Tag Archives: criminal conduct

Seeing the crescent – or the whole moon?

Crescent moonHow should a forensic accountant approach a confiscation case? Should he (or she) focus on the benefit and available amount asserted in the prosecutor’s s16 PoCA 2002 statement – or consider the wider aspects of the proceedings? Should he study the bright crescent, or the whole of the moon?

The prosecutor’s s16 statement

The s16 statement may have been written by a financial investigator who has been involved in the case before and during the trial and who will bring to his s16 statement his knowledge of the circumstances of the case, the indictment and the judge’s sentencing remarks.  That can mean that the benefit in the s16 statement fairly and properly reflects the situation of the convicted defendant.

However, in my experience this is often not the case, particularly where there has been more than one defendant convicted at trial.  Sometimes the author of the s16 statement adopts a one-size-fits-all approach to the confiscation – going overboard with ‘cut and paste’ to speed up the production of multiple s16 statements.

But confiscation is very much focused on each single defendant.

The forensic accountant

The forensic accountant who is provided only with the s16 statement and its appendices, may be (at that stage) unaware of important features of the specific charges of which this defendant was convicted and relevant details of his unique role in the offending.

Obtaining copies of the indictment and perhaps the judge’s sentencing remarks, or the prosecution opening, may provide information of key relevance to benefit which is not to be found in the s16 statement.

So a little digging by the forensic accountant may bear fruit.

Conspiracy

This is particularly so in conspiracy cases where the s16 statement may blithely treat all convicted defendants as having jointly obtained the full benefit derived from the conspiracy.  But did the evidence at trial support that view?  The judge’s sentencing remarks may throw some light on this, perhaps indicating a more limited role for a particular defendant involving a more restricted benefit for him.

Tax evasion

Another fertile area of challenge surrounds convictions for offences such as “being knowingly concerned in the fraudulent evasion of tax”.  This is an example of an area in which there may be a disconnect between the criminal conduct and the benefit derived from it.

Consider the case of a company director who deliberately submits false VAT returns for his company to enable it to retain or obtain the funds it needs to continue a legitimate trade.  The director may be quite properly convicted of the offence.  In these circumstances the s16 statement is likely to assert that he has benefited to the extent of the tax evaded.  But has he?  Undoubtedly the initial beneficiary will have been the company rather than the director.

The disconnect between offending and benefit

As long ago as 2008, in the case of CPS v Jennings [2008] UKHL 29 the court authoritatively stated,  “A person’s acts may contribute significantly to property … being obtained without his obtaining it. But … a person benefits from an offence if he obtains property as a result of or in connection with its commission, and his benefit is the value of the property so obtained, which must be read as meaning ‘obtained by him’.”

That is as true today as it was then.

Whether, and to what extent, the director has himself obtained a benefit demands careful investigation, it is by no means a foregone conclusion.

There are many more examples in which establishing the benefit obtained by a particular defendant demands a wider consideration of the circumstances of the case and the essential principles of confiscation law and practice.

Ideally these issues will have been identified and addressed by the defendant’s legal team and set out in detailed instructions to the forensic accountant.

But in practice this is often not the case for one reason or another.

Criminal lifestyle

Importantly the issue of whether a defendant has a ‘criminal lifestyle’ – triggering the draconian statutory assumptions – may depend upon whether he has obtained from his offending a total benefit of at least £5,000 (in England and Wales).

So not only may the benefit derived from the defendant’s ‘particular criminal conduct’ be important in itself, it may be the key to establishing – or not – a much larger benefit figure.

The danger of focusing only on the s16 statement is that the forensic accountant may fail to appreciate the importance of relevant matters which are not referred to within that statement.

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 and Trading Standards offences

Cumbria Trading Standards officerTrading standards officers these days deal with a wide range of offences.  Years ago trading standards work centred on checking that retailers were using correct weights and measures.  That is still an element of the work, but trading standards officers today also deal with scams, frauds, dishonest overcharging, trade mark and intellectual property offences and transgressions of the Consumer Protection from Unfair Trading Regulations 2008 and other legislation.

Consumer protection

The essence of trading standards work is the protection of consumers.  So it is not surprising that in criminal prosecutions trading standards departments will focus on the loss to the consumer.  That includes losses which the offender intended but failed, for one reason or another, to bring about.

For sentencing purposes it is unquestionably correct for the court to have regard to both the actual and the intended losses to consumers.

But a different approach is required in confiscation.

Confiscation

It should not be overlooked that the principal objective of confiscation is to deprive a wrongdoer of the financial benefit obtained by him from his criminal conduct.  Self-evidently benefit which the convicted defendant had intended to obtain but did not, cannot be the subject of a confiscation order.

