Category Archives: Civil recovery

Civil recovery Part 5 PoCA 2002

Criminal Finances Act 2017

Big Ben imageThe new Criminal Finances Bill was published on 13 October 2016. Consideration of the detailed provisions of the Bill by MPs and Lords has now been completed and limited amendments have been made to the original Bill.  When this blog post was last updated (16 April 2018) the final version of the Bill had received Royal Assent and had become the Criminal Finances Act 2017.  However most of the operative sections of the Act are being brought into force by regulations which are being made in stages (updates to the text below indicate provisions which are in force).

The new Act strengthens civil recovery of the proceeds of crime; creates ‘unexplained wealth orders’; creates new offences of failing to prevent the facilitation of tax evasion; and extends existing investigation powers in relation to money laundering and terrorist finances.

It appears that the provisions in the Bill were largely based on suggestions from investigators and prosecutors.  Insofar as the Bill was criticised in parliament those criticisms were to the effect that the Bill’s provisions did not go far enough.

WARNING – THIS IS A LENGTHY BLOG POST – OVER 2,000 WORDS

 

  1. Strengthening civil recovery powers
  2. Unexplained wealth orders
  3. Failing to prevent the facilitation of tax offences
  4. Suspicious Activity Reports and the moratorium period
  5. Tidying up investigation powers
  6. Conclusion
  7. Contacting us

 

Strengthening civil recovery powers

Originally Part 5 of the Proceeds of Crime Act 2002, which deals with civil recovery, contained 87 sections (numbered 240 to 326).  Previous amendments have deleted two of those sections but added 31 new ones.  The new Act adds a further 45 new sections to Part 5 in two entirely new chapters, chapter 3A ‘Recovery of listed assets in summary proceedings’ and chapter 3B ‘Forfeiture of money held in bank and building society accounts’.

The existing chapter 3 of PoCA 2002 (which continues in force) makes provision for officers to search for cash, for the detention of cash where (on ‘reasonable grounds’) that cash is suspected to be ‘recoverable property’ (which broadly means proceeds of crime) or is suspected to be intended for use in crime, and is more than the ‘minimum amount’ (which is £1,000), and for the forfeiture of seized cash where the court is satisfied (on a balance of probabilities) that the cash is ‘recoverable property’ or is intended for use in crime (or where no objection has been raised to forfeiture).

In essence the new chapter 3B, inserted by s16, extends similar provisions (except the search provisions) to monies in bank or building society accounts.  That will involve a bank or building society account initially being ‘frozen’ for a period of up to 2 years by an ‘account freezing order’ made in the Magistrates’ Court (which, like a Crown Court restraint order, may initially be made on an ex parte basis).  Application could then be made, by way of an ‘account forfeiture notice’, for monies in the ‘frozen’ account to be forfeit to the Crown without the necessity of a further appearance in the Magistrates’ Court.  Alternatively, or if an objection were made (in writing and normally within 30 days) to the ‘account forfeiture notice’ (for example by the account holder or another interested party), a hearing in the Magistrates’ Court would be required before the monies could be forfeit.

There is provision for the account holder to be informed of the making of an ‘account freezing order’ and the issue of an ‘account forfeiture notice’ and for allowances to be made for monies to be drawn from a ‘frozen’ account – for example to meet living expenses or to allow the running of a business, as well as to meet appropriate legal costs.  There are also provisions to cater for setting aside or variation of an ‘account freezing order’ and for late objections and appeals.

The new chapter 3A, inserted by s15, extends similar provisions (including search provisions) to ‘listed assets’ which  include precious metals, precious stones, watches, artistic works, face-value vouchers and postage stamps.  The chapter 3A provisions also cater for associated property and joint property (where only part of an asset is subject to forfeiture).  Again a ‘minimum value’ of £1,000 applies.

The Act also provides, s14, for the definition of “cash” in s289 PoCA 2002 to be extended.  The definition already included cheques (including travellers’ cheques), bankers’ drafts, postal orders, bearer bonds and bearer shares.  It will now include gaming vouchers, fixed-value casino tokens and betting receipts.  The idea is to cover what might be described as ‘cash substitutes’ which could be used by criminals as an alternative means of transferring value.  A similar amendment is made to the Anti-Terrorism, Crime and Security Act 2001 in respect of “terrorist cash”.

