What makes confiscation so Draconian?

The confiscation legislation in the Proceeds of Crime Act 2002 and its predecessors has often been described as "Draconian".  But what features of the regime cause it to be so described?

I think there are half a dozen key features which combine to make the confiscation regime severe.

The intention of confiscation is to part the convicted criminal from the proceeds of his crime.  But the proceeds are not to be ascertained by an accountant's detailed examination of the "business" in which the criminal was engaged.  Indeed the Court of Appeal as long ago as 1989 in R v Ian Smith [1989] 1 WLR 765 said:

"It seems to us that the section is deliberately worded so as to avoid the necessity, which the appellant's construction of the section would involve, of having to carry out an accountancy exercise, which would be quite impossible in the circumstances of this case."

With that in mind the legislation has always been interpreted (in England and Wales at least) as equating the 'benefit' to be confiscated with the gross amounts received by the convicted defendant in connection with his criminal conduct.  This figure may be far in excess of the criminal's profit from the enterprise.

A second Draconian feature derives from the long-standing legal doctrine that where monies or other assets are received jointly by two or more persons then each of them receives the whole amount.  That means that, in confiscation, each of them obtains as 'benefit' the whole of the amount received jointly by them.  This inherently leads to double counting (and more than double counting where more than two people jointly receive monies or assets).

In cases where the convicted defendant is held to have a 'criminal lifestyle' (which include cases in which the defendant has been convicted of a single offence) the statutory assumptions (now found in s10 Proceeds of Crime Act 2002) apply.  These are a third Draconian feature of the legislation.  The effect of the statutory assumptions is that all receipts and expenditures since the 'relevant day' (normally 6 years prior to the day on which the defendant was charged with the offence(s) of which he is subsequently convicted) are deemed to represent benefit of unspecified criminal conduct, and all assets held by the defendant after the date of his conviction are deemed to represent further benefit.  These assumptions may be rebutted but the burden of proof, on the balance of probabilities, falls upon the defendant rather than the prosecution.  Where a defendant does not have adequate records over the previous 6 years or more he may find himself unable to produce the "clear and cogent evidence" which the courts require in order for the assumptions to be rebutted.

A fourth Draconian feature concerns the 'available amount' of the defendant.  A confiscation order is normally made for whichever is the lesser of (i) the defendant's 'benefit' and (ii) his 'available amount'.  But his 'available amount' is not the amount which he has available.  Rather it is his gross assets, less liabilities secured on those assets, plus the value of any 'tainted gifts'.  Further, the burden is placed upon the defendant to prove to the court, on the balance of probabilities, that his 'available amount' is less than the figure of 'benefit'.  This leads to difficulties (already discussed in this group) where the prosecution allege that there may exist 'hidden assets'.

In the event that a confiscation order is made based on the defendant's 'available amount' being less than his 'benefit' then it is open to the prosecutor to recommence proceedings against the defendant, in later life, to collect from him the balance of the 'benefit' which he was not ordered to pay first time around.  A fifth Draconian feature.

The final, sixth Draconian feature, is the default prison sentence which attaches to an unpaid confiscation order.  When making the confiscation order initially the court may order the amount to be paid immediately or allow the defendant up to 6 months to pay.  On further application the defendant may be allowed a further 6 months (making 12 months in all) but PoCA 2002 lays down that no extension beyond that 12 months is permissible.

Given that the order may well require the convicted defendant to dispose of all his assets it may be something of a tall order to satisfy the confiscation order on time.  In the event that payment is not made on time interest commences to run at 8% per annum on the unpaid balance.  More seriously the defendant may be committed to prison for (or have his sentence extended by) a 'default sentence'.  The length of the maximum default sentence is fixed by law on a scale relating to the amount of the confiscation order.  Where the order is for £1 million or more the maximum sentence in default is 10 years.  This is not a sentence to be served instead of paying the confiscation order, it is in addition to the order (since the amount due under the order remains payable in full).

In my view the confiscation regime richly deserves its Draconian epithet.

David

Comments

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Draco would be proud!

Stephen Morris | | Permalink

Yes, David. Totally over the top and not British. Confiscating property that is not proven to be the proceeds of crime? I've always thought there should be no punishment without crime.  Where has "beyond reasonable doubt" gone, which is the usual standard of proof for alleged criminality?

davidwinch's picture

Confiscation and reasonable doubt

davidwinch | | Permalink

A person can only be subject to confiscation if they have first been convicted of a criminal offence from which they have gained a benefit (either by obtaining money or an asset or avoiding a liability - e.g. by tax evasion).

So by the time we get to confiscation we have, if you like, already jumped the "beyond reasonable doubt" hurdle.

In deciding matters in confiscation the test is always (with one exception which is rarely relevant) the "balance of probabilities".  Also, as explained in the main post, it is often for the defendant to 'prove' that something is NOT the case, rather than for the prosecution to show that it is.

David

Draconian? Happy days.............

tonyarm | | Permalink

I think it's brilliant.  About time criminals have real punishment for their crimes. Society striking back in my view and long may it continue.

apples

The Black Knight | | Permalink

Anybody reported an apple theft ?