But equally importantly, the focus of a confiscation order is on the benefit obtained by the convicted defendant – not on the loss suffered by the consumer.  As it was put succinctly in the case of R v Reynolds & Others [2017] EWCA Crim 1455 at para [58(vi)] “the amount lost by the loser is generally irrelevant”.

But how is the benefit to be established for the purposes of the confiscation provisions of the Proceeds of Crime Act 2002?

Benefit

The first step has to be the correct identification of the convicted defendant.  This is particularly important where there is more than one defendant (where it is necessary to determine if each element of benefit was obtained singly by one defendant or jointly by more than one) and where a limited company is involved (where it may be necessary to consider whether the corporate veil should be pierced or to differentiate between benefit obtained by the company and benefit obtained by a director or employee).

This may involve careful consideration of matters of fact and issues of law.

Of course when there is more than one convicted defendant quite separate s16 statements are required for each defendant.

The next step is careful consideration of the precise offence(s) of which the defendant has been convicted and – if possible ‘criminal lifestyle’ is in issue – the period of time over which each offence occurred, and the number of offences of which this defendant has been convicted.

It is sometimes the case that a defendant will be prosecuted for a number of individual offences but the trading standards officers regard these specific charges as merely representative of a more widely operated illegal method of business.

In assessing the benefit of ‘particular criminal conduct’ the court will have regard only to matters which have been the subject of a charge which has resulted in conviction (and other offences taken into consideration in sentencing).

Where the offences do not appear in Schedule 2 PoCA 2002 and the aggregate benefit obtained by a convicted defendant is less than £5,000 (in England and Wales) then that defendant will not be deemed to have a ‘criminal lifestyle’ and the statutory assumptions of s10 cannot be employed.

When quantifying the benefit obtained by a convicted defendant it may, depending upon the circumstances, be appropriate to use the amount of the his profits (i.e. net proceeds), permitting him to deduct the expenses incurred in supplying the goods or services in question.

It may also be necessary to reduce the amount of benefit in respect of VAT charged to the consumers and any amounts refunded to them.

For all these reasons the benefit obtained by the convicted defendant may be very much less than the losses suffered by consumers as a result of the criminal conduct in which he engaged, or even the amount referred to by the judge when sentencing him.

So what are the key points to remember?

Key points

For the prosecution, great care needs to be taken at the charging stage regarding who to charge (and, for example, whether to charge a limited company as well as charging a director), what offence(s) to charge and over what period, and how many charges to bring.

For the defence, it is important to challenge the s16 statement appropriately having regard to applicable statute and case law and the relevant facts.

In many trading standards cases it will be useful for the defence to instruct a forensic accountant to critically review the prosecution s16 statement.

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.)

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.)

UK Supreme Court rules on money laundering arrangements

Supreme Court logoThe UK Supreme Court recently ruled on the law relating to prosecutions for entering into, or becoming concerned in, an arrangement which facilitates the acquisition, retention, use or control of criminal property for, or on behalf of, another person – contrary to s328 Proceeds of Crime Act 2002.

The case arose as a result of the actions of a fraudster, referred to as ‘B’.

Shortly before commencing his fraud the defendant, referred to as ‘H’, opened two bank accounts and handed control of them to ‘B’ who then used them in connection with his frauds.  ‘B’ conned unsuspecting members of the public into making payments into these bank accounts (for services which in truth were non-existent).

The prosecution case was that ‘H’ must have known or at least suspected that ‘B’ had some criminal purpose even if he was not aware of the details of the con.  ‘B’ was convicted of fraud.  ‘H’ was charged with becoming concerned in an arrangement contrary to s328 PoCA 2002.

The Supreme Court was required to consider whether, in the circumstances alleged, ‘H’ could be guilty of a s328 offence – R v GH [2015] UKSC 24 (22 April 2015).

The Supreme Court broke the issue down into four key questions.  In addressing those questions it overturned some decisions of the courts below.

 

1  Must the property be ‘criminal property’ before the arrangement operates on it?

Counsel for the prosecution submitted to the Supreme Court that the same conduct could both cause property to become criminal and simultaneously constitute the offence charged under s328.  He made the same submission in relation to sections 327 and 329, correctly recognising that the three sections have to be construed coherently.

So, he submitted, a thief who steals “legitimate” property is necessarily at the same time guilty of “acquiring criminal property” contrary to s329.

The Supreme Court rejected that view, holding that it failed to recognise the necessary distinction between a person who acquires criminal property and one who acquires legitimate property by a criminal act or for a criminal purpose.

Sections 327, 328 and 329 are aptly described as “parasitic” offences because they are predicated on the commission of another offence which has yielded proceeds which then become the subject of a money laundering offence.