The scope of ‘unlawful conduct’ which may be the basis of civil recovery action under Part 5, PoCA 2002 is extended by s13 to include ‘gross human rights abuse or violation’ which is defined by a new section 241A PoCA 2002.

[UPDATE: The provisions of s16, inserting a new chapter 3B into PoCA 2002, came into force on 31 January 2018.  The provisions of s15, inserting a new chapter 3A into PoCA 2002, and s14, extending the definition of cash, came into force on 16 April 2018.]

 

Unexplained wealth orders

The Act creates ‘unexplained wealth orders’ by s1.  An ‘unexplained wealth order’ requires an individual to set out the nature and extent of his interest in the property specified in the order, and to explain how he obtained that property in cases where that person’s known income does not explain ownership of that property.

It therefore allows an enforcement authority to require an individual to explain the origin of assets that appear to be disproportionate to his income.  It is important to recognise that ‘unexplained wealth orders’ form part of chapter 8 of PoCA 2002 which deals with powers of investigation (new sections applicable to England and Wales are inserted after s362 of PoCA 2002) – rather than part 5 which deals with civil recovery.

Applications for ‘unexplained wealth orders’ are to be made to the High Court, who would need to be satisfied either that there are reasonable grounds for suspecting that the respondent is, or has been, involved in serious crime (or a person connected with the respondent is, or has been, so involved) or that the respondent is an overseas ‘politically exposed person’ (meaning an individual who has been entrusted with prominent public functions by an international organisation or a State outside of the UK or the European Economic Area, or a close relative or associate of such a person).

Serious crime refers to an offence set out in Schedule 1 to the Serious Crime Act 2007 (including some drug trafficking, arms trafficking, people trafficking and modern slavery offences, organised crime, money laundering, firearms offences, prostitution offences, fraud, tax evasion, bribery, counterfeiting and trade mark offences, poaching and environmental offences).

In the case of an overseas ‘politically exposed person’ there would be no requirement for a suspicion of serious criminality.

In the original Bill, an application for an ‘unexplained wealth order’ could only be made in connection with property having a value greater than £100,000.  During the Bill’s passage through parliament this figure was reduced to £50,000.

Where a person provides information in response to an ‘unexplained wealth order’ the authority may use that information as a basis for civil recovery proceedings under Part 5 or in connection with any confiscation proceedings under Part 2 PoCA 2002.

Where a person fails to provide information in response to an ‘unexplained wealth order’ (without reasonable excuse) there will be a rebuttable presumption that the property in question is ‘recoverable property’ for the purposes of any civil recovery proceedings taken subsequently.

Alongside the proposed new ‘unexplained wealth orders’ will be new ‘interim freezing orders’, introduced by s2, to ‘freeze’ assets subject to ‘unexplained wealth orders’ to prevent their dissipation.

[UPDATE: The provisions relating to unexplained wealth orders came into force on 31 January 2018.]

 

Failing to prevent the facilitation of tax offences

The Act creates, at sections 44 to 52, a new offence of failing to prevent the facilitation of tax offences.  This new offence may be committed by an organisation such as a limited company or a partnership (but not by an individual).  The essence of the offence is that where an individual has committed an offence which has facilitated a tax offence by another, then the organisation with which he is connected (typically his employer) may be prosecuted for its failure to prevent the individual committing his offence.

For example if an employee of a bank or a firm of accountants facilitates a tax offence by a customer or client then not only will that employee be liable to prosecution (as he is now) for his criminal conduct in facilitating the tax offence but the organisation will be liable to prosecution for this new offence.  In this way the government intends to hold organisations to account for the criminal misconduct of their employees and other persons acting on their behalf.

Under existing law the organisation would only be liable to prosecution if the ‘directing minds’ of the organisation were engaged in criminal conduct.  Because employees who commit tax evasion facilitation offences are typically not at the most senior level of the organisation which employs them the organisation itself is not currently at risk of prosecution.  The Act changes that.

The new offence is modelled on the s7 Bribery Act 2010 offence of failing to prevent bribery.

As with the Bribery Act offence, guidance will be issued to assist organisations to set up appropriate procedures to prevent tax evasion facilitation offences by their employees and agents.  Key principles are likely to include risk assessment, prevention procedures, due diligence, staff training, and monitoring and review.

[UPDATE: These provisions came into force on 30 September 2017.]

