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Cash retrieval: Confiscation orders under fire

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24th Jan 2014
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An NAO report which reported that criminals keep all but 26 pence in every £100 generated by crime, has raised questions over the effectiveness of confiscation orders. 

Enforcement agencies collected £133m of proceeds from crime in 2012-13, while the estimated loss to the economy through fraud last year was £52bn, according to the report.

The NAO said that the criminal justice system lacks a coherent strategy for dealing with the proceeds of crime through confiscation orders and that it is hampered by poor IT systems and poor communication.

Earlier this month, the Public Accounts Committee described the performance of law enforcement bodies as “rubbish”.

But according to David Winch, AccountingWEB contributor and forensic accountant who has acted for defendants facing confiscation orders, they are not as straightforward as the NAO and MPs imply.

“In a major crime case the wife of a criminal may decide that she wants a divorce and share of the house," he told AccountingWEB.

"So you can have two or three sets of legal proceedings simultaneously, including a divorce in family court, confiscation in the criminal court. It all gets quite complicated and messy."

Trying to estimate how much money criminals have made can often be difficult, Winch adds.

“There are issues about how much a dealer has benefited from drug dealing because he doesn’t have any financial records. 

“You need to look at bank records over a few years. If it doesn’t show up there you look at whether he has an expensive car or a Rolex watch. Where does the money for those things come from? Is there a legitimate source? You need to need to know this to decide the drug dealer’s 'benefit' from crime. Does he have cash that has been undiscovered? What about money hidden offshore?”

Winch said confiscation orders could be more efficient if the prosecution put more manpower into proceeds of crime proceedings.

They could raise more money but not as much as the £1.4bn figure that the NAO has said could be collected.

“I was talking to the lead chief constable on confiscation. He thought about £100m or £200m might be able to be collected from existing confiscation orders - but not the whole £1.4bn.”

Accountants can help estimate the benefits from crime, although as Winch notes a drug dealer probably won’t have kept records to piece together annual profit figures.

“It’s fascinating work but it is a case of estimate and assume and do your best guess. It’s not a case of double-entry book-keeping.”

Proceeds of Crime Act

Confiscation orders are the main the main way the government deprives criminals of the proceeds of their crimes.

Many bodies across the criminal justice system are involved in its administration, including the police, the Crown Prosecution Service and HM Courts & Tribunals Service.

These bodies spend around £100m a year on administration, the NAO estimated.

The Proceeds of Crime Act (PoCA) 2002 defines “criminal benefit” obtained by an offender either in terms of a specific crime, or based on a judgment that the offender has lived a criminal lifestyle. In the latter case, assets and expenditure over the previous six years can be included in the benefit assessment.

In 2012-13, courts in England and Wales set 6,392 confiscation orders, dealing with a total criminal benefit of £1.6bn, according to the NAO. During that year, enforcement agencies confiscated £133m.

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By Justin Bryant
29th Jan 2014 10:14

Simple solution

Why not just make all such criminal activity a deemed DoTAS activity?

That way, these criminals will be on an equal footing with law abiding citizens doing absolutely nothing illegal and being fully compliant and HMRC can simply issue them 90 day payment notices come July 2014 on a fully retrospective basis.

 

 

 

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By chatman
29th Jan 2014 11:46

I thought it was 100%

I have heard that, in most cases, they have been allowed to keep 100% of their bonuses, not just 26%.

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By Justin Bryant
29th Jan 2014 11:54

They keep 99.74% of their tax efficient bonus

They pay 26p in every £100 = 0.26%.

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Replying to Jane Evans:
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By chatman
29th Jan 2014 12:02

It wasn't the arithmetic that was the problem

Justin Bryant wrote:
They pay 26p in every £100 = 0.26%.

Not on their bonuses they don't (although I thank you for the advanced mathematics lesson).

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