The Supreme Court therefore approved the decision of the Court of Appeal in an earlier case R v Geary [2010] EWCA Crim 1925 that to say that s328 extends to property which was originally legitimate but became criminal only as a result of carrying out the arrangement is to stretch the language of the section beyond its proper limits.  I have discussed the Geary case more fully in an earlier article on this blog.

However, for example, a thief who steals legitimate property might then commit a s329 money laundering offence by his possession or use of that property after his acquisition of it.

In practice such a thief should normally face a charge of theft rather than one of money laundering.  But the legal point that he may also be guilty of a money laundering offence is an important one because of the obligation on banks & others in the ‘regulated sector’ to report suspicions of money laundering under s330.

 

2  Must the ‘criminal property’ exist before the defendant joins the arrangement?

The Supreme Court agreed with the decision of the Court of Appeal in holding that it does not matter whether criminal property existed when the arrangement was first hatched.  What matters is that the property should be criminal property at a time when the arrangement operates on it.

It should be noted that the Supreme Court did not hold it to be necessary that the property should be criminal property at the time when the arrangement commences to operate on it.

The offence is complete when the arrangement becomes one which facilitates the acquisition, retention, use or control of criminal property for, or on behalf of, another person and the defendant knows or suspects this to be the case.

 

3  Were the monies ‘criminal property’ before being paid into the defendant’s bank account?

Counsel for the prosecution made a somewhat technical submission to the Supreme Court that the monies banked were criminal property at the time of payment because they represented a chose in action, namely the obligation of the purchasers of the supposed services to pay for them.

The Supreme Court were unimpressed by this submission, holding that there was a stark absence of material before the court to substantiate a case of this nature.

However the court did not close the door on such an argument being successfully presented in a future case.

 

4  Was the actus reus of the offence committed on the facts of the case?

Looking at the substance of the matter, the money paid by the victims into the accounts was lawful money at the moment at which it was paid into those accounts.  It was therefore not a case of the account holder acquiring criminal property from the victims.

But by the arrangement the respondent also facilitated the retention, use and control of the money by or on behalf of ‘B’.  Did the arrangement regarding the facilitation of the retention, use and control of the money fall foul of s328 on the basis that it was criminal property at that stage, since it was the proceeds of a fraud perpetrated on the victims?

In this case the character of the money did change on being paid into the defendant’s accounts.  It was lawful property in the hands of the victims at the moment when they paid it into the defendant’s accounts.  But it then became criminal property in the hands of ‘B’, not by reason of the arrangement made between ‘B’ and the defendant, but by reason of the fact that it was obtained through fraud perpetrated by ‘B’ on the victims.

There was a crucial difference therefore between this case and the situation in Geary (in which the arrangement itself had been the reason that the property in question became criminal property).

The Supreme Court (overturning the decision of the Court of Appeal) held that there was no artificiality in recognising that change in character of the money, and that it would be appropriate to regard the defendant as entering into or becoming concerned in an arrangement to retain criminal property for the benefit of another.

It was the retention, use & control of the monies after they had been paid into the bank accounts as the result of a fraud, under the bank account arrangement made earlier between ‘B’ & ‘H’, which could properly form the basis of a conviction of ‘H’ under s328.

 

Contacting us

Our contact details are here.

David

(Note: This article applies to prosecutions under the provisions of Part 7 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 trial 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

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.)

A confiscation case study – the career fraudster

Books - copyright David Winch 2014On 16 June 2014 the Court of Appeal in London heard the appeal of Mr Sam Ernest against a confiscation order in the sum of £308,380 made against him at Kingston-upon-Thames Crown Court.  The Appeal Court judgment R v Ernest [2014] EWCA Crim 1312 makes interesting reading.

Mr Ernest purported to run a business as an events organiser.  He would claim to have contacts from whom he could obtain sought-after tickets to popular high profile events, such as Wimbledon, the London Olympics, rock concerts or film festivals, in return for money.

Mr Ernest sometimes provided the tickets for which he had been paid, but often he would not.  When tickets were not provided he would usually promise refunds – on some occasions refunds were given, but on others they were not.

 

The victims

His victims were in the main either wealthy people or organisations who could afford to pay substantial sums of money for prestige events, or men whom he had befriended or women with whom he entered into relationships.

One woman with whom he was having a relationship got a party of 18 people together, some from the USA, to attend events at the London Olympics.  She paid almost £4,000 to Mr Ernest.  He continued to promise that the tickets would arrive right up until after her friends had arrived in the UK.

In total Mr Ernest defrauded his victims of over £48,000.