 

Suspicious Activity Reports and the moratorium period

Provisions in the Act aim to make more effective the Suspicious Activity Reports regime.  There is a new power, introduced by s12, allowing the National Crime Agency to require any person within the ‘regulated sector’ (that is businesses subject to the Money Laundering Regulations and obliged to make a Suspicious Activity Report in appropriate circumstances) to provide relevant information to the NCA where the NCA has received a SAR (whether from that person or another) or a request by an overseas authority.  If necessary an order may be made in the Magistrates’ Court compelling disclosure of the required information (with a penalty of up to £5,000 for non-compliance).

Previously the SARs regime operated on a ‘shop and stop’ basis.  Where a reporting entity, such as a bank or firm of accountants or lawyers, made a report it was relieved of any obligation of client confidentiality with regard to the content of the SAR.  But the reporter was not in a position to provide follow up information or further details to the NCA where ordinary client confidentiality prevented that.  So once the report had been submitted the reporter was effectively stopped from providing further details.  The provisions in the Act remove any obstacle to the supply of further information (except in respect of information covered by legal privilege).

Another change, introduced by s11 of the Act, facilitates the exchange of information about suspicious activities between different businesses within the ‘regulated sector’ so that, where appropriate, they can co-ordinate their reports and actions in relation to those suspicions.

Customers of banks in particular may be concerned by further provisions, inserted by s10 of the Act, allowing the ‘moratorium period’ (during which, for example, a bank account may be frozen) to be extended by up to six months longer than was previously permitted.

Under previous legislation a bank could freeze a customer’s account pending consent from the NCA initially for a period of seven working days and then for an additional period of no longer than 31 calendar days.  This 31 day period is known as the ‘moratorium period’.  Under the new provisions the NCA (or other appropriate investigator such as the police or HMRC) can apply to the Crown Court for the moratorium period in respect of a particular SAR to be extended.  Initially the Crown Court could grant an extension of (up to) 31 days and the court would have power, upon further applications by the investigator, to grant further (up to) 31 day extensions – up to a maximum extension of 186 days from the end of the original moratorium period.  Extensions could be granted where the Court is satisfied that it is necessary and reasonable, and where an investigation is being conducted diligently and expeditiously.  The Court may exclude from any part of its hearings concerning extending the ‘moratorium period’ the ‘interested person’ (the holder of a frozen bank account for example) and his legal representatives.

It follows that a customer’s bank account could be frozen for more than seven months without the customer having an opportunity to hear the evidence upon which the suspicion of money laundering was based and to effectively challenge that evidence or provide appropriate explanations.  Such a long period of account freezing could have very serious implications for the customer.

These provisions of the Act add new sections to Part 7 PoCA 2002.

[UPDATE: These provisions came into force on 31 October 2017.]

 

Tidying up investigation powers

The Act also contains various provisions to tidy up the PoCA 2002 provisions relating to powers of investigation.

In particular amendments made by s7 allow ‘disclosure orders’ under s357 PoCA 2002 to be obtained in connection with money laundering investigations and, by s33, the investigation powers of Part 8 PoCA 2002 become available for revisits under s22 PoCA 2002 to a defendant’s available amount in relation to an existing confiscation order.

Section 32 of the Act ensures that confiscation orders which are discharged under s24 or s25 PoCA 2002 may still be subject to reconsideration under s21 or s22 PoCA 2002.

The Act also extends PoCA 2002 enforcement and investigation powers more coherently to HMRC, the Serious Fraud Office, the Financial Conduct Authority and immigration officers.

[UPDATE: Some of these provisions have now come into force.]

 

Conclusion

The Criminal Finances Act 2017 makes significant changes to a variety of PoCA 2002 provisions with corresponding amendments to the law relating to terrorist property.

 

Contacting us

Our contact details are here.

David

(Note: This article deals with the Criminal Finances Act 2017 so far as it applies in England and Wales.  At the time of writing not all of the operative provisions of the Act had been brought into force.   Appropriate professional advice should be sought in each individual case.)

Criminal Finances Bill proposed

bigbenA new Criminal Finances Bill was proposed in the Queen’s Speech at the opening of the new parliamentary year on 18 May 2016.  The new Bill is intended to assist in tackling corruption, money laundering and tax evasion.

The Bill itself has not yet been published, but the Home Office have said that the Bill will allow the government to recoup more criminal assets by reforming the law on proceeds of crime, including provisions to strengthen enforcement powers and protect the public. It will also implement a more effective regime to support reporting of suspicious financial activity, make it easier to seize illicit funds and improve coordination between the public and private sectors to tackle criminal financial behaviour.

