Confiscation, conspirators, couriers and money launderers

What benefit, for confiscation purposes under PoCA 2002, is obtained by conspirators, couriers of money or drugs, or by money launderers?  The question has been considered by the appeal courts since the landmark ruling in R v May [2008] UKHL 28 left some unfinished business with its closing words, “it may be otherwise with money launderers”.

The judgment of the House of Lords in May, and in the case of CPS v Jennings [2008] UKHL 29 delivered at the same time, set out the importance in confiscation proceedings of establishing what the defendant had ‘obtained’.  The judgments noted that a defendant “ordinarily obtains property if in law he owns it, whether alone or jointly, which will ordinarily connote a power of disposition or control”.  From these judgments sprang issues concerning what it was, in particular circumstances, that a defendant had ‘obtained’.

To some degree these issues have been resolved but, in the author’s view at least, there may still be some loose ends

To some degree these issues have been resolved in the judgments of the Court of Appeal in R v Sivaraman [2008] EWCA Crim 1736 (in relation to conspirators) and Allpress & others v R [2009] EWCA Crim 8 (in relation to couriers and money launderers).  But, in the author’s view at least, there may still be some loose ends to be addressed.

 

Conspirators

The issue in Sivaraman can be simply stated.  The defendant was employed as a manager of a filling station.  In that capacity he accepted between 8 and 10 deliveries each of approximately 30,000 litres of diesel fuel on which excise duty said to amount to £128,520 should have been paid.  To the defendant’s knowledge that duty had not been paid and on that basis he pleaded guilty to conspiracy to fraudulently evade excise duty.  He admitted being paid £15,000 for his role in the conspiracy.  For the purposes of confiscation was his benefit limited to the £15,000 he was paid or was it the £128,520 duty evaded by the conspiracy in which he had played a part?

The Court of Appeal held that Mr Sivaraman had himself ‘obtained’ only £15,000 from his criminal conduct and accordingly his benefit was £15,000.  Whilst May had demonstrated there where ‘property’ (meaning an asset of any description) was obtained jointly by more than one person then each person obtained the whole of it (and so each had a benefit of the whole of it), it did not follow that in a conspiracy each conspirator obtained everything which had been obtained as a result of the criminal conspiracy.

A conspiracy is not a legal entity,  in confiscation proceedings the court is concerned with the benefit obtained by the individual conspirator

A conspiracy is not a legal entity but an agreement or arrangement which people may join or leave. In confiscation proceedings the court is concerned not with the aggregate benefit obtained by all parties to the conspiracy but with the benefit obtained, whether singly or jointly, by the individual conspirator before the court.

So in confiscation proceedings following a conviction for conspiracy it is necessary to consider the role played by the individual conspirator and the benefit obtained by him (including any benefit which he has obtained jointly with one or more other members of the conspiracy).

The Court of Appeal summarised the position in the case of R v Rooney [2010] EWCA Crim 2 as follows: “(a) if a benefit is shown to be obtained jointly by conspirators, then all are liable for the whole of the benefit jointly obtained. (b) If, however, it is not established that the total benefit was jointly received, but it is established that there was a certain sum by way of benefit which was divided between conspirators, yet there is no evidence on how it was divided, then the court making the confiscation order is entitled to make an equal division as to benefit obtained between all conspirators. (c) However, if the court is satisfied on the evidence that a particular conspirator did not benefit at all or only to a specific amount, then it should find that is the benefit that he has obtained.”

 

Couriers

The Court of Appeal judgment in Allpress dealt with several otherwise unconnected cases in which similar issues arose.

the courier’s benefit for confiscation purposes should not include the cash or assets which he was merely conveying

With regard to the benefit arising to a person who acted merely as a courier of cash or assets belonging to others, the court held that the mere physical possession of the money or assets was not sufficient to amount to the ‘obtaining’ of them by the courier.  It follows that the courier’s benefit for confiscation purposes should not include the cash or assets which he was merely conveying.

It may be therefore that a courier has been convicted of possessing criminal property (which is a money laundering offence contrary to s329 PoCA 2002) but have obtained no benefit from the offence for the purposes of confiscation.

 

Money launderers through the banking system

However, in the same judgment, the court also considered the case of a Mr Paul Morris who was a Staffordshire solicitor who had laundered the proceeds of a VAT fraud committed by a Mr Raymond Woolley. Not only had Mr Morris passed the monies through his firm’s client bank account but he had arranged the transfer of over £4.5 million to a company called Thornbush Entertainment Inc (USA).  The evidence showed that Mr Morris had a connection with this company but Mr Woolley did not. It seems that these transfers were part and parcel of the laundering by Mr Morris of the proceeds of the VAT fraud.

Mr Morris was not acting as a bare trustee of funds belonging to Mr Woolley but Mr Morris’s connection with the funds was “far more than that”

Mr Morris had been convicted of money laundering in relation to those funds.  In the confiscation proceedings which followed the Crown Court judge had held, on the evidence, that Mr Morris was not acting as a bare trustee of funds belonging to Mr Woolley but Mr Morris’s connection with the funds was “far more than that”.  The Court of Appeal held that the Crown Court judge had been entitled to make that finding and also noted that Mr Morris had sole operational control of his firm’s client account through which the monies had passed.