 

The police investigation

Mr Ernest’s activities had first been reported to the police in 2009, but they took no action at that stage.  It was not until 2012, when a special team of police officers were investigating fraud associated with tickets for the London Olympics, that attention was focused on his activities.

On discovering that the police wished to speak to him, Mr Ernest prevaricated and would not agree to attend for interview.  No doubt this was in part because he was a United States citizen who had entered the UK on a six month tourist visa in 2005 and was an illegal over-stayer. His passport had expired in 2010.

However in December 2012 Mr Ernest pleaded guilty to 17 counts of fraud and was sentenced to 4 years imprisonment.  Confiscation proceedings followed.

 

The confiscation proceedings

Mr Ernest was subject to confiscation proceedings on the basis that he had a ‘criminal lifestyle‘ having been convicted in the same proceedings of more than 3 offences from which he had obtained a benefit and had, in aggregate, obtained a benefit of at least £5,000, s75 Proceeds of Crime Act 2002.

The Appeal Court judgment does not, of course, give a full history of the confiscation proceedings.  We do not know what was in the prosecution’s s16 statement or in Mr Ernest’s response.  We do know, however, that the confiscation went to a full hearing in the Crown Court which heard evidence from a Detective Constable Knowles and from Mr Ernest.

 

The prosecution assertions

DC Knowles referred to bank accounts held by a Ms Barbara Howell which had apparently been used by Mr Ernest (and by Ms Howell for legitimate purposes).  There was also a bank account in the name of J Bailey Morgan which apparently Mr Ernest controlled.  DC Knowles considered the movements on these bank accounts since the ‘relevant day’, which it was agreed was 29 August 2006 (six years prior to the date on which Mr Ernest had been charged).

DC Knowles calculated the amount of money in these accounts paid in by known victims together with all of the unexplained credits to the accounts, that is all the monies deposited during the relevant period other than those which represented Ms Howell’s legitimate earnings and funds. This figure came to £209,980. This figure included sums specifically identified as being monies paid into that account by persons identified as victims of Mr Ernest’s activities.

The prosecution invited the court to assume all these sums credited to the various bank accounts to be benefit of Mr Ernest’s general criminal conduct pursuant to s10(2).  Presumably to avoid risk of double counting the prosecution did not seek to assert, as benefit of particular criminal conduct, any additional benefit of the 17 offences of which Mr Ernest had been convicted.

However the prosecution did assert that a further assumed benefit arose, under s10(4), in respect of Mr Ernest’s day to day living expenses over the period since the ‘relevant day’.  These were estimated at £16,400 per year for 6 years, so £98,400 in total.  The prosecution accepted that to some extent Mr Ernest had been financially supported over this period by a succession of girlfriends but contended that, even so, he would have incurred this £98,400 expenditure himself.

In consequence, the prosecution’s total benefit figure was £308,380.  The prosecution apparently did not accept that Mr Ernest’s ‘available amount’ would be less than his benefit.

 

The defence evidence

Mr Ernest asserted that on at least some occasions he had supplied tickets for which he had been paid and on other occasions he had made refunds to customers.  So it would not be correct, in his view, to treat the entirety of the sums banked as benefit.  He also asserted that he had no assets available and no hidden assets.

However the defence produced no books and records of the business and no report of a forensic accountant, nor did the defence produce documentary evidence of Mr Ernest’s current ‘available amount’.  The defence relied upon the oral evidence of Mr Ernest.

 

The judgment in the Crown Court

The Crown Court judge entirely rejected the oral evidence of Mr Ernest.  He was, the judge concluded, a “career fraudster” who had used the bank accounts of others and had produced no documents in support of his oral evidence.  The judge concluded that he was a dishonest man who had lied repeatedly under oath.

The judge accepted the benefit figure of £308,380 asserted by the prosecution and found that the defendant had not discharged the burden upon him to show that his ‘available amount’ was less than his benefit.

Accordingly he ordered Mr Ernest to pay £308,380 within 6 months, with a default sentence of 3 years consecutive to the prison term he was already serving.

 

The Court of Appeal judgment

On appeal it was argued that the judge should have reduced the benefit figure to reflect legitimate business activities conducted by Mr Ernest where he had provided tickets or had made refunds.  Furthermore Mr Ernest had incurred expenditures in obtaining the tickets which he had supplied.

The Court of Appeal would have none of this.  It noted the absence of evidence in support of the asserted legitimate activities and commented that “the fact that some unidentified proportion of that money might conceivably be referable to some specific (but unidentified) business transaction does not render the making of the assumption incorrect”.

The Court was not prepared to make any reduction in the benefit figure in respect of expenses which Mr Ernest might have incurred.  It regarded the occasional provision of tickets by Mr Ernest as a means of furthering his fraudulent purpose by luring customers to do more business with him.

