New Criminal Finances Bill 2016: Summary of Main Measures

Criminal Finances Bill 2016 - The Main Measures Contained in the Bill

  1. Unexplained Wealth Orders. The Bill will enable a court to make an Unexplained Wealth Order to require an individual or organisation who is suspected of direct involvement in or association with serious criminality to explain the origin of assets, where their assets appear to be disproportionate to their known income. A failure to provide a response would give rise to a presumption that the property was recoverable, in order to assist any subsequent civil recovery action. The Bill would also allow for this power to be applied to foreign politicians or officials or those associated to them, known as Politically Exposed Persons (“PEPs”), helping to tackle the issue of the proceeds of grand corruption overseas being laundered in the UK.
  2. Improved seizure and forfeiture powers. Current legislation allows law enforcement agencies to take action against criminal cash, but they are unable to do so if criminals store the proceeds of crime in bank accounts or other means, such as precious metals and jewels. There is evidence that these moveable items are being used to move value, both domestically and across international borders. The Bill will create new civil powers, similar to the existing cash seizure and forfeiture schemes in current legislation, which would close this gap. The powers will be exercisable where there is reasonable suspicion that the property is the proceeds of crime, or that it will be used in unlawful conduct in a manner similar to cash.
  3. Reform to the SARs regime. The SARs regime provides a critical intelligence resource direct to the NCA from regulated companies, allowing the NCA the opportunity to approve or refuse consent to transactions that may involve the proceeds of crime. Where the NCA refuses consent, the Bill will extend the current 31 day moratorium period granted by a court, for up to six months so as to allow investigators sufficient time to gather evidence to determine whether further action, such as restraint of the funds, should take place. It will also create a power for the NCA to request further information following receipt of a SAR; or where they have received a request from a Financial Investigation Unit in another country.
  4. Information Sharing. The Bill will provide for a legal gateway for the sharing of information between entities within the regulated sector (e.g. banks). This has already been happening under the Joint Money Laundering Intelligence Taskforce (JMLIT) pilot, helping the banks to build the intelligence case for suspected money laundering before they submit a report to the NCA.
  5. Corporate failure to prevent tax evasion. At present, if an individual evades tax and this is facilitated by the advice or actions of those in a corporation, although the individual will have committed a crime and those directly facilitating it could be prosecuted, the corporate entity does not hold any liability. The Bill would create two new offences so that a corporation in this situation could be prosecuted – one to catch companies facilitating the evasion of UK taxes; another to cover evasion of foreign taxes facilitated by an entity that has some nexus with the UK (such as a UK-based office), and where there is dual criminality with the UK.
  6. Disclosure Orders. The Bill would authorise a law enforcement officer by way of a Disclosure Order, to require someone who has relevant information in a money laundering investigation to answer questions and provide information or documents. Disclosure Orders are already used in confiscation investigations and by the Serious Fraud Office (SFO) in fraud investigations, and the Bill would extend their use to money laundering investigations.
  7. Combatting Terrorist Finance. The Bill would also make complementary changes to the law enforcement and intelligence agency response to the threat of terrorist finance, by mirroring many of the provisions in the Bill on Disclosure Orders, and Seizure and Confiscation powers, so that they also apply for investigations into offences under the Terrorism Act 2000 (TACT).

Confiscation in Private Prosecutions? Court of Appeal Gives Key Decision

In Virgin Media Ltd, R (on the application of) v Zinga [2014] EWCA Crim 52 (24 January 2014) the Court of Appeal has determined important issues concerning private prosecutions, including whether a private prosecutor was entitled to bring confiscation proceedings under the Proceeds of Crime Act 2002 even if it had no financial or personal interest in the outcome, and the propriety of a private prosecutor procuring assistance from the police in return for a "donation" to police funds. 

The Court acknowledged that "there was an urgent need for consideration of the circumstances in which the police should assist in confiscation proceedings brought by private prosecutors."

