Tag Archives: confiscation

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.)

Confiscation & compensation – double trouble?

doppelgangerFor some years courts have wrestled with the issue of compensation & confiscation.  Should the Crown Court make both a compensation order (in favour of the victim of the crime) & a confiscation order (effectively in favour of the Crown) in respect of the same benefit obtained by a convicted defendant?

The Court of Appeal recently considered the issue again in the case of Davenport v R [2015] EWCA Crim 1731.

 

Statute law

The power to make a compensation order in the Crown Court derives from s130 Powers of Criminal Courts (Sentencing) Act 2000.  The power to make a confiscation order in the Crown Court derives from s6 Proceeds of Crime Act 2002.  The legislation clearly envisages that the Crown Court may make both a compensation order and a confiscation order when dealing with an offence.

In particular s13 PoCA 2002 (as amended by s6 Serious Crime Act 2015 with effect from 1 June 2015) defines a “priority order” in subsection (3A) to include a compensation order and sets out what the court is to do where a court is making both a confiscation order and one or more priority orders against the same person in the same proceedings and the court believes the person will not have sufficient means to satisfy all of those orders in full.

In these circumstances the court must direct that so much of the amount payable under the priority order(s) as it specifies is to be paid out of any sums recovered under the confiscation order; and the amount it specifies must be the amount it believes will not be recoverable because of the insufficiency of the person’s means, subsection (6).

The other types of priority order now identified in subsection (3A) include a surcharge order under s161A Criminal Justice Act 2003, an unlawful profit order under s4 Prevention of Social Housing Fraud Act 2013 and a forfeiture order under s23 or s23A Terrorism Act 2000.  It is anticipated that a slavery and trafficking reparation order under s8 Modern Slavery Act 2015 will be added to the list of priority orders in due course.

 

Case Law

The Court of Appeal have considered the making of both compensation orders and confiscation orders against the same person in the same proceedings in the cases of Jawad v R [2013] EWCA Crim 644 and of Davenport v R [2015] EWCA Crim 1731.  Both of these judgments post-date the UK Supreme Court decision in the case of R v Waya [2012] UKSC 51 which highlighted the importance of proportionality in the making of confiscation orders and resulted in the amendment to s6(5)(b) PoCA 2002.

 

The issue

The problem is that whilst the statute law makes clear that it is possible for the court to make a compensation order and a confiscation order against the same person in the same proceedings – and sets out what the court should do if the offender cannot pay both orders in full, the statute gives no guidance as to what the court should do if the offender can pay both.

Since the decision in Waya and the amendment to s6(5)(b) would it now be disproportionate, and therefore wrong, for the court to make a compensation order and a confiscation order in respect of the same benefit obtained from the same offence against an offender who appears to be in a position in which he can pay both?

This was the question addressed in Jawad and in Davenport.

The Court of Appeal considered in Jawad that it generally will be disproportionate to require the defendant to pay for a second time money which he has fully restored to the loser – and an order for a lesser sum which excludes the double counting ought generally to be the right order.  What will bring disproportion, said the Court, is the certainty of double payment.  If it remains uncertain whether the loser will be repaid, a POCA confiscation order which includes the sum in question (and therefore requires the same benefit to be recovered twice – by compensation & confiscation orders) will not ordinarily be disproportionate, concluded the Court of Appeal.

In Davenport the Court of Appeal appears to have taken a slightly more relaxed approach.  It held that mathematical certainty of restitution is not required.  The court should approach matters in a practical and realistic way in deciding whether restitution is assured.  Restitution to the victims in the future is capable of being properly assessed as assured, depending on the particular circumstances, notwithstanding that such restitution will not be immediate, or almost immediate, at the time of the confiscation hearing.  Obviously the longer the time frame the greater force there will be to an argument that restitution is not assured: but a prospective period of delay in realisation is not of itself necessarily a conclusive reason for proceeding to make a combination of such orders without adjusting the amount of the confiscation order.

Whilst a defendant who is truly intent on making restitution in full to his victims ordinarily should be expected to have arranged such restitution prior to the date of the confiscation hearing there may sometimes be cases where that is not possible.  If, in such a case, the court has firm and evidence-based grounds for believing that restitution may nevertheless be forthcoming, albeit that cannot be taken as “assured” at the time of the hearing, the court has power in its discretion to order an adjournment to enable matters to be ascertained.

But, said the Court of Appeal, each case must be decided on its own facts and circumstances.

 

Contacting us

Our contact details are here.

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales.  There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this.  Appropriate professional advice should be sought in each individual case.)

Crown Court s10A determinations in confiscation

Crown Court judgeThe Serious Crime Act 2015 has introduced a new power enabling a Crown Court judge when making a confiscation order to make a “determination” of the extent of the defendant’s interest in any property which is likely to be used to satisfy the order.

In other words, where more than one person has an interest in the property the judge may ‘determine’ what proportion of the property belongs to the defendant at the time the confiscation order is made.

That determination will then, subject to limited exceptions, be conclusive in further proceedings taken with a view to satisfying the order.

The objective of such a “determination” under the new s10A Proceeds of Crime Act 2002 appears to be to facilitate the enforcement of confiscation orders by a conclusive ruling at the time the confiscation order is made on competing interests in assets which might need to be realised to satisfy the order.  Previously such matters would not be resolved until a later stage – when enforcement proceedings against the defendant’s assets were underway.

But it remains open to the judge to make a confiscation order without making any “determination” – in other words to do precisely what he would have done before s10A was introduced.  It is envisaged that in many cases that is exactly what will happen.

 

The new law

The new law, which came into effect on 1 June 2015, is to be found in sections 1 – 4 Serious Crime Act 2015.

Section 1 is the key provision, inserting a new s10A into PoCA 2002 setting into law the power to make a “determination” and the requirement that, before doing so, the court must give any “interested person” (meaning any third party whom the court thinks has, or may have, an interest in the property) a reasonable opportunity to make representations to it.

So where a judge is considering making a “determination” an “interested person” can be represented at the confiscation hearing, which is a new development in confiscation law.

As always in confiscation law, “property” means an asset of any description – not just land & buildings.

Section 2 deals with the provision of information to the court by the defendant (amending s18 PoCA 2002), the prosecutor (amending s16) and the interested person (inserting a new s18A).

Sections 3 & 4 deal with appeals & reconsideration.  I deal with those aspects in ‘S10A PoCA 2002 determinations – appeals & reconsideration‘.

 

How is it supposed to work?

The idea is that when a convicted defendant is first required by a s18 order to provide information to the court for the purposes of confiscation proceedings he may also be required to provide information which would be relevant to a potential s10A determination.  In other words he may be required to set out his assertions concerning the extent to which he is interested in assets in which he has a less than 100% interest.  Presumably the court would wish at that stage also to be provided with the identities of any “interested persons”.

The court may at any stage require an “interested person” to provide information to it.  New s18A enables the court to place upon an “interested person” similar obligations to those placed on a defendant under s18 – and with the same danger that where an “interested person” fails to comply with the court order the court may draw appropriate inferences.

The prosecutor is required to include in his s16 statement any information known to him which he believes is relevant to a possible s10A determination.  This appears to be a mandatory requirement applying to all s16 statements issued after 1 June 2015.

Although there are no changes to s17, a defendant would be unwise not to respond to any relevant assertions in the prosecutor’s s16 statement with which he did not agree because his silence may be taken for agreement.

Prior to the confiscation hearing if the court was contemplating making a s10A determination any “interested persons” would need to be notified of the hearing to enable them to be represented at it.  (However it is far from clear whether any legal aid funding would be available to an “interested person” who wished to obtain legal advice or instruct a legal representative to appear at the hearing.)