I believe this may have resulted in the death penalty in Ancient Greece, so we have improved a bit !

Judge Draco is mellowing.

carnmores's picture

let him that is without sin cast the first stone

carnmores | | Permalink

any one for antidisestablismentarianism?

Society striking back?

Stephen Morris | | Permalink

By confiscating property that is not proved to have been criminally obtained?

ShirleyM's picture

Proof

ShirleyM | | Permalink

I may be naive, but it isnt it fairly easy to prove where you got legitimate money from, these days?

You either earn it, borrow it, win it, receive it as a gift or inherit it. I have probably missed something, but aren't all these things fairly easy to produce evidence of?

Surely, if someone can't account for the £100K they spent last year, or the year before, it has to be suspicious if they cannot prove where they got it from. I'm all for criminals being denied their ill-gotten gains and think it should have happened years ago.

Not too long ago, it was still worthwhile for burglars to be caught, serve their sentence, and then recover the money from their criminal activities. They were still earning more than the average guy in the street!

davidwinch's picture

Misnomer

davidwinch | | Permalink

"Confiscation" is something of a misnomer.

A confiscation order is an order requiring a convicted person to pay an amount of money to the state.  It is an order attaching to the person, not to an asset.  So in that sense it is not 'confiscation'.  However if the person does not pay, then the order may be enforced through the court - and that enforcement may involve action against identified assets belonging to the person.

However there is a deliberate dis-connect in the legislation.

Suppose Jimmy has been operating a business contrary to a local authority planning enforcement notice.  He is convicted of that offence.  His 'benefit' is the gross receipts of the business arising after the enforcement notice was made.  Let's suppose that was £1 million.  He incurred wages costs and other expenses in the business.  The profit he retained was, say, £500,000.  He now has that in a bank account (unlikely, I know!).  He also has the house in which he lives with his wife.  The house, which he bought a few years ago and is held in his sole name, is worth £400,000 but there is a £250,000 mortgage outstanding on it.

Also his sainted aunt left him her cottage in her will.  She died last year.  The cottage is free of mortgage and is worth £200,000.

Jimmy will be ordered to pay the lower of his 'benefit' - £1 million - or his 'available amount' -  £850,000 (that is £500,000 + £400,000 - £250,000 + £200,000).  So he has to sell his home and his late aunt's cottage to meet the confiscation order, although neither of those assets are in any way tainted with criminality.

David

The "benefit" figure may not be the proceeds of crime

Stephen Morris | | Permalink

In cases where the convicted defendant is held to have a 'criminal lifestyle' (which include cases in which the defendant has been convicted of a single offence) the statutory assumptions (now found in s10 Proceeds of Crime Act 2002) apply.  These are a third Draconian feature of the legislation.  The effect of the statutory assumptions is that all receipts and expenditures since the 'relevant day' (normally 6 years prior to the day on which the defendant was charged with the offence(s) of which he is subsequently convicted) are deemed to represent benefit of unspecified criminal conduct, and all assets held by the defendant after the date of his conviction are deemed to represent further benefit.  These assumptions may be rebutted but the burden of proof, on the balance of probabilities, falls upon the defendant rather than the prosecution.  Where a defendant does not have adequate records over the previous 6 years or more he may find himself unable to produce the "clear and cogent evidence" which the courts require in order for the assumptions to be rebutted.

 

Presumed guilty of unspecified criminal conduct.  Kafkaesque. Draconian.  Call it what you will, but fair is not an adjective that springs to my mind. Punishment of unspecified and unproven crimes.

 

 

cymraeg_draig's picture

Insanity in the courts

cymraeg_draig | | Permalink

Quite simply this Act, or rather the way it is operated, flies in the face of any sense of justice or fair play. 

It is the kind of law you would expect to see in Iran or Libya, or some other backward barbaric country, not in a civilised society. 

Using Davids example, the convicted person has income of £1million, and pays £500k out in wages.  His "benefit" from that crime by any sensible sane assessment is therefore the remaining £500k. For the courts to assess his "gain" as £1million is an act of sheer stupidity of incredible proportions.

By that warped and twisted "logic" HMRC should simply tax businesses on their turnover rather than their profits. 

 

depends

The Black Knight | | Permalink

If the legislation is intended to be punitive and a deterent rather than just recovering the proceeds of crime then that is what it does.

If only the profit were taken into account then the criminal faces less business risk than an honest businessman who is competing and faces a greater risk of business failure and bankruptcy than the criminal chancer,

so in that respect it merely levels the playing field.

It therefore cannot be right that just the profits are taken into account otherwise it is well worth the risk to commit the crime, and tantamount to an encouragement.

ShirleyM's picture

'Available amount'

ShirleyM | | Permalink

Does this mean that an intelligent criminal, who has access to good legal advice who advised they take the precaution of planning ahead, need merely transfer all his assets to his/her spouse, and therefore get off without any confiscation at all?

Surely not! There must be more to it.

davidwinch's picture

The theory

davidwinch | | Permalink

The theory is that a confiscation order is to part the criminal from the benefit of his crime.  The confiscation proceedings are technically part of the sentencing process in the Crown Court and (from the point of view of compliance with the Human Rights Act 1998) confiscation is regarded as a "punishment".