The £209,980 assumed benefit arising from credits to the bank accounts was therefore upheld.

But the Court of Appeal did accept that the bank statements showed expenditures by Mr Ernest on his living costs.  These expenditures had therefore been met from monies already included in assumed benefit.  This undermined the prosecution’s assertion that Mr Ernest would have incurred £98,400 of living expenditure funded entirely by additional assumed criminal conduct.  There was no other suitable figure before the court, so this head of benefit was omitted on appeal.

In consequence the benefit figure was reduced to £209,980.  The court ordered Mr Ernest to pay this lower figure and reduced the default sentence to 2 years 6 months.

 

Commentary

One doesn’t know whether in this case the defence had instructed a forensic accountant or not.  It is possible that a forensic accountant’s report had been obtained but had not been disclosed as part of the defence evidence (perhaps for good reason!).

However it should come as no surprise to find a Crown Court judge entirely rejecting the unsupported oral evidence of a convicted defendant.  Possibly if a forensic accountant had given evidence in the Crown Court confiscation hearing the judge might have accepted that the defendant, having incurred the expenses shown on the bank accounts, would not have had an ‘available amount’ equal to the total of his assumed benefit.  Such a conclusion would have been consistent with the Court of Appeal decision in McIntosh & Marsden v R [2011] EWCA Crim 1501.

In the event this defendant seems destined to serve his default sentence in due course.

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.)

Supreme Court caps confiscation enforcement

Supreme Court logoThe UK Supreme Court has capped confiscation enforcement in cases where more than one confiscation order covers the same joint benefit.  The result is that the State will be unable to recover in excess of 100% of the benefit jointly obtained.  It is as if the confiscation order created a joint and several liability of the defendant to ‘repay’ the benefit jointly obtained.

The principle is simple – but the practical implications may on occasion be complex.

In fact the Supreme Court judgment on 18 June 2014 in the cases of R v Ahmad & Ahmed and R v Fields & Others [2014] UKSC 36 dealt with another point too – confirming that under the law of confiscation if two or more persons obtain a benefit jointly they each obtain the whole of it.  That point is considered in a separate blog article.

 

The problem

The problem may best be understood by a simple example.  Suppose John and Jim get a couple of guns, walk into a bank together and rob it of £10,000.  Subsequently they are caught and convicted and are made subject to confiscation orders.  In those confiscation orders each of John and Jim will have a benefit of £10,000.  Assuming each of them has sufficient assets it seems that in total they will be required to ‘repay’ £20,000 into court.  So, it appears, the court will recover twice the amount stolen.

The Supreme Court concluded that that could not be right.  Recovering double the amount stolen would be disproportionate.  It would not serve the real aims of the Proceeds of Crime Act 2002 and it would be a violation of the defendants’ rights under Article 1 of the First Protocol to the European Convention on Human Rights.

 

The simple answer

The simple answer is to require each of the confiscation orders against John and Jim to provide that it is not to be enforced to the extent that a sum has been recovered by way of satisfaction of another confiscation order made in relation to the same joint benefit.

This is what the Supreme Court held in its judgment at para [74].

So if the court recovers £5,000 from John it will only recover a further £5,000 from Jim.  Of course that means if the court recovers £10,000 from John then it will recover nothing from Jim, but the Supreme Court said that criminals have to accept that risk of unfairness.

 

Potential complications

Although the principle is clear and the reason for it is straightforward, its application in practice may be more complicated.

Suppose that as well as John and Jim robbing the bank there was a getaway driver, Jack.  Let’s suppose Jack was not caught at the time, but a good while later he is caught and convicted.  If he is subject to confiscation then presumably he cannot be liable to pay anything if the court has already received £10,000 from John and Jim.  So that is a bit of luck for Jack!

Let’s consider some other defendants.  Peter and Phil are fraudsters operating a fake business in which they order goods on credit, sell them and disappear – pocketing the money and never paying their suppliers.  Peter and Phil had a joint bank account for the fake business which received £50,000 from customers over a period of just under one year.

Peter and Phil are caught, convicted of fraudulent trading contrary to s9 Fraud Act 2006 and subject to confiscation.  In the confiscation proceedings each of them has a ‘criminal lifestyle‘ having been convicted of an offence carried on for at least 6 months from which a benefit of at least £5,000 has been obtained, s75 PoCA 2002.

Peter and Phil each have a benefit of £50,000 from the offence of which they have been convicted.  But that is not the end of the story.