At the conclusion of the confiscation hearing the court could make not only a confiscation order but also a s10A determination of the defendant’s interests in specified assets (i.e. the proportion of each asset which belonged to the defendant).

If the confiscation order was not satisfied & matters proceeded to enforcement then, subject to the provisions relating to appeals and reconsideration already mentioned, enforcement could then proceed on the basis of the defendant’s interests in those assets as had been determined.

 

A fictional case study

To better understand the issues let us consider a fictional case study.

Norman & Monica have been married for ten years & have two school age children.  They jointly own their matrimonial home (as joint tenants) subject to a building society mortgage (also in joint names).  They purchased their current home, Rose Cottage, 3 years ago.

Norman also owns a ‘buy to let’ property, Rainbow’s End, which is occupied by students at the local university.  Norman bought the property 5 years ago in his sole name with the help of a secured bank loan (also in his sole name).  Norman declares all the rents received from Rainbow’s End on his personal income tax returns.

Norman was recently convicted in connection with a drug trafficking conspiracy & is now subject to confiscation on the basis of a ‘criminal lifestyle’.  The figure of his ‘benefit’ is undoubtedly going to be very large so the confiscation order will be limited by his ‘available amount’.

Norman’s ‘available amount’ will include his interests in Rose Cottage & Rainbow’s End.  In relation to any s10A determination which the judge may be considering making in regard to those properties the “interested persons” appear to be Monica, the building society & the bank.

If the court is considering making a s10A determination it may issue s18A orders requiring Monica, the building society & the bank to supply information & must give each of them an opportunity to make representations to it.

In practice the interests of the commercial lenders are likely to be uncontroversial & it is unlikely that they will wish to be represented at the confiscation hearing.  However there is a danger that the interests of the lenders in the properties may change between the date the confiscation order is made & the date the order is enforced.  The new legislation does not appear to be designed to accommodate that possibility, particularly as the legislation refers to the defendant’s interest as a proportion of the value of the property itself, s10A(5).

An alternative approach might be for the court to define the ‘property’ to be dealt with by the determination as ‘Norman & Monica’s interests in Rose Cottage & Rainbow’s End’.  That may enable some potential complications to be side-stepped but arguably would run counter to the natural meaning of the wording of s10A.  Another option may be for the court to give a rather wide meaning to the word “proportion” in this context.

For the purposes of a s10A determination the court would then need to reach a conclusion as to whether Monica had any interest in the ‘buy to let’ property Rainbow’s End.  That might depend upon whether Rainbow’s End was regarded as ‘matrimonial property’ in the sense that term is understood in the Family Court.

As a quite separate matter the Crown Court would have to consider, in the context of deciding Norman’s ‘available amount’, whether Norman had made any ‘tainted gifts’.  It is possible that any interest Monica had in Rose Cottage and / or Rainbow’s End might be considered to have arisen by ‘tainted gift’ from Norman (which would mean that his ‘available amount’ would need to include the current value of the interest gifted by him & still held by Monica).

Suppose the Crown Court made a s10A determination that Norman had a 100% interest in Rainbow’s End, subject only to the interest of the bank as secured lender.  If Monica & Norman were later to divorce would the Family Court be able to take account of the value of Rainbow’s End in the divorce settlement?  Could it do so on the basis that, contrary to to the s10A determination in the Crown Court, Monica did have an interest in the property – whilst at the same time recognising Norman’s obligations under his confiscation order?

In such a case the Crown Court judge might consider the better course would be to decline to make any “determination” under s10A, leaving matters to be resolved if necessary in enforcement proceedings.  Indeed even when legislating the government envisaged that the Crown Court would only make s10A determinations in relatively straightforward cases.

 

Transitional provisions

There appear to be no relevant express transitional provisions in the Serious Crime Act 2015 or the commencement order.  However the practicalities are that a s10A determination cannot be made unless the “interested persons” have been identified & notified of the intention to make a “determination”.

For that reason, although the law came into effect on 1 June 2015, courts are unlikely to be making any s10A determinations just yet.

However I would suggest that all prosecutor’s s16 statements should now contain the information required by new subsection 16(6A) inserted by s2 Serious Crime Act 2015.

 

What will actually happen?

As yet I have detected no enthusiasm on the part of prosecutors for inviting the Crown Courts to make s10A determinations.  This may be because of the extra complexity that this would bring to the proceedings involved in obtaining a confiscation order.

It remains to be seen whether, in the event, this new power is employed often in practice or left to gather dust in the statute book.

 

Contacting us

Our contact details are here.

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales. There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this. Appropriate professional advice should be sought in each individual case.)

Confiscation default sentences under the new law

BewareThe law relating to the default sentence which may be triggered by a failure to satisfy on time a confiscation order made under Part 2 Proceeds of Crime Act 2002 has been amended by s10 Serious Crime Act 2015 with effect from 1 June 2015.

The government’s objective in making the changes seems to be to make default sentences more effective in securing payment by both simplifying & increasing the severity of sentencing.

So what has changed & what has not?

 

Comparing the old & new tiers

It might be helpful to compare the old tiers & the new.  There were twelve tiers previously – now there are only four.  The four new tiers include a new break point at £500,000.  The following table shows all the tiers with both the old & new maximum default terms.

Old New Change
An amount not exceeding £200 7 days 6 months Increased
An amount exceeding £200 but not exceeding £500 14 days 6 months Increased
An amount exceeding £500 but not exceeding £1,000 28 days 6 months Increased
An amount exceeding £1,000 but not exceeding £2,500 45 days 6 months Increased
An amount exceeding £2,500 but not exceeding £5,000 3 months 6 months Increased
An amount exceeding £5,000 but not exceeding £10,000 6 months 6 months No change
An amount exceeding £10,000 but not exceeding £20,000 12 months 5 years Increased
An amount exceeding £20,000 but not exceeding £50,000 18 months 5 years Increased
An amount exceeding £50,000 but not exceeding £100,000 2 years 5 years Increased
An amount exceeding £100,000 but not exceeding £250,000 3 years 5 years Increased
An amount exceeding £250,000 but not exceeding £500,000 5 years 5 years No change
An amount exceeding £500,000 but not exceeding £1 million 5 years 7 years Increased
An amount exceeding £1 million 10 years 14 years Increased

It can be seen that the maximum default sentences are increased for all amounts except for amounts exceeding £5,000 but not exceeding £10,000 & amounts exceeding £250,000 but not exceeding £500,000, for which the maximums are unchanged.

Because in each case the specified sentence for each tier is a maximum sentence, any default sentence which may have been set on or after 1 June 2015 using the old tiers will not be an unlawful sentence under the new tiers.

However when operating the new tiers it seems likely that in very many cases Crown Court judges will be minded to fix a higher default sentence than the one which they would have fixed under the old tiers.

In the author’s view this is particularly likely in relation to higher value confiscation orders.  For example a defendant ordered to pay £400,000 will be subject to a statutory maximum of 5 years (which is unchanged).  But whereas previously the ‘5 year tier’ was from £250,000 to £1 million it is now from £250,000 to £500,000.  Therefore a sum of £400,000 is now much closer to the ceiling of the tier and therefore likely to attract a default sentence which is also closer to the ceiling for that tier.

 

Previous case law

The setting of a default term will always be, in the author’s view at least, dependent upon the particular facts relevant to the defendant & the case.  But previous case law has established a principle that the default term will normally be not less than the maximum term applicable to the tier immediately below.

So, for example, under the old tiers one would expect a default term in respect of an amount of £110,000 to be not less than two years (which was the maximum for sums not exceeding £100,000).

That principle may be a less useful guide under the new regime as there are now four tiers rather than twelve.