But the theory is that the punishment for the offence is the prison sentence, or requirement for unpaid work, or fine or whatever - and the confiscation order imposed in addition is simply "payback".

In practice of course the effect of the confiscation order can be much more severe than the sentence.

The reality is that the legislation has been carefully drafted to give judges very little room to deliver 'justice' as distinct from delivering 'the law'.  The application of the assumptions in a criminal lifestyle case is mandatory.

One can compare the situation to a tax enquiry, but in a tax enquiry it would be unusual for the tax, interest and penalty to amount to 100% of the profit - let alone 100% of the gross receipts.

David

davidwinch's picture

Tainted gifts

davidwinch | | Permalink

Shirley

You would make a smart criminal - but not smart enough!

I mentioned that the value of any 'tainted gifts' is added to the 'available amount'.  I didn't have space to say that a tainted gift is any gift from the proceeds of crime and, in a 'criminal lifestyle' case, any gift made after the 'relevant day' (which is the day 6 years before the day on which the defendant was charged with the offence).

So if you are going to give everything to your spouse you need to do it more than 6 years before you expect to get caught (a bit like Inheritance Tax).

Also if you are engaged in nefarious activities it is entirely possible that your spouse is a knowing (or suspecting) recipient of the proceeds of crime.  So the police may 'do' your spouse for a money laundering offence with the objective of obtaining a confiscation order against him or her as well.  That avoids any need for arguments about who owns what share of the matrimonial home!

David

Benefit? Profit?

tonyarm | | Permalink

I am quite happy for criminals to be denied any benefit whatsoever from their activities. In the cases where they simpy have no record or are unwilling to produce a record of their activities (as an accountant) I cannot feel sorry for them. Frankly, where their activities at the top end of the criminal dungheap ripple out to affect law abiding citizens like me , my mum, sister, her kids, my kids, my clients and their dependents ... and you and your families - by way of burglaries, ID theft, car theft, muggings, shop lifting, etc  - I have zero sympathy. The harder we make it for them the better.  The gross benefit of a crime is a benefit of a crime - the criminal was not entitled to that gross benefit in the first place.  If they choose to dispose of some of it before they are caught - that's tough. If they choose to use some of it to make more - that's tough. The concept of net earnings should only apply to legitimate businesses not criminal businesses. A world where crime doesn't pay would be wonderful for those of us who play fair and care about society.  The current system seems to be getting us slightly closer to that state and I for one am for it.

Civil penalties

The Black Knight | | Permalink

100% of tax due, plus the tax of course, so profit of tax evasion plus an additional percentage up to 100%

or otherwise in example above  £500,000 + 100% penalty = £1,000,000 confiscation.

buts lets assume that mr Honest businessman does not take on the £1,000,000 contract (because he knows it is wrong, even though there's a recession on) and he still incurs a £500,000 wage bill, he has made a loss of £500,000

Compared to the criminal who breaks even, if only his profits are confiscated.

of course not all businesses make 50% net profit (I wish) so the inequality occurs at less than 50% net profit,

those with more than decent mark up would be better off ?

ShirleyM's picture

david

ShirleyM | | Permalink

Shirley - You would make a smart criminal - but not smart enough!

No I wouldn't  - Im one of those people who feel guilty when they have done nothing wrong and blush furiously when telling a white lie!

I agree with previous posters, make it so crime doesn't pay. Why do people feel sorry for people who prey on others? In lots of crimes the offender shows no compassion whatsoever for their victims but there is always someone standing up for the criminals 'rights'.

Prison only serves to teach them new methods of breaking the law. Same with vandals; make them pay the cost of fixing whatever they damaged. If the cost of repairs were to come out of their pocket their attitudes would quickly change. If they have no money they should do community work in exchange until the 'debt' is paid off. The more damage they do, the higher the cost to them.

I know there are degrees of criminality, and I am not saying the vandal should receive the same 'punishment' as a drug dealer, but the message should be given that crime will not be tolerated, in any shape or form.

davidwinch's picture

Income Tax rates

davidwinch | | Permalink

Kalden

I think you have made an error in your figures.

If the turnover is £1,000,000 and the net profit is £500,000 then I think the income tax will be (not more than) £250,000.  So with a 100% penalty the amount payable would be £500,000 (not £1,000,000).

David

davidwinch's picture

A lively debate

davidwinch | | Permalink

This has generated an enjoyable and lively debate!

David

Restoration v Punishment

Stephen Morris | | Permalink

By all means confiscate the proceeds of the crime (even the gross proceeds). Todo so is simply restoring the perpetrator to the status quo ex ante. Imprisonment and the fine are the punishments. My difficulty with the legislation is that confiscation can include assets whose provenance is not criminal, that these assets have been criminally obtained when in fact they have not been. That is not just - it is punishment without a proven crime. It is not a case of feeling sorry for the criminal and ignoring the victim, it is justice. In cases where there is a civilian victim the proceeds can be returned to them. That too is justice.