[UPDATE: The Criminal Finances Bill has now been published and an article on it appears HERE]

The bill will:

  • introduce a criminal offence for corporations who fail to stop their staff facilitating tax evasion;
  • improve the operation of the suspicious activity reports regime to encourage better use of public and private sector resources against the highest threats, to target entities that carry out money laundering instead of individual transactions, and to provide the National Crime Agency with new powers; and
  • improve the ability of law enforcement agencies and courts to recover criminal assets more effectively, particularly in cases such as those linked to grand corruption.

 

New offence

The new offence for corporations who fail to stop their staff facilitating tax evasion may have similarities to the offence committed by a commercial organisation which fails to prevent bribery.  That was a new offence introduced by s7 Bribery Act 2010.

The essence of the Bribery Act offence is that it occurs when a person associated with a relevant commercial organisation bribes another person with the intention of getting or keeping business, or an advantage in the conduct of business, for the organisation.

So it could be that the new offence will be committed by a corporation where a person working for the corporation facilitates the evasion of tax by the corporation itself or by another person.

My expectation would be that in this context (as in the case of the Bribery Act offence) the offender could be an incorporated company or a partnership and that a person working for the corporation could be widely defined and not limited to employees of the corporation (so as to include partners and self-employed ‘staff’ and agents instructed by the corporation).

So, for example, a firm of accountants, lawyers or tax advisers would commit the offence if it failed to prevent a person working for it facilitating tax evasion by a client of the firm.

Under existing legislation a person who is knowingly concerned in tax evasion commits an offence, but an incorporated body would not be subject to such prosecution unless the ‘controlling mind’ of the company were ‘knowingly concerned’ in the evasion and acting dishonestly.  The new offence will therefore place an incorporated body at risk of prosecution in a significantly wider range of circumstances.

Again it may be the case (as with the Bribery Act offence) that it would be a defence for the firm to show that it had in place adequate procedures designed to prevent persons working for it from undertaking such conduct.

The maximum penalty for the Bribery Act offence is an unlimited fine and a similar penalty may be prescribed for the proposed new offence.

 

Suspicious Activity Reports

A new focus for the Suspicious Activity Reports (SAR) regime would be welcome.  Over 300,000 such reports are received by the National Crime Agency (NCA) each year.  The vast majority of these reports are from the High Street banks.  Some of these reports must be based on very limited information about the bank’s customer and his financial affairs.

A proportion of these reports will incorporate consent requests, meaning that the NCA need to urgently address the report as they have a statutory time limit requiring a response within 7 working days.  Yet these urgent cases may not be the most important matters to which the attention of the NCA should be directed.

We shall have to see what detailed proposals are in the Bill to shift the focus of SARs to encourage better use of public and private sector resources against the highest threats and to target entities that carry out money laundering instead of individual transactions.

 

Recovering criminal assets

The authorities recover criminal assets by confiscation under Part 2, Proceeds of Crime Act 2002, and by civil recovery under Part 5 of the Act.  Broadly speaking, confiscation applies where a defendant has been convicted of an offence from which he has obtained a benefit and obliges him to pay a sum of money to the court (so the focus of confiscation is on the defendant); whereas civil recovery does not necessarily involve any criminal conviction but requires specified property to be forfeit to the state where that property is, or represents, proceeds of criminal conduct (so the focus of civil recovery is on the asset).

Confiscation law was subject to significant amendment relatively recently by the Serious Crime Act 2015.  It may be that the Criminal Finances Bill will concentrate on amendments to civil recovery law.

 

Conclusion

No doubt the Criminal Finances Bill is a topic to which we shall be repeatedly returning in this blog as matters develop over the coming months.

[UPDATE: The Criminal Finances Bill has now been published and an article on it appears HERE]

 

Contacting us

Our contact details are here.

David

(Note: This article applies to the provisions of the Proceeds of Crime Act 2002 applicable in England and Wales. Appropriate professional advice should be sought in each individual case.)

Getting technical help on proceeds of crime issues

 

My name is David Winch, Director of Accounting Evidence Ltd.

We are forensic accountants specialising in crime and proceeds of crime proceedings in Crown Court cases in England and Wales.

Most of the work we do is financed by legal aid under ‘prior authority’ arrangements.

Personally, I have been qualified as a Chartered Accountant for 35 years and have a lot of experience in the Crown Court as an expert witness.

