White Collar Crime: Stash and grab
18 June 2007
9 January 2014
1 October 2014
19 August 2014
24 January 2014
22 September 2014
To the uninformed, the abolition of the Assets Recovery Agency (ARA) after only four years in existence, and the transfer of its powers to the Serious Organised Crime Agency (Soca) in 2008, may appear to acknowledge a failure on behalf of the Government to 'take the cash out of crime'.
However, those engaged in financial crime should not take succour from the ARA's demise. The reality is that, since the passing of the Proceeds of Crime Act 2002 (Poca), the UK has some of the most far-reaching confiscation laws in the Western world, and they are all part of a continuing battle against fraud, which costs the UK up to £14bn a year.
The Government's attack on the acquisition and retention of illegal assets from fraud is continuing with a series of new initiatives that will see UK laws to restrain, seize and confiscate assets kept at the forefront of efforts to combat financial crime. While post-trial confiscation may remain the most obvious method of seizing assets, with orders running into millions of pounds not uncommon, there is an increasing emphasis on finding other ways to identify and seize assets.
Such developments are relatively new. It was not so long ago that the participants in the criminal trial process tended to view confiscation as an afterthought. Today the Crown's attitude towards confiscation can play a key part in determining whether a contested trial will need to take place at all.
Confiscation issues now arise at the very outset of a case. In large fraud cases the absence of a restraint order is now the exception rather than the norm. Prospective defendants are waking up to find their assets have been frozen. Often they have not had notice of the application and in many instances they may not, at that stage, have even been charged with any criminal offence.
Once suspects have been charged, prosecutors are now taking a far more robust view with regard to confiscation issues, making settlement of complex fraud cases more problematic. The court must proceed to confiscation in every case in which the Crown demands it, and post-conviction the traditional legal safeguards enjoyed by defendants are swept away. Discretions that the court used to enjoy under the previous legislation so that it did not have to make an order if it would cause injustice have, subject to a few limited exceptions, gone.
The size of any confiscation order is determined by a two-stage test: ascertaining the defendant's benefit from their criminal conduct and then ascertaining the realisable property that they have, known as the 'relevant amount'. Unless the defendant can satisfy the court on a balance of probabilities that they do not have the assets, a confiscation order can be made against them for the full amount of the benefit figure. Failure to pay a confiscation order can lead to a further default prison sentence of up to 10 years. The default sentence is not an alternative to payment, as upon release the order remains.
In calculating benefit, the Crown is entitled to claim that any monies or property passing through the defendant's hands as a result of their crime represent the benefit. It is irrelevant whether or not the defendant actually enjoyed the benefit. It is irrelevant whether the property or monies has been recovered and restored or that the defendant may as a matter of mitigation have voluntarily compensated the victim for the full amount.
Couriers and intermediaries who may receive relatively small payments for their involvement in criminal activities often have benefit figures found against them running into millions. If more than one defendant is convicted, each can be made liable for the entire benefit. Thus, in a four-defendant case where the total loss is £1m, the Crown could obtain confiscation orders totalling £4m. While the House of Lords may shortly determine the issue conclusively, surprising as it may seem, this is the current legal position. Moreover, if certain criteria are met, the Crown can allege that a defendant has a 'criminal lifestyle'. If such an assumption is made, then any monies or property passing through the defendant's hands in the preceding six years can be assumed to be part of a defendant's general criminal conduct and can be included in the calculation of the benefit figure.
While calculation of the benefit figure often leads to legal argument, it is the calculation of the 'relevant amount' that is more contentious, for it is upon that finding that any default sentence is based. Nothing is excluded; values can be assigned to properties, cars, clothes, jewellery, furniture and even pets. Also included will be any gifts the defendant has made in the preceding six years, irrespective of whether the value of the gift can be recovered.
If the Crown finds no evidence of significant assets, hidden assets can be alleged. The burden is then on a defendant to satisfy a court to the civil standard that they do not have any. Failure to satisfy the burden can lead to a confiscation order in the full amount of the benefit figure with the consequential impact upon the default sentence.
Once findings of fact have been made as to the extent of a defendant's assets it is very difficult for an order to be challenged successfully. The abolition of many of the discretions that the courts used to enjoy, coupled with the increasing zeal of some prosecutors, has the potential for injustice. The absence of judicial discretion is resulting in confiscation orders that some defendants have no realistic prospect of repaying being made. Moreover, delays in enforcement can mean that some defendants, although they may well have been successfully rehabilitated, are being returned to prison to serve their default sentence months, or even several years, after release.
Few would argue that confiscation orders should not be draconian and that in an appropriate case the full severity of the legislation should follow. However, the approach of the prosecution is often one of 'we can so we should', and the court within the legislative straightjacket of Poca can do little about it. Such an approach comes from the heart of Government and is reflected in a number of new initiatives.
In February the Government published a report entitled 'Financial Challenge to Crime and Terrorism'. This urges the use of all "financial tools" to recover criminal assets and announced the intention to set up a dedicated Treasury Asset Freezing Unit as part of a proactive plan to increase substantially criminal asset recovery targets. These developments are linked with the transfer of powers from the ARA to Soca. Next year the powers of civil asset recovery will be extended to the Crown Prosecution Service, the Revenue and Customs Prosecution Office and the Serious Fraud Office.
This will augment the widely used powers of those prosecutors to make cash seizures of sums of more than £1,000 that are suspected to relate to criminal activity. Add to that the increasing use of pre-charge and post-charge restraint, and the extension of the obligations for government departments and agencies, notably Companies House, to pass information of suspicious activity to investigators, and it becomes apparent that the determination of the UK Government in this field is unquenched.
When it comes to confiscation, the powers of the state are severe and are likely to become more extensive. For those engaged in financial crime, the message from the Government is clear: 'We are coming to get you.'
•Gareth Rees QC and Jason Mansell are barristers at 7 Bedford Row