 

 

davidwinch's picture

Just to be clear on crime and assets

davidwinch | | Permalink

The position is that a person subject to confiscation has been convicted of a crime.

(There are quite separate provisions in PoCA 2002 for 'civil recovery' of assets derived from crime which are held by a person who has not been convicted of a crime.  But those are different proceedings.)

However in confiscation the Crown does not have to contend that the assets held by the person, which form the basis for his 'available amount', are generated from crime.  It is not the case in confiscation proceedings that assets of undoubtedly legitimate origin are afforded any protection.  They are not.

David

Whose money is it?

tonyarm | | Permalink

A criminal grosses £1m at a cost of £0.5m = profit £0.5m in cash and he puts it in the bank. His honest Aunt gifts him a house valued at £1m. His assets are £1.5m, he is ordered to repay £1m. £0.5m comes from the bank in cash and he has to sell the house to pay the balance - what's the problem, he owes the money, he has to pay it.  If I owed half a mill, I'd have to sell my house to repay it.

Nothing is wrong with that scenario

Stephen Morris | | Permalink

@tonyarm

But suppose the remaining £0.5m is deemed to be criminally obtained and confiscated? It is that kind of scenario that the legislation permits. Suppose the accused can not prove the house was obtained legitimately? Perhaps not very likely but with other assets this may be more probable. In any case, why should the offender have to prove that all their assets are legitimate to avoid confiscation? At this point, confiscation proceedings are not restorative but punitive. Moreover, it is punishment for crimes which are just suspicions and which have not been subject to the rigours of due process to establish that crimes were committed to obtain the assets. Whither presumed innocence, that cherished plank of criminal law in the UK?

nothing wrong with calculations

The Black Knight | | Permalink

I was comparing the amount of criminal benefit. Not additional tax on the criminal benefit. for the civil tax penalty comparison, £500,000 of tax evaded to be clear.

£500,000 criminal profit could be from planning or from tax evasion the number is irrelevant.

Incidentally I wonder what the tax position is on the confiscated profit ? Is it still taxable ? I which case that is outrageous ! lol

ShirleyM's picture

The cost of justice

ShirleyM | | Permalink

I have no problem if confiscation amounts were to to exceed the 'profit' element of the crime.

Just how much does it cost the taxpayer to gather the evidence and get them into court in the first place? I know there are exceptions, but most of these people choose to do the crime, so let them make full recompense to society and their victims.

I have heard examples of certain court cases costing us millions!

Gross proceeds are the compensatory element

Stephen Morris | | Permalink

I am sure David will correct me if I am wrong but my understanding is that the confiscation of the gross proceeds is restorative so the parties involved are returned as if the offence never took place  It is the gross proceeds that are recovered from the offender, not the net proceeds (or "profit"), otherwise the victim would not be restored to the ex ante position

With regard to the court and prosecution costs I should imagine that the judge can order these costs to be met by the offender at the time of conviction. However, that is not part of the confiscation proceedings although it is restorative in the sense that the State does not suffer a loss from taking out a prosecution.

In addition to the confiscation proceedings, and the award of court costs against the offender, the judge will have meted out a punishment, such as imprisonment or a fine etc.

To summarise, justice meted out to the offender is both punitive and restorative. To complete the circle it would be good if the confiscated (gross) proceeds of the offence could be given back to the victims so as to restore them to their original position. Obviously, if it is the State that is the victim then the State will get to keep the proceeds. So it will be wine, women and song for our MPs! Yep, that's justice!

Nothing wrong with that scenario

tonyarm | | Permalink

My scenario clearly stated that he had earned £1m from criminal activity and that is what the courts required him to repay.  If you are saying that he had earned £1.5m from criminal activity and had spent £1m of it then the balance of £.5m from the sale of the house should also be confiscated.  I cannot accept that if he had earned £.5m from legitimate activities he would not be able to provide evidence to that effect. If you cannot or are unwilling to show where you got your money from, society through the courts has a right to assume that it was from activities that society (through their representatives) has deemed to be illegal and therefor has a right to confiscate it. 

davidwinch's picture

Confiscation, compensation and costs

davidwinch | | Permalink

This is going to seem a bit confusing - but here goes!

A confiscation order is an order requiring the convicted defendant to pay a sum of money to the state.

A compensation order is an order requiring the convicted defendant to pay a sum of money to the victim (but the amount payable to the victim cannot exceed the loss to the victim which has been determined by the court and used in sentencing the offender).

A costs order may be made against the convicted defendant in respect of prosecution costs, or defence costs or both.  In practice (for a reason I shall explain in a moment) defence costs orders are now virtually being phased out.  A prosecution costs order requires the convicted defendant to pay a sum of money to the prosecuting authority in respect of the whole, or a part, of the costs it has incurred in prosecuting him.