The separate personal bank accounts which Peter and Phil have are examined and the statutory criminal lifestyle assumptions are applied.  There are £70,000 unexplained credits in Peter’s bank account and £25,000 unexplained credits in Phil’s bank account.  In consequence the court finds Peter’s total benefit for confiscation purposes to be £120,000 and Phil’s total benefit to be £75,000.

Peter’s available amount is £80,000 and Phil’s is £45,000.  So the court makes confiscation orders against Peter for £80,000 and against Phil for £45,000.

If Peter pays the £80,000 and Phil pays nothing, can enforcement proceedings still be taken against Phil?  If they can, how much can be enforced against Phil?  I do not think the Supreme Court judgment helps me answer these questions because I need to know how much of the £80,000 recovered from Peter relates to the £50,000 benefit jointly obtained and how much of it relates to the other £70,000 assumed benefit of Peter’s.

For example if the £80,000 recovered from Peter includes all the £50,000 jointly obtained benefit of the fraud then the most that can be enforced against Phil is his additional assumed benefit of £25,000.

But, at the other extreme, if the £80,000 recovered from Peter comprises £70,000 re his additional assumed benefit and only £10,000 re the jointly obtained benefit then it would appear that the whole £45,000 can be enforced against Phil (because he still has unrecovered amounts of £40,000 joint benefit and £25,000 additional assumed benefit).

Looking at this another way, if we make a presumption that in each case the first £50,000 of the amounts ordered to be paid by Peter and Phil related specifically to the jointly obtained benefit then the £80,000 paid by Peter has repaid all of the jointly obtained benefit and so (arguably) there can be no enforcement action against Phil.  But that would seem to be a nonsensical outcome.

 

Default sentences

We also need to consider the implications for default sentences.

Going back to John and Jim.  They each had a benefit of £10,000 from the bank robbery.  Let’s assume the confiscation orders against each of them specified a default sentence of 6 months.  If the court recovers £5,000 from John – so it can then only enforce a maximum of £5,000 against Jim – does that result in a corresponding reduction in Jim’s default sentence if he fails to pay?

My guess is that Jim will indeed have his default sentence effectively reduced.  But the Supreme Court judgment does not provide the answer.

Presumably Jack, the getaway driver, cannot be made to serve any default sentence if the court has already recovered the £10,000 from John and Jim.  And what about Phil the fraudster – what is the position regarding his default sentence?

 

In conclusion

It seems to me that in solving one problem the Supreme Court have risked creating further problems in relation to the enforcement of confiscation orders.

If it were decided that any ambiguity should be resolved in favour of the defendants then (i) all recoveries from any defendant should be applied against his benefit jointly obtained in priority to his other benefit, and (ii) each defendant’s default sentence ought to be reduced pro-rata when the amount enforceable against him reduces (whether this arises as a result of a recovery from him or as a result of a recovery from another person relating to benefit obtained jointly with him).

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.)

UK Supreme Court rules on benefit obtained jointly

Supreme Court logoThe UK Supreme Court has finally and firmly ruled out apportionment of benefit obtained jointly in its judgment on 18 June 2014 in the cases of R v Ahmad & Ahmed and R v Fields & Others [2014] UKSC 36.

The Supreme Court confirmed that where benefit is jointly obtained by more than one defendant then each defendant obtains the whole of the benefit obtained jointly, for the purpose of confiscation proceedings.

 

Benefit “obtained”

Benefit arises where a person “obtains” an asset or evades a liability as a result of or in connection with criminal conduct, see s76 Proceeds of Crime Act 2002.  But the Supreme Court points out, in para [42] of Ahmad, whilst a criminal may sometimes become the owner of property obtained through crime, in many cases he does not do so.  When a person “obtains” a chattel, money, a credit balance or land through criminal dishonesty, he does not acquire title to, or ownership of, the item in question, although he does acquire control over it.

As was pointed out by Lord Walker and Hughes LJ in Waya [2012] UKSC 51, para [68], a person who dishonestly obtains property has “at most a possessory interest good against third parties, and thus of no significant value”.

 

Contrasting “obtaining” and “ownership”

The Supreme Court considered that cases under the 2002 Act involve “obtaining” not “ownership”, and, even if they did involve ownership, the Court were doubtful whether that ownership would be technically joint, para [55].

In paras [60] to [62] of Ahmad the Supreme Court set out their thinking in rejecting arguments for apportionment of benefit.  The argument for apportioned valuation is that s79(3) requires the valuation of the property obtained to take into account the interests of accomplices.  This argument misunderstands the purpose and effect of s79(3) said the Supreme Court.  A defendant who steals property or obtains it by deception does not acquire ownership of that property.  Likewise if two defendants jointly misappropriate property, neither of them obtains a legal interest in it and neither has an “interest” for the purpose of s79(3).  In relation to each of them, the value obtained is the value of what they have taken, which is the market value of the misappropriated property.  Thus, once a defendant has obtained the property, whether solely or jointly, that market value is the value of what he has obtained.

