Corporate Crime analysis: Confiscation experts Andrew Bird, Gary Pons, Sarah Wood, and James Fletcher, barristers at 5SAH, discuss the Law Commission Consultation Paper on Confiscation and Part 2 of the Proceeds of Crime Act 2002 (POCA 2002) and provide insight on some the key proposals.
This analysis was first published on Lexis®PSL on 2 December 2020 (subscription required).
The Law Commission’s Consultation Paper on Confiscation and Part 2 of the Proceeds of Crime Act 2002 (POCA 2002 or the paper) was launched on 17 September 2020 and remains open until 18 December 2020. It seeks to identify the most pressing problems with the confiscation regime and how they may be addressed. As anyone familiar with Part 2 of POCA 2002 will know, there are some legal and practical difficulties with the current legislation and regime. As a result, the paper has ended up being a comprehensive and wholesale review of the entire confiscation regime. The scale of the consultation is emphasised by the paper’s 720 pages and 104 consultation questions. The complexity of the underlying statutory provisions and case law are evident from even a cursory review of it.
The key areas identified for development
The paper covers numerous different areas and makes some interesting proposals, but there are three areas that are particularly worthy of consideration:
- how the court places a value on the amount a defendant has benefitted from their criminal conduct (Benefit)
- the enforcement of confiscation orders (Enforcement)
- a new focus on ensuring the compensation of victims (Victims’ rights)
The largest and most complicated proposal relates to benefit. The current provisions in relation to benefit have led to the majority of the appellate decisions and are capable of being the subject of a consultation paper on their own. The paper proposes a new approach to defining benefit by introducing notions of ‘gain’ and an analysis of a defendant’s intention in relation to that gain. This proposal would replace the present basis of what is ‘obtained’. In short, it is proposed that the court should embark upon a two-stage process to determine a defendant’s ‘benefit’:
- determine what the defendant gained as a result of or in connection with the criminal conduct for which he or she was convicted
- make an order that a defendant’s benefit is equivalent to that gain, unless the court is satisfied that it would be unjust to do so because of the defendant’s intention to have a limited power of control or disposition in connection with that gain
This proposed two-stage process relates to an assessment of the defendant’s benefit from particular criminal conduct. So far as the application of assumptions in criminal lifestyle cases in order to assess a defendant’s benefit from their wider general criminal conduct is concerned, the paper envisages introducing additional offences to the schedule of offences which trigger the criminal lifestyle provisions but also raises the possibility of introducing more prosecutorial and judicial discretion into the question of whether the assumptions should apply in particular cases.
So many of the problems that exist within the current confiscation regime flow from an unrealistic and inflated assessment of a defendant’s benefit, based upon what was ‘obtained’. As a result, confiscation orders have been made that can never be satisfied, which in turn leads to the impression that the whole system is simply not fit for purpose. That means it is essential that any new regime gets the definition of benefit, including the application of the assumptions, right. The current proposals fall short of that. While there is some merit in the introduction of the concept of ‘gain’, it is difficult to see how judges having to embark upon an assessment of the defendant’s intention in relation to that gain will streamline the confiscation regime. It merely serves to introduce another layer into the process that can only lead to even more caselaw and complexity.
In relation to the proposals regarding the lifestyle provisions, the introduction of more prosecutorial and judicial discretion in relation to an assessment of which cases are suitable for the application of the assumptions is to be welcomed, but more thought needs to be given to the question of whether there should a complete overhaul of the current list of ‘trigger events’ so that the application of the provisions is limited to those cases where it is absolutely plain that the defendant genuinely does have a criminal lifestyle.
Confiscation orders under the present regime are value-based orders requiring the defendant in personam to pay a specified sum of money which is calculated by placing a value on his available assets. Thus, a defendant must be allowed the opportunity to decide how to pay the confiscation order.