The legal costs of a defendant in criminal proceedings in the Crown Court are generally met by the legal aid fund.  However the defendant is required to make a contribution to the legal aid fund (which he may be required to pay in instalments before the trial and as an additional lump sum after the verdict).   If the defendant is acquitted any contributions he has paid are refunded to him.  The amounts he is required to pay depend upon his income and capital (in other words they are means tested).  If the total he has paid exceed the defence legal costs in the case the excess is returned to him.  (In this way, if he has sufficient assets he will automatically be required to reimburse the legal aid fund for all of his defence costs - this is why defence costs orders are effectively now phased out.)

It is possible for the Court to make a confiscation order and a compensation order and a costs order.  If the defendant is unable to pay the confiscation order and the compensation order then the money is first used to compensate the victim.

Of course if the defendant is going to be financially wiped out by a confiscation order there is little point in making a costs order as well.

I hope that is clear.

David

Still not quite sure David

Stephen Morris | | Permalink

@ David

So what is the purpose of a confiscation order then? Is it intended to be punitive? If so, how does it differ from a fine? Are there limits to how much can be confiscated? I understood it was limited to the gross proceeds of the criminal activity.

@tonyarm

Everyone is, or should be, equal before the law. For this reason, I believe it is draconian for the courts to confiscate property in excess of what is known to have been criminally obtained, even if the individual has been convicted. The right to presumed innocence in respect of property which has not been proved to have been dishonestly obtained should not be removed just because someone has been found guilty of a crime relating to other property.

If removing the presumption of innocence was applied to other legal scenarios then it would be possible for an individual convicted of murder to be found guilty of any other murder unless he or she could prove their innocence. This is the wrong way around - it is up to the state to prove guilt, not the accused to prove innocence.

cymraeg_draig's picture

Stephen

cymraeg_draig | | Permalink

So what is the purpose of a confiscation order then? Is it intended to be punitive? If so, how does it differ from a fine? Are there limits to how much can be confiscated? I understood it was limited to the gross proceeds of the criminal activity.

 

Posted by Stephen Morris on Wed, 09/03/2011 - 18:06

 

If you want the cynical answer - ignoring all the fancy words, the simple fact is that it's how the state (the treasury) profits from crime.

Stephen

tonyarm | | Permalink

A confiscation order is only made against someone who has been found guilty of a crime from which they have obtained financial benefit.  The amount of money that the courts determine that they have obtained is what they are ordered to repay.  It is irrelevent in my opinion out of which assets they have to repay it.  If they do not have the full amount of the funds it is because they have used them for some purpose. It's irrelevent whether that purpose is legal or otherwise.  What is relevent is that they have to pay back the full amount that they illegally obtained out of the pool/pot of money/assets that is available to them.

 It is no different to a situation in which I borrow money and spend it, cannot repay it but am subsequently required by the courts to repay it.  I will have to do so out of any assets that I have, whether they were purchased out of the proceeds of the loan or not.  It is my debt - I repay it out of my assets, wherever they came from (I know that I have not described the legal process for this in its complete form but it is the principle that I am trying to explain).

The assets available to someone are evidence of their ability to generate income.  If they are a convicted criminal who has no apparent legitimate source of income then it is absolutely right and no breach of their civil liberties for the Court to decide that the income must have arisen from criminal activities.  If it was a few hundred pounds of unexplained income out of thousands of expalinable income I would agree with you - but this is not the scenario that I have been reading on this forum.

 I understand and wholeheartedly support the concept of innocent until proven guilty but confiscation orders are only made against people who have been proven guilty of a crime. The confiscation order simply results from an assessment of the benefit of that crime to them and seeks to remove it.  If they cannot or will not provide evidence of legitimate sorces for their wealth then they must expect the Courts to assume it was from criminal activity.

I'm afraid I don't understand your murder analogy.

Profit from crime?

tonyarm | | Permalink

It is criminals who profit from crime - thankfully confiscation orders seek to remove that "profit".  The state makes no profit from crime , it is a net loser - along with society, it is a victim of crime.

cymraeg_draig's picture

Justice should work both ways

cymraeg_draig | | Permalink

It is criminals who profit from crime - thankfully confiscation orders seek to remove that "profit".  The state makes no profit from crime , it is a net loser - along with society, it is a victim of crime.

Posted by tonyarm on Wed, 09/03/2011 - 18:43

 

Then perhaps when "the state" commits a crime it should be made to pay - but it doesnt.

We had a client who was wrongly imprisoned for over 20 years. His total innocence was eventually proven after police (officers of the state) were proven to have lied. He was awarded £2.5million in compensation (not enough in my opinion), and was then presented with an invoice for £3/4million from the Prison Service for "20 years board & lodging".

Just how SICK and CRIMINAL is that ?

 

Sick and Criminal

tonyarm | | Permalink

I wouldn't call it sick or criminal.  It is however grossly unfair and wrong for him to have to pay this, if he did in the end have to.

Was the award made taking into account that he would have to pay it? If so, then it's the amount that he was awarded that should be considered.  I'm not familiar with the regulations/rules about falsely convicted persons to be able to comment on whether it was fair or not.

However, I think that arguements about what one part of the state does is not relevent to whether another part of the state has got it right or not.

davidwinch's picture

RE: Still not quite sure

davidwinch | | Permalink

Part of the genesis of confiscation was a police investigation known as Operation Julie which involved a gang engaged in the manufacture and distribution of LSD on a large scale.