Kennedy Talbot for the DPP. Download the judgment here

Following conviction of the appellant (Z) in a private prosecution by the respondent media company (V), the court was required to determine important issues concerning the operation of private prosecutions.

V had lost around £380 million when Z and others sold equipment and software enabling customers to obtain V's media services without payment. V decided not to take civil proceedings, but to bring a private prosecution. It enlisted the help of the police, who applied for arrest warrants on V's behalf. V then entered into an agreement with the police, agreeing to donate to police funds 25 per cent of any sums recovered under a compensation order. It also began confiscation proceedings under the Proceeds of Crime Act 2002 s.130.

Z sought to stay both sets of proceedings on the basis that the pursuit of compensation and confiscation by a private prosecutor was permitted neither by legislation nor by established authority, and that it was an abuse of process. V abandoned its claim for compensation because it accepted that there were problems with quantification. It pursued the confiscation proceedings, which stood to benefit only the Crown. The issues were (i) whether a private prosecutor was entitled to bring confiscation proceedings under the Act, even if it had no financial or personal interest in the outcome; (ii) the propriety of the agreement with the police. 

Appeal dismissed:

  1. The right to bring a private prosecution was preserved in wide terms by the Prosecution of Offences Act 1985 s.6. Sentencing was part of "criminal proceedings" referred to in s.6; it followed that confiscation proceedings were also part of "criminal proceedings". Charitable or public interest bodies regularly engaged in private prosecutions and the right to pursue confiscation proceedings had never been challenged, R. (on the application of Gujra) v Crown Prosecution Service [2012] UKSC 52, [2013] 1 A.C. 484, Jones v Whalley [2006] UKHL 41, [2007] 1 A.C. 63 and R. v Rollins (Neil) [2010] UKSC 39, [2010] 1 W.L.R. 1922 considered.

    The question was whether the 2002 Act specifically provided for such proceedings to be instituted solely by a state prosecutor. The words used in s.6 of the 2002 Act, together with the content of s.40(9)(b) were clear that a prosecutor was to be read in a wide sense as meaning any person permitted to prosecute. It therefore included private prosecutors.

    Although s.40(9) derived from a drug trafficking context, there was no need to construe it as not being of general application. The fact that there was no reference to private prosecutors in s.72(9) of the 2002 Act did not mean that Parliament had intended to exclude them.

    Clearly there was an omission from the statutory scheme for compensation in the event of a serious default by private prosecutors, but to deem them excluded from the plain meaning of "prosecutor" simply by the failure of statute to provide a remedy in the Crown Court would be an impermissible inference.

    It did not matter that private prosecutors could not conduct financial investigations into a defendant's circumstances and supply the statement of information required by s.16. The 2002 Act distinguished between those who could investigate and those who could prosecute.

    The fact that prosecutors could not investigate did not impair their ability to fully participate in confiscation proceedings provided that an appropriate officer, as defined in s.378(1), assisted by exercising the investigatory powers (see paras 12-32 of judgment). There was no decisive support for V's proposition that a private prosecutor bringing confiscation proceedings acted in the name of the Crown. There was great force in such a contention, but it arose as a subsidiary point and there was no need for the instant court to resolve it. Whatever a private prosecutor's status, it was the court's duty to ensure that the confiscation order was not disproportionate, R. v Waya (Terry) [2012] UKSC 51, [2013] 1 A.C. 294 followed (paras 33-36). 

  2. V had entered into the agreement with the police because the confiscation proceedings could not proceed without an appropriate officer. The "donation" was to be accepted under the Police Act 1996 s.93(1) so as to give effect to the court's views in R. v Hounsham (Robin Edward) [2005] EWCA Crim 1366, Times, June 16, 2005. As the confiscation proceedings were for the sole benefit of the state, it could not be said that the agreement between V and the police was an abuse of process, but it did run some of the risks identified in Hounsham because it provided an incentive for the police to devote resources to assisting V in its claim for compensation and gave rise to a perception of compromised police independence.