If you visit our website you will find over 70 detailed technical articles which will help you.

If you can’t find what you want, try the Quick Query button on our website homepage.

That emails me and I will personally reply – free of charge.

If you need expert advice, get in touch.

Accounting Evidence.

It’s what we do.

 

Contacting us

Our contact details are here.

David

Video produced by On Record Media Ltd info@onrecord.media 07872 550905

PoCA 2002 and ‘kinds of unlawful conduct’

Although the Proceeds of Crime Act 2002 has been a part of UK legislation for nearly ten years now it is still throwing up intriguing technical arguments.  One of these concerns an apparent anomaly between Part 5 PoCA 2002 dealing with civil recovery and Part 7 dealing with the criminal offence of money laundering.  The issue is, in order to demonstrate that property is derived from crime does the Crown have to identify at least the kind or kinds of unlawful conduct from which the property has been obtained?

It is clear that it is not necessary for the Crown to specify a particular offence, or to identify a particular offender, in order to satisfy the court that property has been obtained by criminal conduct.

there appears to be a divergence between what is to be proved in civil recovery proceedings and in criminal prosecutions for money laundering

But beyond that there appears to be a divergence between what is to be proved (i) to the civil standard (the balance of probabilities) in civil recovery proceedings under Part 5, and (ii) to the criminal standard (beyond reasonable doubt) in criminal prosecutions for money laundering under  Part 7.

In short, under Part 5 the Crown does have to identify a kind or kinds of unlawful conduct from which the property was obtained, under Part 7 it does not.

The requirements under Part 5 (civil recovery)

The general purpose of Part 5 PoCA 2002 is to enable the Crown, by civil proceedings, to appropriate property obtained by unlawful conduct.  That may be by action in the High Court to ‘recover’ the property, or, in the case of cash, action in the Magistrates’ Court to have the cash forfeit to the Crown.  The powers may be used whether or not any proceedings have been brought for a criminal offence in connection with the property, s240.

Part 5 also extends to property which represents other property which had been obtained by unlawful conduct and, in the case of cash, money intended for use in future unlawful conduct.

Conduct occurring in the UK is unlawful conduct if it is unlawful under the criminal law where it occurred.  Conduct occurring outside the UK is unlawful conduct if it is unlawful under the criminal law where it occurred and would also be unlawful under the criminal law in any part of the UK, s241.

Section 241(3) provides that the court must decide on a balance of probabilities (i.e. the civil standard) whether it is proved “that any matters alleged to constitute unlawful conduct have occurred”.

In layman’s terms Part 5 enables the authorities to seize and retain the proceeds of crime

In layman’s terms Part 5 enables the authorities to seize and retain the proceeds of crime whether or not anyone has been, or can be, convicted of that crime.  Indeed it is not necessary for the Crown to be able to identify a specific offender or a specific offence in order to succeed under Part 5.

It is not necessary even for the Crown to show that the property was obtained by a particular kind of crime.  But the Crown does have to satisfy the court, on the balance of probabilities, “that the property was obtained through conduct of one of a number of kinds, each of which would have been unlawful conduct”, s242.

But the Crown will not succeed under Part 5 if all it can say is that the property must have come from crime of some sort but it has no idea what sort of crime that might have been.

So, for example, in the case of a man who has wealth which cannot be explained as having been obtained from any legitimate source, that fact in isolation will not be sufficient as a basis for civil recovery.  That was confirmed in the case of R (Director of Assets Recovery Agency) v Green [2005] EWHC 3168 (Admin).

Of course the lack of any identifiable source of known wealth together with other evidence of crime of one sort or another may be sufficient to satisfy the requirements for Part 5.

the Crown need not prove the commission of any specific criminal offence, in the sense of proving that a particular person committed a particular offence on a particular occasion

In the Court of Appeal judgment in Assets Recovery Agency Director v Szepietowski & others [2007] EWCA Civ 766 at para 107 Lord Justice Moore-Bick put it this way, “it is sufficient, in my view, for the Director to prove that a criminal offence was committed, even if it is impossible to identify precisely when or by whom or in what circumstances, and that the property was obtained by or in return for it. In my view Sullivan J. was right, therefore, to hold that in order to succeed the Director need not prove the commission of any specific criminal offence, in the sense of proving that a particular person committed a particular offence on a particular occasion. Nonetheless, I think it is necessary for her to prove that specific property was obtained by or in return for a criminal offence of an identifiable kind (robbery, theft, fraud or whatever) or, if she relies on section 242(2), by or in return for one or other of a number of offences of an identifiable kind”.