It remains to be seen how far, if at all, Crown Court judges will have some regard to the old tiers when setting a default sentence under the new regime.

 

Transitional provisions

The amendment made by s10 SCA 2015 came into effect on 1 June 2015 as set out in regulation 3 Serious Crime Act 2015 (Commencement No 1) Regulations 2015.  But neither the 2015 Act nor the commencement regulations tell us anything useful about transitional arrangements for the new four tiers.

Typically confiscation proceedings (in the broadest sense) might pass through nine significant stages en route to activation of the default sentence:-

  • The offence is committed
  • The defendant is charged
  • The defendant is convicted
  • A prosecution s16 statement is issued or amended
  • A confiscation order is made in the Crown Court
  • Default in payment occurs
  • Interest accrues on the outstanding amount
  • The confiscation order might be varied in the Crown Court
  • The defendant is committed to prison by the Magistrates’ Court

But which of these must occur on or after 1 June 2015 for the new regime to be applicable?  The legislation gives no clue.

One approach is to suggest that whenever the Crown Court makes or varies a confiscation order on or after 1 June 2015 the new regime applies.  I understand that to have been the government’s intention & there is a certain logic to it.

An alternative approach is to suggest that the new regime can only apply where the offence is committed on or after 1 June 2015.  The basis of that is an argument that the setting of the default sentence, and the confiscation proceedings in the Crown Court, are an integral part of the sentencing for the offence.  Since legislation cannot retrospectively impose a greater penalty for an offence than was in operation when the offence was committed, the old regime (it is argued) must apply if the offence was committed before 1 June 2015.

Which is the correct approach may become clearer over the coming months.

 

Pro-rata release

Questions have been raised as to whether early release of the defendant from his default sentence on the basis of part-payment still operates.  The short answer appears to be “Yes”.

Pro-rata release for part payment applies by virtue of a rather complex chain of statute law from s35(2) PoCA 2002 to s140(3) Powers of Criminal Courts (Sentencing) Act 2000 to s79(2) Magistrates’ Court Act 1980.  That chain of legislation is unaffected by the changes made by the Serious Crime Act 2015.

This means that, for example, a defendant who is given a 2 year default sentence in respect of an amount of £100,000 will have his sentence effectively reduced to one year if he makes payment which reduces the amount outstanding to £50,000.

[UPDATE: See a more detailed article about reductions for part payments HERE.]

 

Early release on licence

Similarly – but with one important exception – early release from a default sentence at the half-way stage on licence under s258 Criminal Justice Act 2003 continues to apply.

The exception is that the early release provision is disapplied where “the sum in question” exceeds £10m, see s10(3) SCA 2015.  It appears that “the sum in question” refers to the amount ordered to be paid by the confiscation order or any variation of that order, rather than to the amount currently remaining unpaid under the order (taking into account interest accrued & payments made).  In a sense therefore this provision creates a further tier of default sentence in respect of orders for sums in excess of £10m.

This disapplication of early release in respect of sums exceeding £10m applies where the default occurs on or after 1 June 2015 and so can apply where a confiscation order was made prior to the implementation of the new regime, see s86(2) SCA 2015.

 

Appeals

In the past default sentences have proved to be a fertile ground for appeals by defendants – particularly where the Crown Court judge has been too quick to apply the maximum term.  In all likelihood we shall continue to see a steady stream of such cases making their way to the Court of Appeal.

However it appears that the prosecution has no right of appeal against a default sentence which it considers is too short, see R v Mills [2018] EWCA Crim 944 at para [37].

 

Variation of the confiscation order

Application may be made in various circumstances by the defendant or by the prosecution to vary the confiscation order, for example where the available amount proves inadequate (s23), where new assets come to light (s22), or where accrued interest has increased the amount outstanding & the prosecution wish the court to consider increasing the default sentence (although in practice such applications are understood to have been rare).

 

Impact on future proceedings

It might be considered that the increased severity of default sentences under the new regime could have an impact upon the way that prosecutors pursue & settle confiscation proceedings.

For example it may prove to be the case that prosecutors will be less willing to settle confiscation proceedings by compromise agreement, or more willing to pursue assertions of ‘tainted gifts’ or ‘hidden assets’, in the hopes that heavier default sentences may strengthen their hand in negotiations prior to the making of an order & in persuading defendants (& perhaps their families or third parties) to disgorge assets to satisfy an order which has been made.

Similarly prosecutors might have greater expectation of reward from revisiting older PoCA 2002 confiscation orders & pursuing s22 applications.

 

Contacting us

Our contact details are here.

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales.  There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this.  Appropriate professional advice should be sought in each individual case.)

Serious Crime Act 2015 amendments to confiscation law

ER 1 sigThe Serious Crime Act 2015 has received the Royal Assent.  The new Act amends the Proceeds of Crime Act 2002 in relation to confiscation (and makes numerous other amendments to criminal law).

The changes referred to in this article came into force on 1 June 2015 (see reg 3 Serious Crime Act 2015 (Commencement No. 1) Regulations 2015) except where otherwise noted.

 

Proportionality

One relatively late amendment to the Act was to introduce into statute law, by an addition to s6(5) PoCA 2002, the proportionality requirement identified by the Supreme Court in R v Waya [2012] UKSC 51.  The words “Paragraph (b) applies only if, or to the extent that, it would not be disproportionate to require the defendant to pay the recoverable amount” have been added to that subsection.

However there is no amendment to reflect the more recent Supreme Court decision in R v Ahmad [2014] UKSC 36 concerning double recovery of jointly obtained benefit.

 

Major reforms

The major reforms fall into six areas: – restraint orders; money belonging to a person subject to a confiscation order; determination of third party interests in assets; time to pay; default sentence for non-payment and other powers to ensure compliance; and powers of investigation.

This article deals with the reforms to confiscation law applicable in England & Wales.  The Act also introduces amendments to the confiscation law operating in Scotland and Northern Ireland.

 

Restraint orders

As noted in my article “Restraint orders under PoCA 2002“, under the old law the applicant for the restraint order had to show that he had reasonable cause to believe that a benefit had been obtained from criminal conduct, s40(2).  Now s11 of the new Act amends s40(2) so that an applicant is only be required to show that there are reasonable grounds to suspect that a benefit has been obtained from criminal conduct.  That obviously is a lesser hurdle for the applicant.

But interestingly the Act does not amend s69(2) which forms the basis of the view that ordinarily a restraint order should be made only if there is genuinely a risk that assets will be dissipated.  That approach has itself militated against the early obtaining of a restraint order in some cases.

Additional changes to sections 40 to 42 of the 2002 Act in relation to restraint orders have been made in regard to: (a) the prosecution making reports to the court on the progress of a criminal investigation where a restraint order has been made on that basis; (b) the continuation of a restraint order where a conviction is quashed and a re-trial is ordered; and (c) restrictions on foreign travel by a person subject to a restraint order.  Further changes (which were included in the Policing and Crime Act 2009) relating to: (i) outstanding legal aid contributions due from the subject of a restraint order; and (ii) the retention of seized property (inserting a new section 41A), have also been brought into effect on 1 June 2015.

 

Money belonging to a person subject to a confiscation order

Amendments to s67 & s67A make it easier for a court to order that money held in a bank account (or similar account) should be paid into court where the money belongs to a person subject to a confiscation order, s14.  That applies when the account is in the name of the defendant or where the money has previously been seized by the authorities.

Previously this power could only be exercised where the money was subject to a restraint order and where the period allowed for payment under the confiscation order had elapsed.  These two conditions are omitted under the amendments.