    It was not appropriate for the court to comment upon the circumstances in which the police should assist in confiscation proceedings brought by private prosecutors. Such issues were for careful and very urgent consideration by the Association of Chief Police Officers, the Association of Police and Crime Commissioners, and the Home Office in the light of the observations in Hounsham and the changed financial circumstances in which the police currently operated.

  3. The court commented on the reasons for, and implications of, the pattern of increases in the number of private prosecutions including cases presenting a conflict of interests from the interrelationship between the public interest and the benefit to the private prosecutor (paras 55-63).

Public Accounts Committee Puts Confiscation Regime Under the Spotlight (Updated)

The Public Accounts Committee heard evidence from key Government personnel on the 15th of January 2014.

The National Audit Office has criticized the Government’s implementation of its policy to deny criminals the proceeds of their crimes by confiscating their assets.

According to today’s report to Parliament, government has no overall coherent strategy for confiscation orders and this fundamentally undermines the process for confiscating assets. Decision-makers across the criminal justice system, such as senior police officers, are often not prioritizing confiscation. In 2012-13, 673,000 offenders were convicted of a crime, many of which had a financial element, yet only 6,400 confiscation orders were set.

The annual amount of fraud perpetrated by criminals in England and Wales has been estimated by the National Fraud Authority as some £52 billion. On this basis, it has been further estimated that, out of every £100 generated by the criminal economy, £99.65 was kept by the perpetrators.

Without the government knowing what constitutes the overall success of its policy, the bodies involved have no way of knowing which criminals or court cases should be prioritized for confiscation activity. Today’s report also found that appropriate action was not taken early enough in many cases and this, together with out-of-date ICT systems, data errors and poor joint working, hampers the efficiency and effectiveness of enforcing confiscation orders. Forty-five hours a week are taken by HM Courts and Tribunals Service’s regional confiscation units just to enter information manually into multiple systems. There are also numerous data errors, particularly in inputting information after court hearings.

The NAO found that, throughout the criminal justice system, there is insufficient awareness of the proceeds of crime and its potential impact. Confiscation orders have a low profile within law enforcement agencies, with low awareness of financial legislation outside specialist teams. This results in many cases not being considered for confiscation.

HM Courts and Tribunals Service, supported by the Crown Prosecution Service and the Serious Fraud Office, works hard to enforce confiscation orders. But, owing to a lack of data and agreed success criteria, it is impossible to make meaningful cost-benefit assessments of the enforcement of different orders. The Courts and Tribunals Service successfully collects 90 per cent of its orders under £1,000, but it is not clear whether this activity on lower-value orders is cost-effective, or whether resources should be redirected towards enforcing higher-value orders.

Where confiscation orders are made and not paid, the main sanctions do not work. Sanctions include default prison sentences of up to 10 years and additional eight per cent interest on the amount owed. The Courts and Tribunals Service found, however, that in 2012, only two per cent of offenders paid in full once the sentence was imposed.

“The use of confiscation orders to deny criminals the proceeds of their crimes is not proving to be value for money. The government has not specified a target but only about 26p in every £100 of criminal proceeds was actually confiscated in 2012-13. The fundamental problem is a lack of strategic direction and agreement on what level of confiscation would constitute success. This is compounded by poor information, lack of knowledge, outdated IT systems, data errors and ineffective sanctions. There is a sharp need for a coherent and joined-up cross-government strategy. At the moment this activity cannot be seen as value for money nor as a credible deterrent to crime.”

Amyas Morse, head of the National Audit Office, 17 December 2013

The report can be found here

Peter Handcock CBE, Chief Executive, Her Majesty's Court and Tribunal Service, Ministry of Justice, Alison Saunders, Director of Public Prosecutions, Crown Prosecution Service, Ministry of Justice, Keith Bristow, Director-General, National Crime Agency and Mark Sedwill, Permanent Secretary, Home Office were called to give evidence before the committee.