The requirements under Part 7 (criminal money laundering)

Part 7 of PoCA on the other hand is concerned with the prosecution of an individual for money laundering.

The principal money laundering offences are set out in sections 327 – 329.  These cover the possession, acquisition, use, concealment, conversion, transfer and removal from the jurisdiction of ‘criminal property’ as well as entering into an arrangement concerning ‘criminal property’.  In effect almost any involvement with ‘criminal property’ is likely to comprise a money laundering offence.

‘Criminal property’ is defined by s340(3).  Property is ‘criminal property’ if it constitutes or represents a person’s benefit from criminal conduct and the alleged money launderer knows or suspects this to be the case.

Of course in a criminal prosecution the offence must be proved to the criminal standard (beyond reasonable doubt).

there is no reference in Part 7 to a need to identify the offence from which the criminal property was initially obtained nor is it necessary for the Crown to identify even the kind or kinds of predicate offence

However there is no reference in Part 7 to a need to identify the offence from which the criminal property was initially obtained (sometimes referred to as the ‘predicate offence’).  Nor indeed, for the purposes of Part 7 is it necessary for the Crown to identify even the kind or kinds of predicate offence.

So that in the case of R v Anwoir [2008] EWCA Crim 1354 the Court of Appeal held, at para 21, “We consider that in the present case the Crown are correct in their submission that there are two ways in which the Crown can prove the property derives from crime, a) by showing that it derives from conduct of a specific kind or kinds and that conduct of that kind or those kinds is unlawful, or b) by evidence of the circumstances in which the property is handled which are such as to give rise to the irresistible inference that it can only be derived from crime”.

This approach was followed in the case of R v F & B [2008] EWCA Crim 1868 concerning two people whose luggage was searched at Heathrow Airport in January 2008.  Their bags were found to contain £1,184,670 in cash.  They were charged with money laundering although at their trial the Crown gave no indication of the kind or kinds of predicate offence from which the cash had been derived.  The Court of Appeal confirmed that the prosecution was under no obligation to do so.

A back door route to satisfy the Part 5 requirements?

This arguably opens a back door route which might be available for use in civil proceedings under Part 5.

It may be open to the Crown in civil proceedings to specify “money laundering” as the kind of unlawful conduct from which the property was ‘obtained’ in order to satisfy s242.

In the author’s view this would only be appropriate where the predicate offence was committed by someone other than the present holder of the property in question

In the author’s view this may be appropriate where the predicate offence was committed by someone other than the present holder of the property in question, because it may then be said that the present holder obtained it by acquisition of criminal property or by becoming concerned in an arrangement involving criminal property.  However it would not be appropriate where the predicate offence was committed by the person presently holding the property.

To take an example, if John steals and retains a valuable painting then he has committed theft, the predicate offence, and money laundering (by possession of the stolen painting).  However it could not be said that he ‘obtained’ the painting by money laundering because the painting did not become ‘criminal property’ until he had stolen it.  His obtaining of the painting was by theft (only his retaining of it was a money laundering offence).

In contrast if John steals the painting and passes it to his friend Jane and asks her to keep it so it will not be discovered if the police search his home, then Jane has obtained the painting by money laundering (by entering into an arrangement to facilitate John’s retention of the stolen painting). So it would be reasonable to describe money laundering as the kind of unlawful conduct by which Jane obtained the painting.

So I would suggest that an allegation of money laundering does not in reality represent an easy and universal option for the Crown in civil recovery cases under Part 5.

It has been argued however that, in the case of cash, the Crown could be on stronger ground because any use of the cash by a person who knows or suspects it to be derived from crime would itself be a money laundering offence

It has been argued however that, in the case of cash, the Crown could be on stronger ground (see “Seized up?” by David Allan, barrister of 23 Essex Street Chambers – Criminal Law & Justice Weekly, 28 May 2011).  This is because any transfer or use or export of the cash by a person who knows or suspects it to be derived from crime would itself be a money laundering offence.  Therefore the Crown could argue that the cash was intended for use in unlawful conduct.  This would satisfy the requirement for cash forfeiture in s298(2)(b) without any need to specify the kind of predicate offence from which the cash was derived.