 

Determination of third party interests in assets

Prior to the coming into effect of the new Act a person other than the defendant who claims an interest in property in which the defendant also has an interest, played no part in the confiscation proceedings until the enforcement stage (that is, after the confiscation order had been made).  However the extent of the defendant’s interest in the property (and hence also the extent of the third party’s interest in it) may have had a bearing on the defendant’s benefit (particularly where the ‘criminal lifestyle‘ assumptions have been triggered) and on his available amount.

In consequence at the enforcement stage third party claims on assets might need to be considered by the courts for the first time.  That could have the effect of delaying and, in some cases, frustrating enforcement of the confiscation order.

Under the new Act at the stage of making the confiscation order the Crown Court may make a ruling determining the defendant’s interest in property (in which a third party has, or may have, an interest) and such a determination would be conclusive in most circumstances, s10A PoCA 2002 inserted by s1 of the new Act.  Determinations would be subject to appeal to the Court of Appeal, s3.

In order to allow third party claims to be properly considered, the prosecutor must include in his s16 statement any relevant information known to him & the Crown Court, before making such a determination, would allow third parties to make representations to the court regarding their interests in the property in question.  Amendments are made to sections 16 & 18 PoCA 2002 and a new s18A is introduced by s2 of the new Act.

In the author’s view this change risks creating as many problems as it solves.  It will in many cases increase the complexity of confiscation proceedings.  It carries the risk of Crown Court judges making rulings in matters relating to issues of property law and family law in which they may have little experience.  Confiscation orders may be unjust where third parties realise too late that they ought to have been represented in confiscation proceedings in order to protect their own interests.

Whilst the government apparently anticipates that Crown Courts will exercise this power of determination only in straightforward cases, the author’s view is that an apparently straightforward case may prove to be more complex when further matters come to light after a determination has been made.

This may prove to be the most controversial of the reforms.

[UPDATE:  A more extensive article on s10A determinations may be found HERE.]

 

Time to pay

The new Act has halved the maximum time allowed for payment of a confiscation order and made explicit provision for parts of the total sum ordered to be paid to fall due earlier than other parts, s5.

Prior to 1 June 2015 a Crown Court could initially allow a defendant up to six months to pay.  A further six months, making a maximum of 12 months in all, could be allowed on a further application, s11 (as originally enacted)The new law has reduced the initial period to three months maximum, with a further three months available on application, making a maximum of six months in total.

Courts are also able to provide for earlier payment dates for part of the total sum – for example where the available amount comprises money in a bank account and an interest in a residential property the confiscation order could require payments from the bank account within, say, 14 days of the confiscation order with the balance due three months from the date of the order.

The practical effect of this proposal is to further limit the discretion of Crown Court judges to allow a defendant time to pay the confiscation order, with the result that interest and enforcement action will be triggered more quickly.

The Act substitutes a new s11 in PoCA 2002.

 

Default sentence for non-payment

The provisions applicable prior to 1 June 2015 are dealt with in my article “Confiscation – default sentence“.   The new Act amends s35 PoCA 2002, by s10 of the new Act, so the maximum default sentences will read as follows:

An amount not exceeding £10,000 6 months
An amount exceeding £10,000 but not exceeding £500,000 5 years
An amount exceeding £500,000 but not exceeding £1,000,000 7 years
An amount exceeding £1 million 14 years

Furthermore, where the confiscation order is made for an amount in excess of £10 million the usual provision allowing release at the half-way stage of a sentence will be disapplied.  This means that a person who is the subject of a confiscation order in excess of £10 million may be required to remain in prison for the full 14 years of a default sentence.  (This disapplication of early release applies where the default occurs on or after 1 June 2015 and so may apply to confiscation orders made before the new Act received the Royal Assent, s86(2).)

A fuller article considering the changes to default sentences can be found HERE.

A new power is provided for the Crown Court to make a ‘compliance order’ under s13A PoCA 2002 (subject to appeal under s13B).  These sections are inserted by s7 of the new Act.  A ‘compliance order’ is such order as the court “believes is appropriate for the purpose of ensuring that the confiscation order is effective”.

A compliance order might, for example, restrict a defendant’s ability to travel outside the UK.

 

Powers of investigation

Under previous legislation the investigation powers under Part 8, PoCA 2002 ceased to be available as soon as a confiscation order was made.   The new Act provides that these powers shall remain available in effect until the confiscation order is satisfied, s341 PoCA 2002 is amended by s38 of the new Act.  (Note – this provision came into force in England and Wales on 1 March 2016.)

 

Other changes on 1 June 2015

In addition to the changes being made to confiscation law under Part 2, Proceeds of Crime Act 2002 by the Serious Crime Act 2015, other amendments – made by the Policing & Crime Act 2009 and the Crime & Courts Act 2013 – have been brought into effect on 1 June 2015.  Further details of those changes can be found in a Home Office Circular issued on 22 May 2015.  These changes principally concern the search, seizure & forfeiture of property (including cash), applications to the Crown Court (rather than the High Court) for certain orders in relation to proceeds of crime, and payment of legal aid contributions from restrained funds.  New Codes of Practice were issued in March 2016.

 

Contacting us

Our contact details are here.

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales.  There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this.  Appropriate professional advice should be sought in each individual case.)

Confiscation – after-acquired property

Money imageUnpaid benefit from an old confiscation order may be pursued by the prosecution under s22 Proceeds of Crime Act 2002 where the original order was made under s6 of the Act.  (A similar provision, differently worded, was included at s16 of the Drug Trafficking Act 1994 in relation to confiscation orders made under that Act.)

But how does s22 PoCA 2002 work and does it achieve the intended result?

 

The wording of s22

The wording of s22 initially appears complex and baffling.  To the best of the author’s knowledge there is no authoritative case law dealing with the detail of some of the provisions of this section.

The section is headed “Order made: reconsideration of available amount“.  It may be assumed that one of the objectives of s22 was to permit prosecutors to follow up benefit on old confiscation orders which the defendant had not previously been ordered to pay in consequence of his limited available amount at the time.

The intention, it may be presumed, was to permit the court, on an application by the prosecutor (or a receiver appointed under the Act), to make a further confiscation order when the convicted defendant had subsequently acquired additional assets (referred to sometimes as “after-acquired property”).  It is this general principle, rather than the detailed operation of the statutory provisions, which has been addressed in case law (see R v Tivnan [1998] EWCA Crim 1370Saggar, Re Drug Trafficing Act 1994 [2005] EWCA Civ 174, Peacock, Re [2012] UKSC 5 and Padda v R. [2013] EWCA Crim 2330).

But the wording of s22 does not refer to a further confiscation order – it refers to a variation of the original order and, potentially more significantly, it fails to take account of the payment already made by the convicted defendant when limiting the overall impact of the confiscation proceedings on him.  Furthermore the statutory test in relation to his current available amount is, in the author’s view at least, misconceived.

The wording of the section is appropriate to the case of a defendant who has not been ordered to pay any amount under the original confiscation order but does not correctly address the situation of a defendant who has made payment previously.  In consequence the section in practice may not have the intended outcome.  For a more detailed discussion of unresolved problems with the legislative wording of s22 see my article PoCA section 22 – unfit for purpose?

Perhaps the best way to explain some of the difficulties which can arise from the wording of this section is by a couple of illustrative worked examples.

 

Worked example – Edward

Edward is a convicted defendant who was consequently subject to a confiscation order under s6 PoCA 2002 in May 2006.  The order made then showed his benefit to be £500,000 and his available amount to be £200,000.  Edward was accordingly ordered to pay £200,000 and he paid this amount on time and in full.

In recent years Edward has operated a successful legitimate business and now (January 2015) has an available amount of £400,000.  The prosecution apply for an order under s22.