The “interests” of a defendant’s co-conspirators are not to be taken into account when valuing the property for the purpose of assessing the value of the property which the defendant “obtained”.  Furthermore when one is valuing the property which a conspirator, including a defendant, has “obtained”, one is not normally valuing an “interest” at all.

 

Whether benefit was obtained jointly

However the Supreme Court also confirmed, by references at paras [41] and [46] to [51], that Crown Courts should not be too quick to conclude that benefit has been jointly obtained when there is evidence which suggests that it may not have been.  Judges in confiscation proceedings, said the Supreme Court, should be ready to investigate and make findings as to whether there were separate obtainings.

David

P. S.  A separate blog article “Supreme Court caps confiscation enforcement” deals with the cap on enforcement of confiscation orders which was also dealt with in the UK Supreme Court judgment in R v Ahmad & Ahmed and R v Fields & Others [2014] UKSC 36.

(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 – challenging the prosecutor’s s16 statement

Legal wig copyright David Winch 2014How should the defence challenge the prosecutor’s assertions concerning the defendant’s benefit and available amount?

The prosecutor’s s16 Proceeds of Crime Act 2002 statement is a key document in confiscation proceedings.  In preparing the s16 statement the prosecution will have considered the offence(s) of which the defendant has been convicted; the evidence at trial (or readied for trial where there has been a guilty plea) and other information collected during investigation of the offence; information provided by the defendant in any statement under s18 or in response to any requirement in a restraint order under s41(7); information obtained from banks and others (perhaps by way of a production order under s345); and the results of the prosecution’s own investigations – probably undertaken by an accredited financial investigator.

 

Variety

Prosecution s16 statements are prepared in a wide variety of circumstances.  No two s16 statements will be the same – though they all have some similarities.  In any event the s16 statement will need careful study.  Typically the body of the s16 statement will run to between 10 and 30 pages with supporting appendices which could run to several hundred pages, and may include spreadsheets.

The s16 statement is likely to include some background narrative which sets the confiscation proceedings into context, including a description of the court proceedings resulting in the conviction and any restraint order which has been obtained.   There may also be information about the defendant (date of birth, previous convictions, etc) and information about his known legitimate income.

The defence legal team will wish to challenge any incorrect factual assertions in that narrative – but this narrative background is not at the heart of the s16 statement.

 

Financial investigations and ‘benefit’

The s16 statement will then move on, probably providing some details about the financial investigations undertaken by the prosecution and their findings about the defendant’s financial affairs.  That leads to the prosecution assertions about the defendant’s ‘benefit’ for confiscation purposes.

In this context ‘benefit’ has a special meaning based on the statutory provisions – it does not refer to what might be the defendant’s benefit in the everyday sense of the word.

 

‘Benefit’ of the offences

The first element of the defendant’s ‘benefit’ which the s16 statement will deal with is the ‘benefit’ of the offences of which the defendant has been convicted, sometimes referred to as the ‘direct benefit’ or the ‘benefit of particular criminal conduct’.  Here the prosecution are considering what the defendant ‘obtained’ as a result of the offences of which he has been convicted in the proceedings which triggered the confiscation.

This may be very easy to establish.  If the defendant has been convicted of, say, stealing a cheque for £10,000 payable to someone else and paying it into his own bank account then the ‘benefit’ of that offence is £10,000 (possibly uplifted for changes in the Retail Prices Index since the date of the theft).

But in many cases the ‘benefit’ of the offence will be less clear cut.  For example there may be theft of cash where there are inadequate records to quantity the amount of cash stolen, or supply of controlled drugs where there are no records of the monies received for the drugs, or the defendant may have been a member of a conspiracy (meaning it will be necessary to ascertain the amount ‘obtained’ by this particular defendant in his role in that conspiracy).

In rare cases the ‘benefit’ may be based on the profit deriving from fundamentally legitimate business operations which have been tainted by criminality, as in the case of R v Sale.

The ‘benefit’ asserted by the prosecution may also include assets which need to be valued, such as controlled drugs seized at the time of the defendant’s arrest.

In other cases the ‘benefit’ may be based on a ‘pecuniary advantage’ arising from the evasion of a liability – for example evasion of income tax, VAT or duties on goods.

In a minority of cases the prosecution may not be asserting that the defendant has obtained any benefit at all from the offences of which he has been convicted.