Some of the PAC's comments have been reported by BBC Radio 4 Reporter Tom Bateman @tombateman

Listen to Tom's Report here:

Interested parties are invited to consider Mitchell, Taylor and Talbot (authored by members of Chambers) where the NCA, SOCA and AR strategy is discussed in some detail:

“The NCA states that it will recover illicit profits from organised criminals, or deny them access to their money and property. As part of its overall resources the NCA has access to a civil recovery and tax assessment capability under the PCA 2002. The FCA’s Economic Crime Command has been charged with tackling economic crime, including fraud. It will also take the lead in tackling the economics of organised crime, including “investigating and clawing back criminal assets in support of the NCA and its partners”. It is of note that although the NCA is a successor to the ARA the removal of the proceeds of crime is not listed in the Annual Plan as one of its overall operational priorities.

The Serious and Organised Crime Strategy

"Under the same heading ‘Pursue’, HOSSOCS sets out the Home Office’s intention to amend the PCA 2002 to address weaknesses perceived to exist in the confiscation scheme.  HOSSOCS states that legislation will be introduced to create new powers to seize criminal assets and “better tackle people who support and benefit from participating in serious and organised crime”.  Amending legislation will also be introduced “as Parliamentary time allows” to prevent criminals frustrating the making and enforcement of confiscation orders by such means as failing to appear at confiscation hearings post conviction, the bringing of third party claims that reduce the amount of money that is available for recovery and failing to pay orders after serving a default prison sentence, knowing that at present “the option of prison can only be used once”.  With regard to the latter HOSSOCS states that legislation address the situation by “substantially strengthening” default prison sentences.

Further HOSSOCS proposals include enabling assets to be frozen more easily and at an earlier stage in investigations; “significantly reducing” the time to pay confiscation orders; making investigative powers available to trace assets after the making of a confiscation order; removing the requirement for a consent form to be signed before assets can be realised “so as to reduce delays to the proceedings”, and introducing tighter travel and bail restrictions."

The Asset Recovery Strategy

"Quite where all these changes and new proposals leave the 2001 Asset Recovery Strategy is unclear: it is not referred to in either the NRA Annual Plan or HOSSOCS.

In May 2007 the Home Office issued a consultation document in relation to a proposed Asset Recovery Action Plan. [1]  This led to the creation of a ‘recovery of criminal assets’ target of £250 million for the financial year 2009-10.  In its consultation document the Home Office stated, “This is not just an aspiration – we have a robust plan and believe we can achieve it”.  The target was enshrined as Priority Action number 5 in the Government’s October 2007 Public Service Agreement, “PSA Delivery Agreement 24: Deliver a more effective, transparent and responsive Criminal Justice System for victims and the public”.[2]  An interim target of £155 million was set for the year 2007-8.

In March 2010 the Chief Inspectors of Her Majesty’s Crown Prosecution Service Inspectorate, Her Majesty’s Inspectorate of Constabulary and Her Majesty’s Inspectorate of Court Administration issued a joint report into the handling of cases involving asset recovery under the Act.  It considered the Government’s track record in achieving the national asset recovery targets.  It should be noted that as well as confiscation orders, criminal assets recouped from civil recovery and cash forfeiture count towards the target.  The report noted, “Performance nationally has risen considerably since 2001-02, when £25m was recovered, to £135m in 2007-08. However, this was below the trajectory of £155m, and it is unlikely that the 2009-10 target will be met”.  Precise figures are hard to come by but it would appear that the target was not met (the two may or may not be related).  As at October 2012 it would appear that only £154 million was ‘recovered’ [3] and that no new targets seem to have been set.  HOSSOCS claims that the Home are “are currently using powers under the PCA 2002 to recover over £150 million of criminal profits each year and to deny criminals access to even larger amounts (£500 million in 2012/13)”.  No reference is provided to the source of these figures.  However the HOSSOCS claim to recovering over £150million “each year” does not sit comfortably with the findings of the 2010 Chief Inspectors Report.

It would appear that no asset recovery strategy or target has been set by or for the NCA.  On this evidence it is suggested that one conclusion available to observers is that the Asset Recovery Strategy is now defunct, its goals unrealised.”