Under s22 the court will undertake an examination of Edward’s current available amount (referred to as the “new calculation”) and, if this exceeds the ‘relevant amount’, can order Edward to pay such amount as it believes is just, but does not exceed the amount found as the defendant’s benefit from the conduct concerned, see s22(4).

The ‘relevant amount’ is Edward’s available amount as previously determined by the court, s22(8).  Edward’s benefit from the conduct concerned is his benefit as previously determined by the court, s22(9).

But when deciding whether one amount exceeds another the court must take account of any change in the value of money, s22(7).

 

Change in the value of money

For the purpose of taking account of any change in the value of money we are going to use inflation index figures published by the Office for National Statistics known as RPIJ (which stands for Retail Prices Index Jevons).

(See the article Confiscation – which inflation index? for an explanation of the use of the RPIJ rather than the Retail Prices Index or any other measure of inflation.)

At the time the prosecutor’s s22 application in Edward’s case is being finalised (January 2015) the latest available figure for the RPIJ is that for November 2014.

Figures from the Office for National Statistics show that the RPIJ values (in Table 35a) were

May 2006 191.6 Date of confiscation order
November 2014 238.3 Latest available index

 

Calculating the uplifts

Edward’s available amount of £200,000 was determined by the court in May 2006 when the RPIJ was 191.6. The latest RPIJ is 238.3 so the uplift is

£200,000 x (238.3 – 191.6) / 191.6 = £48,747

So the equivalent available amount now, referred to in s22(4) as the ‘relevant amount’, is £248,747.

The £500,000 benefit of the offence was also determined by the court in May 2006 so by a similar computation the uplift to that benefit is

£500,000 x (238.3 – 191.6) / 191.6 = £121,868

So the equivalent benefit figure now is £621,868.

 

The court’s powers

We can now see that Edward’s current available amount of £400,000 does exceed the ‘relevant amount’ of £248,747.  So the court may order Edward to make a further payment, but this must not exceed £621,868 (Edward’s total benefit uplifted for changes in the value of money).

As Edward currently has an available amount of only £400,000 the court will presumably not order him to pay an amount in excess of that because that would contravene the spirit of s7 and would not be “just”.

However the defence may argue that an order for £400,000 would not be just because Edward has previously paid a confiscation order of £200,000 in respect of the same benefit.

The defence may argue that the new order should be limited to £300,000 or perhaps to £373,121.

The £300,000 is the amount of the benefit that was determined, but not ordered to be paid, by the court in May 2006 (that is the difference between the £500,000 benefit and £200,000 ordered to be paid at that time).

In the alternative, the defence may argue that the order should be limited to that £300,000 of unpaid benefit in May 2006 uplifted for changes in the value of money since that time.  The uplift of that amount may be calculated as

£300,000 x (238.3 – 191.6) / 191.6 = £73,121

So the equivalent unpaid benefit figure now is £373,121.

If the court were now to order Edward to pay a further £400,000 he will have been required to pay a total of £600,000 (including the £200,000 paid many years previously under the original order) in respect of a benefit of only £500,000.

Because the court has, under s22, a wide discretion to order payment of the amount it believes is just, the court may order Edward to pay any amount between nil and £400,000 (but subject always to an appeal to the Court of Appeal).

The court will in practice assume the usual powers to allow Edward time to pay and to set a default sentence (reflecting the new amount ordered to be paid) in the event of non-payment (although there is no express provision in s22 to vary the time to pay and default sentence in the original confiscation order).

 

Worked example – Stephen

Now let’s consider a second worked example. Stephen’s circumstances are identical to Edward’s in every way except that his available amount in May 2006 was £350,000.  Stephen was accordingly ordered to pay £350,000 and he paid this amount on time and in full.

The benefit that Stephen was not ordered to pay at the time was therefore £150,000.

Stephen’s available amount of £350,000 was determined by the court in May 2006 when the RPIJ was 191.6. The latest RPIJ is 238.3 so the uplift to that figure is

£350,000 x (238.3 – 191.6) / 191.6 = £85,308

So the equivalent available amount now, referred to in s22(4) as the ‘relevant amount’, is £435,308.

Since Stephen’s current available amount of £400,000 does not exceed the ‘relevant amount’ of £435,308 the condition in s22(4) is not met and the court cannot make any further order against Stephen.  The prosecutor’s application under s22 will fail on this occasion.

 

Unintended consequences

In the author’s view neither the possibility of a new order against Edward which would result in the total amounts confiscated from him exceeding the total amount of his benefit (when all amounts are uplifted for changes in the value of money), nor the impossibility of the court making any further order against Stephen when he has unpaid benefit on an old confiscation order and the means to pay it, appear to be the consequences likely to have been intended by parliament when s22 was legislated.

Section 22 was not discussed when the detailed provisions of the (then) Proceeds of Crime Bill were considered by a House of Commons committee as part of the normal legislative process, nor was there any debate on the section in the House of Lords (although subsections 8 & 9 were added to s22 at that late stage there was no debate).  Perhaps this section should now be revisited by parliament.

 

Contacting us

Our contact details are here.

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales.  There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this.  Appropriate professional advice should be sought in each individual case.)

Confiscation – calculating the inflation uplift

Inflation graphConfiscation legislation in the Proceeds of Crime Act 2002 requires the Crown Court when making a confiscation order to take account of changes in the value of money where appropriate.

This article sets out, with a couple of worked examples, the mathematical details of the computations which may be required under s80 PoCA 2002 in relation to a defendant’s benefit.

 

Worked example – Peter

Take the case of Peter who was convicted in May 2013 of an offence of possession of a controlled drug with intent to supply.  Those drugs were seized from him on his arrest in June 2012 and had a value of £100,000.  Peter has a ‘criminal lifestyle’ for confiscation purposes.  He was charged with the offence on 5 January 2013, so the ‘relevant day’ for the purposes of the ‘criminal lifestyle’ assumptions is 6 January 2007.

A s16 PoCA 2002 statement is now being prepared (in January 2015).  The latest information concerning Peter’s financial affairs covers the period to April 2014.  Examination of this indicates that Peter has an assumed benefit from transfers received in the period from January 2007 to April 2014 of £400,000.  For simplicity let’s say that no assumed benefit arises in respect of Peter’s expenditures since January 2007 or his assets held since the date of his conviction.

Before adjustment for changes in the value of money Peter’s benefit for confiscation purposes is £500,000, comprising the £100,000 value of the drugs seized in June 2012 and the £400,000 assumed benefit of transfers received between January 2007 and April 2014.

 

Inflation index

At the time the s16 statement is being finalised the latest available figure for the RPIJ is that for November 2014.

(See the article Confiscation – which inflation index? for an explanation of the use of the RPIJ rather than the Retail Prices Index or any other measure of inflation.)

Figures from the Office for National Statistics show that the RPIJ values were

January 2007 195.1 Date of start of assumed benefit
June 2012 227.1 Date of benefit of actual offence
April 2014 237.4 Date of end of assumed benefit
November 2014 238.3 Latest available index

 

Calculating the uplift

The £100,000 benefit of the offence was obtained in June 2012 when the RPIJ was 227.1.  The latest RPIJ is 238.3 so the uplift is

£100,000 x (238.3 – 227.1) / 227.1    =  £4,932

The £400,000 assumed benefit arose over a period from January 2007 to April 2014.  We could identify the benefit obtained in each month from January 2007 onwards and perform separate uplift calculations for each month.  However in many cases we can get a reasonable approximation of the correct uplift if we take an arithmetic average of the index figures for the start and the end of the period (January 2007 and April 2014) and apply that to the whole of the assumed benefit obtained over that period.