That was not the outcome in the recent civil recovery case of Angus v United Kingdom Border Agency [2011] EWHC 461 (Admin) but argument in that case did not centre on s298(2)(b) even though it would appear that Ms Angus, who was stopped at Gatwick Airport, had intended to leave England with the cash which was found in her possession.

There is an argument on that issue to be had on another day!

David

Civil recovery under PoCA 2002 & the acquitted defendant

Under Part 5 Proceeds of Crime Act 2002 the Crown can pursue civil claims in respect of ‘recoverable property’ and can seek the forfeiture of ‘cash’.  Both of these terms have specific meanings in this context.

‘Recoverable property’ is defined by sections 304 – 310, but the essence is that it is proceeds of crime (or, as the legislation puts it, property obtained through unlawful conduct) and property representing the proceeds of crime.  So if I steal a valuable painting that painting is ‘recoverable property’.  If I then sell the stolen painting the money or asset which I obtain from the sale is ‘recoverable property’.

‘Cash’ is defined in s289(6) and (7).  It includes not only notes and coins but also cheques, traveller’s cheques, bankers’ drafts and bearer shares (but not bank balances).

These are civil – not criminal – proceedings and the standard of proof is ‘the balance of probabilities’

The key point in proceedings under Part 5 is that the Crown do not have to show that anyone has been convicted of any criminal offence in order to succeed.  (The civil recovery provisions of Part 5 of the Act are quite different from the confiscation provisions of Part 2 – which DO require that a person has been convicted of an offence.)  Nor do the Crown have to show that the person from whom the asset is being taken is himself the perpetrator of an offence, he may simply be holding an asset which was obtained by the criminal conduct of someone else (although a bona fide purchaser for value is protected).  These are civil – not criminal – proceedings and the standard of proof is ‘the balance of probabilities’, see s241(3).

The Crown do not even have to identify a specific offence by which the money or asset was obtained.  (In civil recovery proceedings the Crown need not allege the commission of any specific criminal offence but must specify the kind or kinds of unlawful conduct involved.)

Indeed, in relation to cash the Crown may succeed simply by showing that the cash was intended for use in a future crime (s298(2)).

But, apart from that, what the Crown do have to do is satisfy the Court, on the balance of probabilities, that the money or asset in question has been derived from criminal conduct (by somebody who may, or may not, be identified).  In the case of ‘cash’ the Magistrates’ Court may then order the cash to be forfeit to the Crown.  In relation to other assets the High Court (in England and Wales) may order the property to be vested in a civil trustee who will realise the property for the benefit of the enforcement authority (for example SOCA, the SFO or the CPS).

If a defendant has been acquitted of a crime can an asset or cash believed to have been derived from that crime be subject to civil recovery

This raises an interesting technical question.  If a defendant has been acquitted of a crime (meaning that it has not been proved to the criminal standard – ‘beyond reasonable doubt’) can an asset or cash believed to have been derived from that crime be subject to civil recovery (since the lower standard of ‘the balance of probabilities’ applies in civil recovery proceedings)?

You may remember the notorious case of OJ Simpson in the United States.  Mr Simpson was acquitted of the murders of Nicole Brown and Ronald Goldman, but was subsequently ordered by a civil court to pay substantial damages to the Goldman family as he was (in the civil court) held to be liable for Mr Goldman’s ‘wrongful death’.

Let’s consider the case of Peter who has been acquitted of mortgage fraud.  Can the Crown now commence civil recovery proceedings against the house he purchased with the mortgage?

Or the case of Gwen who has been acquitted of ‘possession of criminal property’ in relation to cash of £30,000 which the police found and seized when they searched her home.  Can that cash now be subject to forfeiture in the Magistrates’ Court?

It seems to have been the view of the (then) government when PoCA 2002 was being debated in the Houses of Parliament that civil recovery proceedings could be pursued in these circumstances.  In the House of Lords Lord Goldsmith, speaking for the government, said on 13 May 2002, “We certainly do not accept that, where a criminal case has not resulted in a conviction, civil recovery action should automatically be barred”.  Later he added, “I do not shrink from the fact that . . . evidence is available in the civil process which would satisfy a court, even though it did not satisfy the criminal process”.

But the UK has brought into effect the European Convention on Human Rights, by virtue of the Human Rights Act 1998.  The Convention Rights are set out in Schedule 1 to the Act.  Article 6(2), reproduced in the Schedule, says simply, “Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law”.