 

Assumed ‘benefit’

If the prosecution assert that the defendant has a ‘criminal lifestyle’ then the s16 statement will also deal with additional assumed ‘benefit’ which arises under the statutory assumptions of s10 PoCA 2002.  The statutory assumptions apply to the defendant’s receipts and expenditures since the ‘relevant day’ (which is usually 6 years prior to the date on which the defendant was charged with the offences of which he has been convicted) and to any assets held by the defendant since the date of his conviction.

Typically the prosecution will have obtained bank and credit card statements for all known bank and credit card accounts held by the defendant and will have reviewed all deposits to those accounts since the ‘relevant day’.  They may also have information about the defendant’s expenditures since the ‘relevant day’ – for example as a result of examining documents seized from searches of the defendant’s premises or considering information provided by the defendant in recorded interviews or in his s18 statement.  In addition the prosecution may have obtained Land Registry records or solicitors’ conveyancing files regarding property purchases, and mortgage account statements.

These same sources of information may be the basis for assertions of assumed ‘benefit’ in respect of any assets held by the defendant after the date of his conviction.

 

‘Available amount’

Finally the prosecutor’s s16 statement will deal with the defendant’s ‘available amount’.  Again this is a term defined by statute which does not mean simply the amount which the defendant has available to meet the confiscation order.  It refers to the current market value of the defendant’s assets, less any mortgage or other liability which is secured on those assets, plus the current value of any ‘tainted gift’ which the defendant has made.

However many of the defendant’s liabilities, such as unsecured borrowings and unpaid bills, will be ignored when computing the defendant’s ‘available amount’.

 

Default sentence

The s16 statement may conclude with an indication of the range of default sentences applicable where a confiscation order remains unpaid.

 

Challenging the s16 statement

The defence will wish to scrutinise in detail the prosecution assertions in relation to both the defendant’s ‘benefit’ and his ‘available amount’.  The focus of the defence challenge to the prosecutor’s figures will depend very much on the details within the s16 statement.

In relation to the ‘benefit’ of the offences of which the defendant has been convicted the defence will wish to consider the existence of the asserted ‘benefit’; whether it has been ‘obtained’ by the defendant himself, solely or jointly; and whether it is correctly valued.

Regarding the assumed ‘benefit’ the defence will wish to consider whether the criteria for a ‘criminal lifestyle’ have been met; whether the ‘relevant day’ has been correctly identified; the existence of the asserted receipts, expenditures and assets of the defendant himself (which may involve careful consideration of bank accounts and assets held in joint names and consideration of ‘lifting the corporate veil’); any evidence of the legitimate nature of those receipts and legitimate funds used to finance those expenditures and the purchase of those assets; any overlap or double counting between the various heads of asserted ‘benefit’ including, for example, where monies have been withdrawn from one of the defendant’s bank accounts and paid in to another; and the valuation of the various items reflected in the assumed ‘benefit’.

In relation to the asserted ‘available amount’ the defence will again consider the existence of those assets; the ownership of them by the defendant himself so as to exclude any interest of third parties; the current market value of those assets; and the amount of any liabilities secured on those assets.

Particular difficulties may arise where the ‘available amount’ is said to include any ‘tainted gifts’ or ‘hidden assets’.

Ultimately the defence will also wish to consider whether the use of the statutory assumptions involves a ‘serious risk of injustice’ or the confiscation order sought by the prosecution would be disproportionate and so infringe the defendant’s human rights.

All of these matters will feed in to the drafting of a s17 statement to be signed by the defendant and filed in response to the prosecution’s s16 statement, and the defence preparation for the confiscation hearing in the Crown Court.

 

Use of a forensic accountant

A forensic accountant may be able to assist the defence in challenging a number of aspects of the s16 statement.  This is likely to be particularly important in cases involving ‘assumed benefit’ under the ‘criminal lifestyle’ assumptions.  A forensic accountant may be better placed than the solicitor to undertake detailed examination of the figures and financial documents underlying the prosecution’s s16 assertions.

The cost of a forensic accountant’s report will normally be met by criminal legal aid under prior authority arrangements.

As a first step it is advisable to ask the forensic accountant to provide a fee quotation (to be forwarded to the Legal Aid Agency with an application for prior authority).  In order to prepare his quotation the forensic accountant should ideally be provided with a copy of the body of the prosecutor’s s16 statement, an approximate page count of the appendices to that statement, a copy of the defendant’s s18 statement, any advice which may have been obtained from counsel in relation to the s16 statement, and a note of the court timetable for the submission of the defendant’s response in the form of a s17 statement.

Where the appendices to the s16 statement include spreadsheets it is usual to ask the prosecution to supply electronic copies of the Excel spreadsheets (not the PDFs) either on disc or as email attachments.

Once the prior authority has been obtained the forensic accountant’s work can get underway!

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.)