(Note that this method has a tendency to overstate the true inflation uplift, as compared to separate computations undertaken for each month in the period, where the amount of benefit arising is greater towards the end of the period and / or annual inflation rates are lower towards the end of the period.)

The average index figure is

(195.1 + 237.4) / 2  =  216.25

Using that we can calculate the uplift on the £400,000 assumed benefit as

£400,000 x (238.3 – 216.25) / 216.25    =  £40,786

So the total uplift on the entire benefit is £45,718 and Peter’s total benefit figure, adjusted for changes in the value of money, is £545,718.

 

Worked example – Brian

Let’s consider a slightly more complex example.  Suppose Brian’s position is exactly identical to Peter’s except that Brian owns a house, subject to mortgage.

Brian bought the house for £80,000 in September 2000 with the aid of a (legitimately obtained) mortgage of £60,000 (so his equity in it at that time was £20,000).  The house is currently worth £200,000 and the outstanding mortgage currently stands at £30,000.

Brian’s assumed benefit arising from his ownership of the house will be the higher of (A) the current value of his equity in the house and (B) the value of his equity in the house at September 2000 uplifted for subsequent changes in the value of money.

Clearly (A) will be £170,000 (which is the £200,000 current value less the £30,000 currently outstanding mortgage).

To calculate (B) we need the RPIJ index figure for September 2000, which was 169.4.  We can then uplift Brian’s equity in the property in September 2000 (which was £20,000) by changes in the value of money.  The calculation for the uplift is

£20,000 x (238.3 – 169.4) / 169.4    =  £8,135

So (B) is £28,135 (which is the £20,000 original equity uplifted for inflation).

Since (A) is the higher figure Brian’s additional assumed benefit in relation to the house he owns is £170,000.

Brian’s total benefit is therefore £715,718 (including the £545,718 actual and assumed benefit from the drugs seized and transfers received since the ‘relevant day’).

 

Conclusion

Hopefully these detailed worked examples will assist prosecutors to perform, and defendants to check, computations of the effect of changes in the value of money for confiscation purposes.

 

Contacting us

Our contact details are here.

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales.  There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this.  Appropriate professional advice should be sought in each individual case.)

Confiscation – which inflation index?

RPI v CPI graphConfiscation legislation in the Proceeds of Crime Act 2002 requires the Crown Court when making a confiscation order to take account of changes in the value of money where appropriate.  For example s80(2) refers to this in the context of evaluating the ‘benefit’ obtained by the convicted defendant and s22(7) refers to “any change in the value of money” in the context of reconsideration of a confiscation order where a convicted defendant has acquired further assets since the original confiscation order was made.

But the legislation does not spell out how the court is to quantify the “change in the value of money”.  It seems obvious that this should be done using a UK index of inflation – but which one?

I would suggest that there are four potential candidates for the appropriate index – the Retail Prices Index (RPI), the Consumer Prices Index (CPI), and modified versions of these two indices which are known as RPIJ and CPIH.  All of these are published monthly by the Office for National Statistics.  But the figures produced by using these alternative indices may be significantly different.  Which of them is to be preferred?

 

RPI & RPIJ

The Retail Prices Index is perhaps the most well known UK inflation index.  It has been published continuously since 1947.  It forms the basis of certain contractual arrangements and the amounts paid on some investments (such as index-linked gilts).

However in recent years it has been recognised that some of the underlying mathematics in the computation of the RPI is flawed and RPI has fallen out of favour.  Since 2013 RPI has ceased to be formally recognised as a ‘National Statistic’ by the Office for National Statistics (ONS).  The RPI does not satisfy international standards as a measure of inflation.  The ONS continue to publish the RPI however because it remains relevant where it has been written into contracts and investments.

The mathematical flaw in the calculation of RPI causes it to systematically overstate inflation in times of rising prices.  Best practice therefore appears to be not to rely on RPI for the purpose of preparing figures adjusted for changes in the value of money.

In order to address the flaw in the calculation of RPI a revised index, known as RPIJ, is now calculated and published by the ONS.  Unlike RPI, RPIJ is recognised as a ‘National Statistic’ and does satisfy international standards as a measure of inflation.  Figures for RPIJ going back to 1998 have now been published by the ONS.

Because of the different underlying mathematics, in times of rising prices RPIJ will always indicate a lower rate of inflation than RPI.

 

CPI & CPIH

The Consumer Prices Index (CPI) has been published by the ONS for each month from January 1998 onwards.

The CPI was originally developed to address aspects of RPI which were perceived as misleading as a measure of the impact of changing prices on UK consumers.  The CPI does not suffer from the mathematical flaw which affects RPI.

Another significant difference between CPI and RPI (and RPIJ) is that CPI does not reflect housing costs whereas RPI (and RPIJ) do.

However the CPI is formally recognised as a ‘National Statistic’ and is a measure of consumer price inflation produced to international standards and in line with European regulations.   It is recognised as the leading index of inflation in the UK for the purpose of the government’s management of the economy, for example when setting an inflation target.

The lack of any element of housing costs in CPI has caused some concern which has resulted in the publication by the ONS of a further index known as CPIH.  In effect this is an index of consumer prices including an element of housing costs.

But CPIH is still regarded as under development and, as yet, is not formally recognised as a ‘National Statistic’ and it is not accepted as satisfying international standards as a measure of inflation.

Whilst that remains the case it would appear to be not best practice to rely on CPIH for the purpose of preparing figures adjusted for changes in the value of money.

 

Comparative figures – a worked example

Suppose that a convicted defendant who has a ‘criminal lifestyle’ has obtained an actual benefit of his offence in June 2012 of £100,000, was charged in January 2013 and has an assumed benefit of £400,000 between January 2007 and April 2014.  Using each of the four different indices what figure would be calculated for his total benefit?

(When these calculations were undertaken the latest available inflation indices were those for November 2014.  In each case the uplift has been calculated using only the index figures for January 2007, June 2012, April 2014 and November 2014 on the assumption that the base for the uplift of the assumed benefit arising between January 2007 and April 2014 is the arithmetic mean of the index figures for January 2007 and April 2014.)

Clearly without any indexation the benefit would be £500,000.  Using RPI the benefit works out at £556,098.  Under RPIJ it is £545,718.  Based on CPI £548,231 and finally employing CPIH it would be £545,085.  (For more detail on the computations behind these figures see Confiscation – calculating the inflation uplift.)

The overstatement which would be caused by RPI is clearly illustrated by the figures in this example.

As only RPIJ and CPI are formally recognised as ‘National Statistics’ one might expect that the court would (given the option) be likely to prefer one of these two figures.  In this example those two figures are reasonably similar, although the prosecution may prefer CPI whilst the defence would prefer RPIJ.

An independent observer might consider that the CPI carries greater authority than the RPIJ.

 

Case law

In a somewhat confused and confusing judgment the Court of Appeal when asked to examine the use of RPI (rather than CPI or some rather vague alternative) in a confiscation case said this:-

“We reject the invitation of Mr Sutton to provide a definitive ruling as to the competing claims of the RPI and CPI as indices or indeed as to the consideration of any other factor. We have concluded that no material which he has placed before us calls for any consideration or reconsideration of the established practice in the Crown Court in confiscation proceedings of reliance upon the RPI . . . We emphasise this court’s view that consistency and certainty is imperative and for that reason the use of the RPI in our judgment continues to be appropriate.

. . .

We note that a decision has been taken recently by the Serious Fraud Office and the CPS to adopt an improved variant of the RPI, known as the RPIJ in confiscation proceedings in the future. The revised index which meets international standards will result in a slightly lower increase in the change in the value of money.”

