, it requires the court to assume that the defendant's entire income during the six years prior to the start of the proceedings for the offence is the proceeds of crime, and secondly, it expands the definition of "tainted gifts" to include any transfers of property at significant undervalue that took place during the six year period.

10. Section 75(1) and (2) provides that the defendant has a criminal lifestyle if the offence before the court satisfies any of the following three tests:

    (a) it is specified in Schedule 2 POCA;

    (b) it constitutes conduct forming part of a course of criminal activity;

    (c) it is an offence committed over a period of at least six months and the defendant has benefited from the conduct which constitutes the offence.

11. Schedule 2 provides an extensive list of offences and should be consulted for that purpose. Here it is sufficient to point out that the list also includes inchoate offences (attempting, conspiring, aiding and abetting etc.) in relation to other offences specified in the list and that there is no requirement to show that the defendant benefited from the offence.

12. Under section 75(3)-(5) a conduct will form part of a course of criminal activity if the defendant has:

1. benefited from the conduct to the amount of not less than £5000, and

2. in the proceedings in which he was convicted he was convicted of three or more other offences, each of three or more of them constituting conduct from which he has benefited, or

3. in the period of six years ending with the day when those proceedings were started (or, if there is more than one such day, the earliest day) he was convicted on at least two separate occasions of an offence constituting conduct from which he has benefited.

13. In determining the relevant benefit the court may include the value if benefit derived from offences which have been or will be taken into consideration by the court in sentencing the defendant (section 75(5)(c)).

14. The third category of "criminal lifestyle", offences committed over six months, also requires the proof of the defendant's benefit of at least £5000 and can include benefit from offences to be taken into consideration (section 75(6)). The category can pose obvious difficulties in practical application particularly in relation to inchoate offences where the date when the offence is committed often will not be immediately apparent.

    1.2 Benefit from criminal conduct

15. Section 76(1) defines criminal conduct as conduct which—

    (a) constitutes an offence in England and Wales, or

    (b) would constitute such an offence if it occurred in England and Wales.

16. As outlined above, if the defendant does not qualify as having a criminal lifestyle the court must consider whether he has benefited from his particular criminal conduct. This category is more straightforward and will be considered first.

    1.2.1 Particular criminal conduct

17. Section 76(3) defines particular criminal conduct as the defendant's all criminal conduct which constitutes:

    (a) "the offence or offences concerned", or

    (b) "offences of which he was convicted in the same proceedings as those in which he was convicted of the offence or offences concerned", or

    (c) "offences which the court will be taking into consideration in deciding his sentence for the offence or offences concerned".

18. Pursuant to...