During the police operation approximately £750,000 in cash was seized.  Undoubtedly this cash was proceeds of crime.  But following the trial and conviction of the gang the police were obliged to return the cash to them as the House of Lords held in 1978 that the police had no power to retain the money.

That caused some consternation which eventually resulted in legislation dealing with the confiscation of proceeds of drug crime, in the Drug Trafficking Offences Act 1986.  Confiscation for non-drug related crime was introduced in the Criminal Justice Act 1988.

The confiscation legislation has been amended several times since then and is currently to be found in the Proceeds of Crime Act 2002.

The essential purpose of confiscation is to part criminals from the benefit of their crime.

As you can appreciate if I were able to steal £20 million from a bank (or, more likely, from HM Revenue & Customs), put the cash in the bank to earn a bit of interest, serve my time and then come out to live the high life that might be regarded as improper.

Where there is an identifiable victim of my crime I could be ordered to pay compensation.  But there are lucrative criminal activities of which there is no identifiable 'victim' who should be compensated - drug trafficking being an example.

So powers of confiscation make sense.  But now criminals are unlikely to leave the cash carefully wrapped in bundles in the freezer, ready to be found when their home is searched.  So the legislation has been developed to place the burden on the criminal to say where the money is.  There is obviously a likelihood that the criminal will not be keen to identify and surrender all his proceeds of crime.  So the legislation requires (in a 'criminal lifestyle' case) the defendant to face unpleasant and sweeping assumptions in court.

But that shifts the traditional burden of proof from the prosecution to the defence to some extent.

The result may be that assets / income / expenditures are assumed to be funded by crime when in truth they were not, but the defendant cannot produce sufficient evidence to rebut the assumptions.  There are other features of PoCA 2002 which I have referred to in the article at the start of this thread.

There is a balance to be struck between the human rights of individuals and the need to deal with crime in our society.

The question is, "Do we have the balance right?".

David

Proceeds of Crime

Stephen Morris | | Permalink

Perhaps I have a simple mind but it strikes me as fallacious that because someone has been found guilty of one crime that they must be guilty of other similar crimes unless they can prove otherwise. This kind of reasoning appears to deprive a convicted offender of the protection of the law (ie the presumption of innocence) that is available to other citizens.  Even convicts should have human rights. That is why I think the burden of proof should remain with the state and not be transferred to the accused. Also, how reliable is the legal definition of "criminal lifestyle", ie, is the criteria used likely to be a good predictor of whether the accused does in fact live off the proceeds of crime?

 

 

cymraeg_draig's picture

.

cymraeg_draig | | Permalink

I dont think anyone would argue against confiscation for drug dealers, terrorists, and the like. In fact a lot of people wouldnt argue against public hangings for them.  However, this law, just like RIPA, has moced far from it's original intention.

We all hear about petty beurocrats in town halls using parts of RIPA intended to deal with terrorists, to track mothers trying to get their kid into a better school, or dog owners who dont clean up after their pooch. Hardly what RIPA was intended for. 

Now we see confiscation proceedings being used against minor "criminals", often whos only "crime" is some technical breach of a petty regulation such as a planning officer spitting his dummy out because he didnt receive the right bit of paper in triplicate. 

There does seem to be a tendancy in this country to overreact to minor things, we brand people as racist or sexist for one unguarded comment (such as Sky Sports commentators), as a nation we have totally lost our sense of humour, and laws are misused for purposes they were never intended for.

And to add insult to injury, we seem now to be appointing to the judiciary a bunch of drones who blindly follow so called guidelines without a thought for real justice.

 

Stephen

tonyarm | | Permalink

I too believe in inncoent until proven guilty. However, these people have been found guilty by the Courts. They are then asked to pay back the proceeds of their crime. As I have stated in previous contributions, if they have spent or hidden part of the proceeds already it should not stop society getting the full proceeds from whatever other assets they have.  Its not good money and bad money - its just money.  Its like a pool of water; if you conribute 10 gallons to a 100 gallon pool and you want it back , you don't identify your particular molecules of H2O, you just take 10 gallons out of the nearest part of the pool you can get to.

Pool of assets

Stephen Morris | | Permalink

@tonyarm

I understand the point - it is the value of the gross proceeds of the offence that are recovered, even if clean assets need to be surrendered or disposed of to achieve this. That is not the issue that concerns me.

My concern is that after being convicted of a crime, which deprived a victim of their assets (the gross proceeds), the convict is then ordered to surrender more than the value of the proven dirty assets. I simply believe that the state should prove that the additional value is dirty and that it should not assume this to be so and confiscate on this suspicion.

Yes, I know you are saying that if the convict is unable to prove that the additional value is of good provenance then these additional assets must be dirty and hence can legitimately be confiscated. This, to my mind, punishes the convict a second time, for an unspecified offence, and without a fair trial, because there is a presumption of guilt which the accused must rebut. Just because someone has been found guilty of one offence does not mean they must be guilty of other offences. That is fallacious.