R v Shepherd [2014] EWCA Crim 179

So it would appear that the Court of Appeal considers that RPI continues to be appropriate but does not rule out the use of CPI or RPIJ.

 

Conclusions

In my view prosecutors, defendants and courts should not be using the RPI as a basis for calculating changes in the value of money in confiscation cases because the ONS no longer regards RPI as a ‘National Statistic’ fit for purpose as an index of UK inflation.  The UK national statistic for inflation which carries most international approval is the CPI and, in the author’s view at least, the CPI is currently the most appropriate index to adopt as the basis for calculating changes in the value of money in confiscation proceedings.

However if prosecutors are now adopting RPIJ, which like CPI is recognised as a ‘National Statistic’ by the ONS, then neither defendants nor courts are likely to object.  In consequence RPIJ is now likely to become the de facto standard as the basis for calculating changes in the value of money in confiscation proceedings.

 

Contacting us

Our contact details are here.

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales.  There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this.  Appropriate professional advice should be sought in each individual case.)

7 key differences between trial & confiscation

Legal booksIn many respects confiscation proceedings exist in a different world from criminal trials.  It is almost as if, like Lewis Carroll’s Alice, we have stepped through a looking glass into a parallel universe.

It is important that lawyers recognise this and adjust their approach to the work accordingly.  This article points up, briefly and in the most general terms, seven key differences between Crown Court trials and confiscation proceedings.

 

1 The question

In a Crown Court trial the key issue is whether the defendant is ‘Guilty‘ or ‘Not Guilty‘ of the offence or offences of which he is charged.

In confiscation proceedings the question is ‘How much?.  The proceedings are concerned primarily with the quantification, in money terms, of the convicted defendant’s ‘benefit‘ and ‘available amount‘ (as defined in Part 2 of the Proceeds of Crime Act 2002).

 

2 The standard & burden of proof

In the trial the burden of proof rests upon the prosecution to the ‘criminal standard’.  They have to make the jury ‘sure’ of the guilt of the defendant.

In confiscation proceedings the standard of proof is the ‘civil standard’ – the balance of probabilities – and, in many respects, the burden of proof is on the convicted defendant; particularly in rebutting the statutory s10 assumptions in a ‘criminal lifestyle‘ case and in satisfying the court that the convicted defendant’s ‘available amount‘ is less than his ‘benefit‘.

 

3 The focus & scope of the proceedings

In the trial the focus is on the offence or offences of which the defendant is charged.  In confiscation proceedings the focus is on the convicted defendant under consideration.

Where, as is often the case, in confiscation proceedings the convicted defendant is alleged to have a ‘criminal lifestylethe scope of the proceedings can range far beyond matters relevant to the offence or offences of which he has been convicted.  The entire financial affairs of the convicted defendant over a period of many years may be subject to scrutiny.

Consideration of the convicted defendant’s ‘available amount‘ involves matters unconnected with any offence.

The indictment in a criminal trial may cover a number of co-defendants, but the s16 statement in confiscation proceedings deals only with a single convicted defendant.  A confiscation order reflects the ‘benefit‘ obtained, solely or jointly, and the ‘available amount‘ of only that particular convicted defendant.

 

4 The evidence

In a criminal trial the prosecution may call a number of witnesses who may have, quite literally, witnessed the alleged crime being committed.  The defence may call evidence from the defendant himself.

In confiscation proceedings the prosecution are unlikely to call evidence from anyone other than the financial investigator who is the author of the s16 statement (which sets out the prosecution assertions regarding the convicted defendant’s ‘benefit‘ and ‘available amount‘).  The likelihood is that little or no weight will be given by the court to unsupported oral evidence from the convicted defendant since, by that stage, he has been found guilty and his credibility thereby undermined.

The defence will therefore seek to present other witnesses, perhaps including a forensic accountant expert witness, and documentary evidence in support of the defence assertions.

Evidence which would be inadmissible in the criminal trial may be admissible in confiscation proceedings.

 

5 The decision makers

In a Crown Court trial the key decision of ‘Guilty’ or ‘Not Guilty’ is made by the jury, then in the case of a ‘Guilty’ verdict the sentencing is carried out by the judge.

But in confiscation proceedings there is no jury.  All the decisions are made by the Crown Court judge.  Having said that, in many cases the figures of ‘benefit‘ and ‘available amount‘ are in practice settled by negotiation resulting in an agreement between counsel for prosecution and defence which has been reached outside the courtroom.  The judge will then be invited to make an order in the agreed figures and fix a default sentence.

 

6 The factors in sentencing

In relation to sentencing following trial key factors will often include the nature and gravity of the conduct of the defendant in committing the offence, whether he pleaded guilty, his previous convictions, and his conduct since the offence in terms of showing remorse or making reparation.

In contrast a confiscation order is not strictly speaking regarded as punishment for the offence at all.  So those factors (other than reparation) will have no impact on the confiscation.  A relatively minor offence (in terms of sentencing) might be followed by a very substantial confiscation order, whilst conviction for a relatively serious offence might be followed by a minimal confiscation order.

By way of example, in the case of Waya [2012] UKSC 51 the mortgage fraud offence attracted 80 hours community punishment but the eventual confiscation order was in the very substantial sum of £392,400.

It has been said that confiscation is intended, not to punish the convicted defendant for the crime, but to deprive him of the benefit he has obtained from relevant criminal conduct, up to the limit of his available means.

 

7 Appeals

The prosecution have, with very limited exceptions, no opportunity to appeal the verdict or sentence in a criminal trial.

However prosecution and defence are each permitted to appeal a confiscation order (or a decision to make no confiscation order).

 

Conclusions

Confiscation proceedings are very different from the criminal trial which precedes them. They demand a different approach from instructed lawyers and an extensive examination of financial evidence.  That examination may be assisted by the work of a forensic accountant, particularly where it is alleged that the convicted defendant has a ‘criminal lifestyle‘.

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales.  There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this.  Appropriate professional advice should be sought in each individual case.)

Confiscation – the basics

photo 123 - copyright David Winch 2014This post aims to be an introduction to the basics of confiscation under the Proceeds of Crime Act 2002 in England & Wales.  It includes links to more detailed articles dealing with particular elements of confiscation law (shown like this).

A word of warning.  An introduction like this can be broadly correct but cannot cover the full detail of the legislation nor can it cover those unusual circumstances which may be exceptions to the general guidance contained here.

Be warned too that words and phrases used in confiscation often have a specific technical meaning which is not the same as their meaning in everyday English conversation.  That applies particularly to terms such as ‘benefit’, ‘criminal lifestyle’ and ‘available amount’.

 

When does confiscation apply?

Confiscation proceedings can only be commenced when a defendant has been convicted (either in the Crown Court or Magistrates’ Court) of one or more offences from which he has obtained a benefit.  All confiscation proceedings in England & Wales are conducted in the Crown Court in front of a judge but without a jury.

A wide range of offences can form the basis for confiscation proceedings, including offences such as theft, fraud, drugs offences, money laundering and tax evasion. However confiscation orders are not imposed in every case in which a defendant obtains a benefit. In the year to 31 March 2013 approximately 673,000 persons were convicted of an offence (not all of which involved any benefit being obtained) but only 6,392 confiscation orders were imposed.

Confiscation proceedings are initiated by the prosecution.  There are no published criteria specifying when confiscation proceedings will be initiated.  Where the defendant has obtained a benefit from an offence of which he has been convicted and the prosecution ask for confiscation proceedings to be initiated the court has no discretion to refuse.

The legislation is intended to deprive defendants of the benefit they have gained from relevant criminal conduct, whether or not they have retained such benefit, within the limits of their available means.  The benefit gained is the total value of the property or advantage obtained, not the defendant’s net profit after deduction of expenses.