The Law Commission’s proposal in relation to enforcement has several layers:
- upon making a confiscation order, the court will be able to consider making an additional order vesting the defendant’s assets in a trustee for confiscation. This would impart an asset-based or in rem approach
- in order to make such an additional order there must be reasonable grounds to believe that:
- a defendant will fail to satisfy the confiscation order through wilful refusal or culpable neglect, or
- a specific asset will need to be realised to satisfy the order and third-party interests in that asset will require resolution before it can be realised. Once the third-party interests have been resolved, the defendant’s share will not be realised voluntarily within the time to pay period
- the court can decide to make either an automatic vesting order or a contingent vesting order
- the court will have a discretion whether to make the vesting order at all. The factor the court should take into consideration will be reduced into a non-exhaustive list including the needs and financial resources of the spouse and child, and whether the asset itself is tainted by criminality
- a contingent enforcement order can include a provision allowing funds in a bank account to be forfeited and seized property to be sold
- if a contingent order is made, a further hearing will be required to consider activation of the contingent order, after the time to pay has expired or one month if payment is required immediately.
The trustee in confiscation would be appointed in order to realise these assets to pay the confiscation order, in much the same way as a receiver is currently. The difference is that the court has more control over the enforcement process. This should prevent a trustee in confiscation being appointed years after a confiscation order was made. It has the potential to act as an incentive to the defendant to pay the order by a certain time, to prevent his assets vesting in the trustee.
The difficulty with these proposals is that they will result in more hearings in the Crown Court at a time when court time is a precious commodity. In seeking to strike a balance between those defendants who want to pay but cannot immediately realise their assets and those defendants who have no intention to pay, the result is a relatively complex system which require the court to consider multiple factors. While is represents an improvement on the current system, the willingness of courts to embrace its various options will determine its effectiveness.
Victims can have a rough ride under the current system, which of course had its origins in confiscation for drug trafficking, where victims were either non-existent or invisible. Thus, a restraint order may prevent a victim from enforcing a civil judgment against a defendant, and although confiscation can be revisited under POCA 2002, s 22, a compensation order cannot.
The Law Commission’s proposals include the introduction of a power to award compensation out of funds recovered from confiscation orders regardless of the means of a defendant, and a power to vary compensation orders in line with variations to confiscation orders.
Some of the interesting new proposals are:
- a more formalised procedure of case management
- tighter control over the contents of the prosecutor’s statement
- enhanced POCA training for judges, with the ability to include an assessor with expertise in a particular area of law to assist the decision-making process
- using duty judges to deal with restraint applications administratively
- a Criminal Practice Direction or statutory guidance providing comprehensive guidance in relation to some of the more complex areas
Conclusion of proposal
The Law Commission are to be commended for their comprehensive attempt to tackle all of the issues that currently exist within the confiscation regime. The overarching approach of seeking to introduce a system that is capable of adapting to the specific needs of each case is plainly desirable, but may not necessarily produce a simpler and more streamlined approach, particularly against the back-drop of limited public funding for confiscation work.
Andrew Bird is a specialist in white-collar crime, civil and criminal asset forfeiture, and civil and public law proceedings regarding the criminal process. Andrew is ranked as a star Individual in Chambers and Partners in the fields of POCA work and Asset Forfeiture and also ranked in Financial Crime and Private Prosecutions - Financial Crime. He is ranked in the Legal 500 as a Tier 1 leading individual in the field of POCA and asset forfeiture. He is also recognised in Who's Who Legal at the UK Bar in the field of asset recovery and civil fraud.
Gary Pons is a talented and dedicated barrister. His approach to cases is distinguished by its careful preparation and measured execution. His practice includes areas such as business crime, asset recovery and civil fraud, insolvency, and licensing. Gary is ranked in both Chambers and Partners and the Legal 500 for his work in the field of POCA and Asset Forfeiture work (all circuits).His experience in complex financial crime and asset forfeiture has allowed Gary to develop his practice over the years.
Sarah Wood is Joint Head of the Business Crime Team at 5SAH and is ranked in both Chambers & Partners and Legal 500 for her confiscation and asset recovery work. She is an experienced and highly accomplished practitioner who specialises in criminal and family matters involving high-value assets and complex financial arrangements. She is one of a handful of counsel at the Bar with experience of dealing with cases where there are contemporaneous proceedings in the criminal and family courts in relation to the same assets.
James Fletcher practises in both civil and criminal law. He is a specialist in Asset Recovery and Proceeds of Crime work. He has significant expertise in dealing with Account Freezing and Forfeiture applications. He is instructed on behalf of businesses, by individual members of the public and by Government departments. He has been featured in Chambers and Partners in the field of Proceeds of Crime and Asset Forfeiture work (all circuits) since 2014 and has been “Top Ranked” since 2016 and is also ranked in the Legal 500 for POCA and asset forfeiture.