Gambling and confiscation

In connection with 'criminal lifestyle' confiscation cases it is sometimes the case that the defendant has engaged heavily in gambling, either on sports events, or in casinos, or online.

The question then arises as to how 'benefit' should be computed under the statutory assumptions if, for example, the defendant has had a running account from which he makes bets, receives winnings and makes further bets.

In my experience prosecutors often will simply add up the total value of bets placed and regard that as expenditure forming 'benefit' under the statutory assumption.  But where a betting account is operated some of the monies staked will be the proceeds of earlier winning bets.

So simply aggregating all the bets staked produces, in my view at least, double counting which cannot be sustained.

I have produced an article on my blog in which I set out how, and why, in my view the benefit should be calculated in such cases.  It is still Draconian - confiscation usually is - but less severe than the simple aggregation of stakes.

You can read the article HERE.

David

Comments
stepurhan's picture

Still not clear-cut.

stepurhan | | Permalink

Fascinating article as always David.

The original confiscation figure does seem unfair, as winnings are clearly being reinvested at various stages. I also follow your logic about your alternative that reduces the figure, whilst still saying that the winnings were additional benefit generated by suspect funds. However, I can see how even your improved version produces unfair results with a slight modification of the situation.

Say that, instead of your scenario, Jim had £20 in his pocket at the start, £10 of which could be accounted for leaving £10 as assumed criminal benefit. He makes two bets of £10 each at 10-1. One bet wins and one bet loses. Jim is therefore £90 better off than he was before. (He originally had £20. He now has £110 from the winning bet) But was the winning bet from clean or dirty money? It seems a bit harsh to Jim to assume that dirty money is lucky but legitimate money isn't.

This would seem to be the case wherever at least some of the funds used in gambling can be proved to be from legitimate sources. The individual is penalised for being lucky in gambling, even if they could demonstrate that said gambling was from legitimate funds. In fact, this is probably an argument for not running a betting account if you have suspect funds, since it would be easier to follow the money trail than with separate bets. It could be argued that having criminal income frees up funds to allow betting to take place, but how far can that be taken?

davidwinch's picture

Mixed funds

davidwinch | | Permalink

Stephen

I have slightly expanded the article on my blog - and also responded to a comment suggesting that the 'benefit' should be limited to the original £10.

I take your point about the man who walks into the bookmaker's with two £10 notes (one 'clean', one 'dirty') and places two separate £10 bets.  If one bet wins and one loses what is his 'benefit'?

A similar situation can arise in relation to bank account transactions.

Suppose Fred has £10,000 in his bank current account which is demonstrably legitimate.  He deposits £5,000 from the sale of a stolen car (demonstrably illegitimate), bringing the balance up to £15,000.

He then purchases an investment by drawing £12,000 from the account.  Over time that investment increases in value to £30,000.  The remaining £3,000 sits untouched in his current account.  What is Fred's 'benefit' for confiscation purposes?

I believe it is £8,000.

That is made up of £3,000 still in the bank account and £5,000 being one-sixth (or 2000/12000) of the value of the investment.

In calculating that I am using the first-in-first-out rule from Clayton's case - Devaynes v Noble (Clayton's Case) [1816] 1 Mer 572 - which is a 19th century civil case.

I have a confiscation case working through the system at present in which this point is relevant.  The prosecutor is - shall we say - not yet won over to my point of view!

The case is currently 'on hold' awaiting the Supreme Court ruling in R v Waya (heard on 5 May).

David

cymraeg_draig's picture

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cymraeg_draig | | Permalink

I wish they would confiscate my gambling winnings - they would be writing me a cheque :)

 

Gambling and POCA

Stephen Down | | Permalink

Dear all, perhaps there is another way of looking at this.

S79(2) POCA states that the value of property is its market value at the material time.  The material time is the time the Court makes its decision (S80(1)).