But if a person has been acquitted of an offence in the criminal courts can it be right for a civil court to proceed on the basis that actually he is guilty of that same offence?

The European Court of Human Rights (ECHR) has answered that question with a firm, “No”.

In the Scottish case of Scottish Ministers v Doig, reflecting a number of ECHR judgments, the court put it this way (at para 24):

“It is perhaps not immediately obvious as a matter of language that article 6(2) could ever be said to apply to proceedings in which a person is not charged with a criminal offence. It is nevertheless clear from decisions of the European Court of Human Rights that article 6(2) may be said to apply, and be said to be infringed, in the course of proceedings which are not criminal in nature but which follow an acquittal in criminal proceedings. In particular a clear strand of authority suggests (a) that article 6(2) would apply if the later proceedings can be said to be sufficiently linked (in particular by law and practice) as to be the consequence, and to some extent a concomitant, of the criminal proceedings in which the person was acquitted, and (b) that the article would be infringed in these later proceedings if it can be said that the court casts doubt on the soundness of the earlier acquittal.”

More bluntly in the case of Geerings v The Netherlands the ECHR held (at para 49):

following a final acquittal, even the voicing of suspicions regarding an accused’s innocence is no longer admissible

“following a final acquittal, even the voicing of suspicions regarding an accused’s innocence is no longer admissible”.

It has to be said however that the UK Supreme Court has expressed disquiet on this issue.  In its judgment in Gale v SOCA [2011] UKSC 49 Lord Phillips said (at para 44), “If confiscation proceedings do not involve a criminal charge, but are subject to the civil standard of proof, I see no reason in principle why confiscation should not be based on evidence that satisfies the civil standard, notwithstanding that it has proved insufficiently compelling to found a conviction on application of the criminal standard”.  Although he refers to “confiscation” it may be that Lord Phillips has civil recovery proceedings rather than confiscation proceedings particularly in mind here.

However the European Court judgments apply where there is a close link between the civil and criminal cases, so that the civil proceedings “constitute a consequence and the concomitant of the criminal proceedings”.  The Supreme Court found no such link in the case of Mr & Mrs Gale.

The principle might be summarised as – one court cannot treat a person as guilty (even on a balance of probabilities) of an offence of which he has previously been acquitted in another court.

But where does leave Peter and Gwen?

Peter purchased a house with the aid of a mortgage and has been acquitted of mortgage fraud.  In these circumstances I cannot see that the Crown can pursue civil recovery proceedings in respect of the house (which Peter has acquired as a bona fide purchaser for value).

Gwen has been acquitted of ‘possession of criminal property’ in relation to cash found in her home.  I would suggest her position is rather different.  Suppose the facts of her defence were that the money in question had been passed to Gwen to look after by her friend Alice.  Unknown to Gwen, Alice had obtained the money by drug trafficking, but Gwen neither knew nor suspected that the monies were tainted by criminality.

On that basis Gwen would be properly acquitted of ‘possession of criminal property’ but the cash itself would still be proceeds of a crime (Alice’s drug trafficking).  So the cash could, I would suggest, be subject to civil recovery proceedings without casting any shadow of doubt on Gwen’s acquittal.

It seems to me that there are three sets of circumstances in which civil recovery could properly proceed:

  1. where the acquitted defendant lacked the mens rea or actus reus for the offence of which he was acquitted but that nevertheless the money or asset concerned is recoverable property (having been derived from an offence committed by someone else) which is able to be traced into the hands of the acquitted defendant;
  2. where the money or asset concerned has been derived from a different offence committed by the defendant (i.e. an offence of which he has not been acquitted); or
  3. where (in the case of cash) it is liable to forfeiture as property intended for use in a future crime.

depending upon the circumstances, it may, or may not, be permissible for civil recovery proceedings to be pursued in relation to money or an asset held by an acquitted defendant

In short, depending upon the circumstances, it may, or may not, be permissible for civil recovery proceedings to be pursued in relation to money or an asset held by an acquitted defendant.

For obvious reasons it is preferable for the defendant’s guilt or innocence to be determined in the criminal courts before any cash forfeiture or civil recovery proceedings are concluded (as noted in Harrison, R (on the application of) v Birmingham Magistrates’ Court [2011] EWCA Civ 332).

(Note: This article refers to civil recovery in England and Wales under the provisions of Part 5 of PoCA, the Proceeds of Crime Act 2002.)

David