Proceeds of Crime Act case query

Semi-hypothetical question regarding someone facing confiscation proceedings under POCA 2002 following conviction of conspiracy to defraud insurance companies.....

 

Alleged benefit of say £1million and available amount of say £500,000.

 

  1. The defendant had bank balances totaling roughly £200,000 at the beginning of the 6 year relevant date, these were profits from genuine property deals some 10 years earlier plus some general weekly savings. Money has subsequently been spent on living expenses, other property purchases etc. Prosecution are including this £200k as property transferred in their benefit figure. As this was earned prior to the 6 year period presumably he does not need to prove provenance of this money and should be excluded from benefit?

 

This is v.important as part of the £200k was rolled into subsequent property purchases within the 6 year period which obviously prosecution are also including as Property Held in their benefit figure, despite the source of monies being from legitimate means.

 

  1. He purchased a few properties jointly with other individuals, contributing say 25% of the initial purchase monies. The properties have since increased in equity. Presumably his benefit is therefore limited to 25% of the current equity regardless of who’s name is on the title deeds?

 

  1. The insurance companies allege that there were say 50 fraudulent insurance claims totaling £100,000. Only 5 were paid into the defendants bank account. The judgement did not state how many of the 50 claims the defendant was guilty of, the prosecution have assumed that the entire £100k represents particular criminal benefit of the defendant, the defendants argument however would be that only 5 are attributable to him. What are the thoughts on this argument?

 

  1. Finally, the defendant made up false income details on some mortgage applications, the mortgage companies didn't check the details and are not bothered even now as he maintained his payments and has significant equity. These false applications are not anything to do with the actual offences he was charged with, however prosecution are claiming the mortgage loan and property as part of benefit figure because they say it is proceeds of crime resulting from the fraudulent mortgage applications. Presumably this is incorrect as he has not been charged with this offence?

 

The prosecution have prepared a very messy report which makes it easy to criticise and rebut, however there are a number of ways of interpreting matters and one element leads on to the treatment of another.

 

Any comments and thoughts would be greatly appreciated!

Comments
davidwinch's picture

A lot of questions!

davidwinch | | Permalink

Sheepy, you raise a lot of points!

 

1.  Normally if the (convicted) defendant has no history of criminal conduct prior to the 'relevant day' (i.e. no convictions in relation to his conduct prior to the 'relevant day'), then money in his account prior to the relevant day is treated as legitimate.  But any deposits on or after the 'relevant day' will be assumed to be proceeds of crime (unless the contrary can be shown).

Where there are deposits and withdrawals from the account after the 'relevant day' you may have to identify which monies were withdrawn on specific occasions (i.e. legitimate 'old' money or illegitimate 'new' money).  I would adopt a first-in-first-out rule as in Clayton's Case.

I would say that money is not "transferred" to the defendant if he already had it before that "transfer".  So if there is no "transfer" that s10(2) PoCA 2002 statutory assumption does not bite on the money movement.

So you need, in respect of property purchases after the 'relevant day' to identify the source of the funds used in the purchase (and hence the proportion of - actual or assumed - illegitimate monies used in the purchase).  Once you know the proportion of illegitimate monies in the acquisition then you apply that same proportion to the current value.

Do be careful to avoid double counting in this exercise.  For example, a property is purchased with £100,000 from a bank account.  The current value is £250,000.  It is established that, say, £50,000 from illegitimate (or assumed illegitimate) sources had been deposited in the bank account and was employed in the purchase.  (Assume no mortgage here for simplicity.)  The prosecutor will already have identified the £50,000 as benefit when the monies were credited to the bank account.  So the additional benefit from the property appreciation is 50,000/100,000 x (250,000 - 100,000) = £75,000.

Very often in such circumstances the prosecutor will add the, say, 50% of the property value (in this case 50,000/100,000 x 250,000 = £125,000) to the benefit rather than 50% of the increase in the property value.

Look at the case of R v Waya [2010] EWCA Crim 412 - but that case has been appealed to the Supreme Court & judgment is awaited.

 

2. You need to look at whether the beneficial ownership has changed - see s79(3) PoCA 2002 and, if it has, what has the defendant bought, sold or given away.  Beware of the 'tainted gift' provisions and their impact on 'available amount' under s9.

As you say, if the defendant is still beneficially entitled to 25% of the equity then 25% of the current value is relevant to issues of 'benefit' and 'available amount'.

 

3.  The issue is how much was 'obtained' by the defendant.  If monies were obtained for the conspirators as a group and he was a member of that group then he may well have 'obtained' those monies even though he did not personally receive them into his bank account.  You have to carefully consider the facts of how the conspiracy operated and this defendant's role in it.  Where monies are 'obtained' jointly by two or more persons then each of those persons 'obtains' the whole of the amount jointly obtained.  See R v May [2008] UKHL 28.

 

4.  On the mortgage point it is not relevant whether he has been charged or convicted (but it would be relevant if he had been charged and acquitted of fraud in connection with the mortgage applications).  The mortgage advances are "transfers" to the defendant after the 'relevant' day.  So they are 'benefit' unless you can show them to have been obtained legitimately (which clearly you cannot if false information was entered on the mortgage application forms).

The mortgage advances may then have been employed in the purchase of property, so additional benefit will arise if that property has increased in value.

There could be an argument that the defendant 'obtained' both a mortgage advance AND an obligation to repay that amount.  One could then say the value of what he obtained is nil.  In practice I have never known this argument to be accepted - courts take the (initial) benefit to be the amount of the mortgage advance.

 

I really should bill you for advice such as this!

David

Accounting Evidence Ltd

P.S. If you are instructed as a forensic accountant to comment upon the prosecutor's figures in his s16 statement you need to ensure that you are independent of the defendant (i.e. you have not previously done any work for him) and you comply with Part 33 Criminal Procedure Rules 2010.  You should be funded via the defendant's solicitor under legal aid and instructed by the solicitor (not the defendant).  If you are not used to doing work for court then consider carefully whether you have the knowledge and experience required to take this on.

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