S80(2) states that its value at the time is the greater of;

a) its value at the time it was obtained adjusted for the change in value in money (in your scenario £10), or

b) if he still holds it, its current market value (in your scenario £0)

Thus the benefit would be £10 + the change in value of money (whether he still holds it or lost it all).

If he had been caught before he lost it all on the last race then the total value would be the total amount he held as a result of the gambling, not the aggregate value of the bets.  This is in line with the case of Pattison [2007] EWCA Crim 1536.

As a practising Financial Investigator, that is how I would work it out, but in practice of course I never get the opprtunity to have a breakdown of the gambling history.

 

 

davidwinch's picture

Pattison

davidwinch | | Permalink

Stephen

I don't have a copy of the judgment in Pattison - do you have a link to it?

Have you had a look at the Court of Appeal decision in R v Waya [2010] EWCA Crim 412?

That case went on appeal to the Supreme Court on 5 May and a judgment is awaited - so we need to be cautious in how much reliance we place on the Court of Appeal judgment.

With that caveat, in Waya defence counsel argued (at para 12.ii)

ii. The court is required by s.80(2) and (3) to value the property obtained either at the time it was obtained (subject to adjustment in the value of money) or at the time of the confiscation order, whichever is the greater, but at no other time.

If that argument is correct then, applying it to Jim's circumstances, the benefit could indeed be said to be whichever is the greater of £10 (plus inflation) or nil, as you contend.

The prosecution contention was that, in Mr Waya's circumstances, s80(3)(b) or (c) applied and that the defendant no longer held the original money (which had been invested in property) and that, relying on R v May [2008] UKHL 28

"The benefit gained is the total value of the property or advantage obtained, not the defendant's net profit after deduction of expenses".

On this point the Court of Appeal accepted the contention of the prosecution.  That view may, of course, be overturned by the Supreme Court shortly.

On that basis any winnings could be regarded as benefit obtained and any losses as expenses to be ignored.  More logically, it has always been the case in confiscation that once benefit has been obtained it is irrelevant to the calculation of total benefit whether the defendant fails to retain it.  That is the basis on which I have relied in my blog post.

However the above approach does not consider the effect of the 'criminal lifestyle' assumptions in confiscation.  These assumptions, as you will know, apply to property (including money) transferred to the defendant since the relevant day and to expenditure incurred by the defendant since the relevant day.

In my experience prosecutors usually aggregate the total monies staked and treat them as expenditure incurred, and hence benefit.  In my view that can incorporate double counting as stake monies returned from successful bets are used a second time in a further bet.  Hence the method of calculation in my blog article which seeks to eliminate that double counting.

With regard to betting history, if the defendant operated a running account with a bookmaker's, or gambled at a licensed casino, there should be a (more or less) full history.

David

davidwinch's picture

R v Pattison

davidwinch | | Permalink

I now have a copy of the judgment - it is online at R v Pattison [2007] EWCA Crim 1536.

Having read the case it makes no mention of gambling, nor is it a case in which the statutory 'criminal lifestyle' assumptions of s10 PoCA 2002 were invoked.

It is a case in which, as part of an illegal money laundering 'arrangement' held to be contrary to s328 PoCA 2002, the defendant acquired a residential property at a considerable undervalue.

Subsequently he raised money by taking out a mortgage on the property - in effect an 'equity release' mortgage.

He also let the property out and received rent.

After his conviction the question arose as to his 'benefit' from the money laundering 'arrangement'.

The Crown Court held the 'benefit' to be (i) the full open-market value of the property acquired in the illegal arrangement plus (ii) the rent received from the letting of it plus (iii) the equity release mortgage obtained later.

The Court of Appeal held that the benefit should be (i) and (ii) only.  The obtaining of the 'equity release' mortgage did not create further 'benefit', it simply converted part of the existing benefit - so that what had been an unmortgaged property and no cash became a mortgaged property plus some cash, but with no overall increase in value.

I am not quite sure how you see this as a basis on which to argue that the losing bets should result in a reduction of the total 'benefit' in the example I gave.  Could you clarify that for me?

David

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