Moreover, the hurdle of "proof of criminal lifestyle", which the state must jump if it wants to confiscate additional assets after conviction, has not been set very high. It would probably catch myriads of individuals whose lifestyle is not criminal in the eyes of a reasonable observer. If I am correct on this point then this too is draconian.

I accept that clean assets may have to be surrendered in lieu of dirty assets if the latter have been disposed of by the accused. However, I do not believe assets should be surrendered in excess of the proven value of the dirty assets. In short, if the state suspects a convict's other assets to be dirty then it should prove it. 

ShirleyM's picture

Has that happened?

ShirleyM | | Permalink

Has a criminal been ordered to pay more than the benefits from crime? And how do you calculate the 'benefits of crime'?

As with many scenarios, it would seem reasonable to look at the cost of someone lifestyle, and then deduct legiimate earnings. The money has to come from somewhere and it should be fairly simple to prove legitimate earnings/income. Is this any different to the requirements to complete a tax return? If HMRC enquire about other income (the £50,000 cash deposited in your account?) you may need to prove it isn't taxable earnings.

Please see excerpt from Davids comments below:

A fourth Draconian feature concerns the 'available amount' of the defendant.  A confiscation order is normally made for whichever is the lesser of (i) the defendant's 'benefit' and (ii) his 'available amount'.  But his 'available amount' is not the amount which he has available. 

The confiscation amount is the lesser amount, so if they have spent it, and have no assets, it cannot be recovered. I would not object to the full debt being carried forward, plus the cost of getting the conviction, until such time as they are able to pay.

It is time we sent out a clear message that criminals will pay (and pay well) for their anti-social actions, and their non-contribution to society.

Before the furore starts, I am not talking about an unemployed single mother with 3 kids who makes a false benefit claim. I am talking about the callous criminals who don't mind who they hurt, or at what cost to the country and it's inhabitants.

 

burden of proof

The Black Knight | | Permalink

Surely all that has changed is the burden of proof.

The criminal now has to prove his money did not come from illegitimate means.

What might be unfair is to remove the resources required to clear his name, and protect his legitimate assets.

but that is the risk of engaging in that activity in the first place.

Might it influence your stance in a civil tax investigation ?, knowing you were banged to rights for 1 or 6 years but could not quantify the previous 14 years (no records required to be kept that long).

 

Calculating the "benefit"

mgh | | Permalink

I would be interested to know what David and others think about the following example. I have no sympathy with people who benefit from the "sex industry" in any way - it enslaves many girls and women, even in the UK. However I have often wondered about  the way the "benefit" was calculated in the case of an ex-client of ours.

The individual in question had built up a portfolio of residential properties over many years, via a legitimate lettings business. There were no mortgages on any of the properties. For the last three years he had rented first one, and then two more, properties to a brothel keeper, who used them as "massage parlours" (incidentally, the local council inspected them, and levied business rates on this basis). A lot of the rental receipts had been paid through lettings agents. Eventually the police raided the brothels and closed them down. The prosecution accepted that he had received no more than market rentals during the time they operated from his properties. These had been declared for tax purposes and were mingled with those of his legitimate lettings business.

The amount confiscated was made up of two elements:

1. The gross rents received from the brothel keeper (around £15,000 in total)

2. The increase in value of the the three properties in question, for the time that they were let in this way. Because of the area where they were situated, this ran into hundreds of thousands of pounds.

I have often wondered about Item 2, as it seems to me that because he had no mortgages to pay, it could not be argued that he needed the rents in order to hang on to the properties and benefit from the increase in value. He could have let them stand empty, and would still have experienced the same increase in value. Or he could have let them legitimately, and made the same gain. The gain seems unconnected to the letting, and is in any case unrealised unless a property is sold. (Indeed, much of it will have reversed now that the market has dropped back a bit.) Was the law interpreted properly? Was this Draconian?

davidwinch's picture

Legally valid

davidwinch | | Permalink

Let's assume that this case is in England / Wales and that all the charges referred to periods beginning on or after 24 March 2003, which is the date that the confiscation provisions of PoCA 2002 came into effect.

The client clearly has a criminal lifestyle.  He has been convicted of one or more offences from which he obtained a benefefit of at least £5,000 and the offences continued over a period of at least 6 months, s75.

So the statutory assumptions apply unless rebutted, s10.

So all income received since the 'relevant day' is assumed 'benefit' of crime.  All assets held after conviction are assumed benefit of crime.

Also (quite apart from the assumptions) anything he obtained as a result of or in connection with his criminal conduct is benefit of crime, s76.

The two items to which you refer are clearly obtained as a result of or in connection with the crime.  Note that anything obtained both in connection with the crime and in some other connection falls within s76.  So the increase in the value of the properties falls in.

It seems clear that the prosecution could have sought (and may well initially have sought) a much higher figure of benefit than that ultimately set out in the confiscation order.

Obviously the client's 'available amount' would be well in excess of the amount ordered (since he owned the properties free of mortgage).

So the outcome was certainly legally valid.

I hope your client bought his legal advisers some bottles of bubbly after the outcome was decided!