 

The court procedure

Whilst the judge can make a confiscation order at the time of sentencing a convicted defendant, in many cases the judge will at that time simply set a timetable for further steps towards confiscation.

This normally involves firstly a requirement for the defendant to supply detailed information about his financial affairs; secondly the prosecution to provide a report identifying the amount of benefit said to have been obtained by the defendant and (usually) identifying his ‘available amount‘ (this is referred to as the s16 statement); thirdly the defendant is required to respond to the prosecution’s report indicating the extent to which he agrees and disagrees with it; and finally there will be a hearing scheduled which will culminate in the making of the confiscation order.

In practice the initial timetable may be revised if difficulties or delays arise so these steps may take months, or even years, to complete.

Evidence which would be inadmissible at trial may be admitted in confiscation proceedings.

 

The three decisions

Assuming that the defendant has obtained a benefit from an offence of which he has been convicted, the court then has three key decisions to make.

  • Firstly what benefit has the defendant obtained from the offence or offences of which he has been convicted (including any other offences ‘taken into consideration’ when sentencing)?
  • Secondly, if the defendant has a ‘criminal lifestyle‘, what benefit is he to be assumed to have obtained in addition to the benefit obtained from the offence or offences of which he has been convicted?
  • Thirdly what is his ‘available amount‘?

In confiscation proceedings the burden of proof generally rests upon the defendant rather than the prosecutor – particularly in rebutting the statutory assumptions where the defendant has a ‘criminal lifestyle‘ and in satisfying the court that the defendant has an ‘available amount‘ which is less than his ‘benefit’.  In each case the court will make its decision on the basis of the ‘balance of probabilities’, see s6(7) PoCA 2002.

 

Benefit obtained from the offence

The legal position is that a person obtains a benefit from criminal conduct if he obtains ‘property’ (which means an asset of any description) or a pecuniary advantage as a result of or in connection with that criminal conduct, see s76 PoCA 2002.

Sometimes the benefit obtained from the offence is quite obvious.  If I steal £10,000 from your bank account I have obviously obtained a benefit of £10,000.

But in many cases the benefit obtained will be less obvious.  For example if John is a member of a group of people and is convicted of conspiracy to supply controlled drugs there may be a number of issues arising concerning the extent of John’s involvement in the conspiracy and the valuation of the drugs.  If Peter has obtained a mortgage advance dishonestly his benefit will be a proportion of the increase in value of the property since he purchased it.

However the courts will always be looking to the benefit “obtained” – not the benefit “retained”.  Where the court is satisfied that a particular benefit has been obtained jointly by more than one person it will treat each person as having obtained the whole of that benefit – but will place a cap on the overall recovery of jointly obtained benefit from the different defendants.

 

Assumed benefit of criminal lifestyle

In many cases the defendant will be held to have a ‘criminal lifestyle‘ and this will trigger the statutory assumptions set out in s10 PoCA 2002.  The effect may be to increase very substantially the defendant’s total alleged benefit.

These assumptions relate to the defendant’s receipts and payments since the ‘relevant day’ (normally the day six years before the day on which he was charged with the offence) up to the day on which the court makes the confiscation order (but in practice the assumptions are usually applied only up to an earlier date for convenience) and the defendant’s assets held at any time after the date of his conviction (whenever they were first obtained).

A defendant has a ‘criminal lifestyle‘ if the criteria set out in s75 are satisfied, but not otherwise.  The criteria relate to the offence or offences of which the defendant has been convicted – they do not relate to his ‘lifestyle’ in the everyday sense of that word.

It is in ‘criminal lifestyle‘ cases in which the services of a forensic accountant may prove particularly valuable in challenging the prosecutor’s s16 statement.

There is an obvious danger of excessive benefit figures and double counting where the ‘criminal lifestyle‘ assumptions are made.

 

The defendant’s available amount

The defendant’s ‘available amount‘ includes all his assets currently held (with a deduction for liabilities secured on those assets) and the current value of any ‘tainted gifts’ he has made, see s9 and s81 PoCA 2002.

The court will not consider, for the purpose of determining the defendant’s ‘available amount‘, whether those assets which he currently holds were obtained legitimately or not – that does not matter at this stage.

 

The confiscation order

In order to reach its decisions the court may hold a hearing at which oral and written evidence from both sides will be presented.

However in many confiscation cases the prosecution and defence will negotiate agreed figures for ‘benefit’ and ‘available amount‘ prior to the scheduled hearing of oral evidence.  In that event there will be only a brief hearing before the judge at which he will be invited to approve the agreed figures which then become the basis for the confiscation order.

Before finalising the order the court may need to consider whether the application of the statutory assumptions has created a serious risk of injustice and whether the proposed order would be disproportionate and infringe the defendant’s human rights.

Only very rarely will the amount of the confiscation order be limited to the profit arising from the criminal conduct.

The court will normally order the defendant to pay, within a specified period of time, a sum of money equal to the lower of (a) his total benefit and (b) his available amount.

If the court has no information from which it is able to conclude on the balance of probabilities that the defendant has an ‘available amount‘ which is less than his total ‘benefit’ it will make a confiscation order in the amount of the ‘benefit’.

Where the court accepts that the defendant’s ‘available amount‘ is less than his total ‘benefit’ a brief list of the assets which form the defendant’s ‘available amount‘ should be appended to the confiscation order issued by the court.

The court will typically allow up to six months for payment (from 1 June 2015 this is limited to three months as a result of amendments to confiscation law).  The court will also set a default sentence, which is a period of imprisonment the defendant may be required to serve if he does not pay the required sum.

The defendant may subsequently return to court to ask for a six month extension to the time to pay, making a maximum of 12 months in all from the date of the confiscation order (from 1 June 2015 this is limited to a further three months making six months in all from the date of the confiscation order).

Interest is charged on any amount which remains outstanding after the due date for payment, s12.

 

Appeals

Either prosecution or defence may appeal against the confiscation order.  Appeal is to the Court of Appeal (Criminal Division) and ultimately to the Supreme Court.  An appeal ought to be initiated within 28 days of the confiscation order but late appeals may be heard in some circumstances.

 

Subsequent events

Where a confiscation order has been made in the amount of the defendant’s ‘available amount‘ and subsequent realisation of his assets identified in the confiscation order produces a lesser amount than anticipated, the defendant (or the prosecution) can apply to the court under s23 to have the amount of the defendant’s confiscation order reduced to reflect his revised ‘available amount‘ based on the actual amounts realised.

Where evidence comes to light which was not available to the prosecution at the time of the confiscation hearing which indicates that the defendant’s benefit was greater than that found by the court at that hearing the prosecution can, within 6 years of the date of conviction, apply to the court for the benefit figure to be increased under s20 or s21.

Where a confiscation order has been made in the amount of the defendant’s ‘available amount‘ (which was less than his benefit) the prosecution can apply to the court, at any time, for an order under s22 requiring the defendant to pay a further amount where he has a current ‘available amount‘ which would enable him to satisfy a new order – but he may not be required to pay an amount more than the court believes to be just.  In that sense a confiscation order may be regarded as a ‘life sentence’.

Where only a small balance remains outstanding on a confiscation order the court may discharge the order under s24 or  s25.

Where, following a fresh conviction on a subsequent occasion, a defendant finds himself subject to confiscation proceedings a second time the usual rules may be modified on the second time around.

 

Other confiscation topics

Other confiscation topics, such as restraint orders, the impact of bankruptcy on confiscation and adjustments for changes in the value of money are covered in further articles in this blog.  A full list of confiscation articles is here.

 

Contacting us

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David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales.  There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this.  Appropriate professional advice should be sought in each individual case.)