In these circumstances Mr Morris had ‘obtained’ the monies and his benefit for confiscation purposes was the amount which had passed through the bank account under his control.

But the judgment in Allpress concludes with these words: “The laundering of money or other criminal property can take many forms. This judgment does not attempt to address all of them, but only the types of case which we have been directly considering.”

 

The value of that which has been ‘obtained’

One issue which did not arise in Allpress was the situation in which a defendant obtains property but has only a limited interest in it.  In that event s79(3) PoCA 2002 provides that if “another person holds an interest in the property its value . . . is the market value of [the defendant’s] interest”.

The defendant would in effect be acting as a nominee or bare trustee for the beneficial owner of the monies

I would suggest that a defendant who launders monies through a bank account on behalf of another may find himself in a position of having ‘obtained’ the monies laundered (when he deposits them in a bank account in his name and under his control) but that his own interest in those monies may have no value (since the monies belong to someone else).  The defendant would in effect be acting as a nominee or bare trustee for the beneficial owner of the monies.  In that event it would appear that the market value of that which he has obtained is nil and so his benefit for confiscation purposes in relation to those monies will also be nil.

However as far as I am aware that point has not, to date, been successfully argued in court.

David

UPDATE: The value of property “obtained” and the implications of s79(3) in that connection were considered by the UK Supreme Court in their June 2014 judgment in the cases of R v Ahmad & Ahmed and R v Fields & Others [2014] UKSC 36 and are now discussed in my blog article “UK Supreme Court rules on benefit obtained jointly“.

8 thoughts on “Confiscation, conspirators, couriers and money launderers”

  1. As regards “The value of that which has been obtained”, it seems to me that there is a danger of ending up dancing on the head of a pin (or trying to count the angels thereon). Is the situation not governed first and foremost by s6(4) of POCA 2002?

    The Court has to decide whether the defendant has benefited from his “general criminal conduct”. If he has not received anything at all in return for his services in passing the money through his account, it’s difficult to see how he has benefited from that conduct, and I would have thought the process should / would end there.

    However, admittedly it must be rare to encounter a situation like that. I suspect the average launderer knows what he’s doing.

    And the word “general” in “general criminal conduct” would be very useful for the prosecution.

    So, if a solicitor (say) were to launder funds through his client account, without deducting anything for himself, but he charged hefty professional fees for his outwardly blameless advice, I could well imagine those fees being treated as the benefits of criminal activity.

    1. Thanks for your comment.

      Ordinarily if a convicted money launderer has passed money through a bank account in his name (whether in his sole name or in his name jointly with one or more others) then the prosecution will say that his ‘benefit’ for confiscation purposes is the amount of money credited to the account.

      It was on that basis that Mr Morris was held to have a ‘benefit’ of the almost £8 million which passed through the bank account which he controlled (which was a part of the proceeds of Mr Woolley’s fraud).

      The logic for that is that the launderer has ‘obtained’ the monies credited to the account (regardless of whether he has retained them) and by s76(4) “A person benefits from conduct if he obtains property as a result of or in connection with the conduct” and s76(7) says “If a person benefits from conduct his benefit is the value of the property obtained”.

      What I am suggesting is that the value to the launderer of the money credited to the account may be nil.

      By the way, the expression “general criminal conduct” is defined by s76(2).

      You may also be interested in my blog article ‘Six Draconian features of confiscation‘.

      David

  2. David,

    Ah yes, that reminds me of something the MLR trainer said when the regs first came in. It’s the “dirty hands” principle.

    If you handle something dirty, the dirt rubs off on your hands, and even if you then pass the assets on to someone else, your hands are still dirty.

    And confiscation orders bear down on anyone with dirty hands.

    Brian

    1. As it happens Mr Woolley was also the subject of a substantial confiscation order. Both Mr Morris and Mr Woolley have been in and out of court and in and out of prison since their original trials. (Mr Woolley’s case was the subject of a judgment as recently as February 2012, Woolley, R (on the application of) v Ministry of Justice [2012] EWHC 295 (Admin).)

      I understand that, at the time of writing, both Mr Morris and Mr Woolley are in prison in relation to default sentences being served following failures to fully satisfy the confiscation orders made against them.

      David

  3. Interesting area. Confiscation orders are flawed. What would happen if the money was laundered through more than one account but the account holder was not the convicted launderer. Would he have obtained control and benefit of the full amount or would his instructions to the account holders mean its the actual account holders who have control?

    1. Let’s suppose X steals £10,000 in cash and passes £5,000 to Y and £5,000 to Z, each of whom deposit the stolen cash in their bank accounts.
      Then suppose X is convicted (either of theft of the £10,000 cash or of money laundering in relation to the stolen cash).
      Then in confiscation terms X has a benefit of £10,000.
      If Y and Z were prosecuted for laundering £5,000 each and convicted then each of them would have a benefit of £5,000 for confiscation purposes.
      There is no problem in law with that – even though it means that a theft of £10,000 results in total benefit for X, Y and Z of £20,000.
      David
      P.S. For simplicity I have ignored the implications of a ‘criminal lifestyle’ in this example.

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