David

davidwinch's picture

Second thoughts!

davidwinch | | Permalink

There is an argument that the legislation ought to be interpreted to exclude the increase in value of the residential properties.  But it is a 'clever' argument based on an interpretation of the law which may not be accepted.

If you look at s80 it provides rules for deciding the value of property obtained by criminal conduct.  But one could argue that the same rules ought to be applied to value property obtained legitimately.

The general rule is that the value of property is its market value, s79.

But s80 deals with particular valuation issues.  It provides that where property obtained by criminal conduct is still held by the convicted defendant then the value required is the value of that property which he still holds, s80(3)(a).

Using that law one could argue the value of the property legitimately acquired by the client when he purchased the properties is now represented by the current market value of those properties.  In other words the whole of the current value relates back to the (legitimate) purchase price by virtue of s80.

That could exclude item 2 from the client's 'benefit' for confiscation purposes.

One could point to the decided case of R v Waya [2010] EWCA Crim 412 as giving some support to that view.

As they say in the movies "It's a long shot but it might just work".

However it is likely to be too late to mount an appeal in your client's case - particularly if his case was decided before the judgment in Waya (March 2010) and so was based on the law as it was understood at the time.

(I am not saying the decision made previously was invalid - I am simply now saying that there is another way of looking at the case.)

David

P.S.  I realise I have come up with two contradictory answers, both supported by reference to the legislation.  But that's what barristers do all the time.

Does the deemed benefit have to link to the proven criminal acti

Stephen Morris | | Permalink

In cases where the convicted defendant is held to have a 'criminal lifestyle' (which include cases in which the defendant has been convicted of a single offence) the statutory assumptions (now found in s10 Proceeds of Crime Act 2002) apply.  These are a third Draconian feature of the legislation.  The effect of the statutory assumptions is that all receipts and expenditures since the 'relevant day' (normally 6 years prior to the day on which the defendant was charged with the offence(s) of which he is subsequently convicted) are deemed to represent benefit of unspecified criminal conduct, and all assets held by the defendant after the date of his conviction are deemed to represent further benefit.  These assumptions may be rebutted but the burden of proof, on the balance of probabilities, falls upon the defendant rather than the prosecution.  Where a defendant does not have adequate records over the previous 6 years or more he may find himself unable to produce the "clear and cogent evidence" which the courts require in order for the assumptions to be rebutted.

I believe there is a case, details of which I think were posted to this site, where the criminal benefit was deemed to be some £700,00 but where the culprit had been convicted of dishonestly obtaining a much smaller sum. The above extract shows that further benefit, obtained from unspecified crimes, can be confiscated, in addition to the benefit obtained from the proven criminal conduct.

davidwinch's picture

@Stephen

davidwinch | | Permalink

I think you are referring to this thread:

Calamitous consequence of failure to notify HMRC

The answer to your question "Does the deemed benefit have to link to the proven criminal activity?" is, No.

David

Brothels

tonyarm | | Permalink

I assume the brothel renting client in question was convicted because he knew the properties were being used as brothels (which is illegal) or would it not matter whether he knew or not. If the latter, its seems a bit harsh.

davidwinch's picture

Presumably

davidwinch | | Permalink

Presumably the client was convicted of an offence contrary to s34 Sexual Offences Act 1956:

"It is an offence for the lessor or landlord of any premises or his agent to let the whole or part of the premises with the knowledge that it is to be used, in whole or in part, as a brothel, or, where the whole or part of the premises is used as a brothel, to be wilfully a party to that use continuing."

David

Brothels

mgh | | Permalink

David, thank you for your very helpful and interesting replies.

Yes, the defendant was convicted on the basis that he knew the true use that his properties were being put to. (Most of us would understand what "massage  parlours" really were, the defendant had visited the properties on occasion to collect the rent, and also it turned out that the brothel keeper had been an employee of the  defendant (in a legitimate business) some years before, so there may well also have been a level of personal  relationship which would have afforded that knowledge.

This all happened after 2003 and before 2010.

Crime in this case definitely did not pay, and personally I think the result in itself was not particularly unjust. What I think is unfortunate is that much bigger players seem to prove harder to catch and punish. Even in this case, this defendant's confiscation order was the largest, possibly because his affairs were mostly in order and his assets easily traceable.

 

cymraeg_draig's picture

A legal nonsense

cymraeg_draig | | Permalink

 I assume the brothel renting client in question was convicted because he knew the properties were being used as brothels (which is illegal) or would it not matter whether he knew or not. If the latter, its seems a bit harsh.

 

Posted by tonyarm on Thu, 10/03/2011 - 17:46

 

Just as a matter of interest, had he let out the property to one prostitute working on her own then he would not have committed any offence as that does not constitute a brothel.  Only if 2 or more women are working at the same time does it become a brothel. (If one girl vacated the premises before another entered, again technically it is not a brothel).

Perhaps his defence was a little remiss as if it was argued that he let it to one woman (regardless of her "profession") and that he did not know any others were using the property, then he would not have been convicted. I would certainly have put the prosecution to the task of producing proof that he actually knew that more than one "working girl" was in the premises - something the prosecution may have found difficult to prove. 

 

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