This article was first published by The Law Society Gazette on December 9, 2022.
Recovering criminal assets is difficult. A good recent example of this difficulty came in October this year, when the Treasury estimated that it could recover just £1.2 billion of the £4.5 billion lost to Covid fraud.1 However, even when defendants are convicted, recovering criminal assets presents a significant challenge.
On 8 November 2022 the Law Commission released its report on reform of the UK’s criminal confiscation regime (“the Report”). The aim of the recommendations set out in the Report is to improve the process by which confiscation orders are made, ensure the fairness of the confiscation regime, and optimise the enforcement of confiscation orders.
In total, the Report makes 119 separate recommendations on a range of topics – fine tuning the Proceeds of Crime Act 2002 (“POCA”) regime rather than overhauling it. Some of the recommendations are relatively minor, for instance one concern identified in the Report is the delay between conviction and the instigation and conclusion of subsequent confiscation proceedings, so the Report recommends requiring the prosecution to raise the timetable as a matter for confiscation proceedings before the completion of the sentencing hearing.
More substantively, the Report recommends giving courts the power to impose a “contingent enforcement order” alongside a confiscation order, which is intended to incentivise defendants’ compliance with confiscation orders, in order to avoid the activation of the enforcement order. These would take effect, subject to a further hearing to activate the order, if (1) there are reasonable grounds to believe that the defendant will fail to satisfy the order through wilful refusal or culpable neglect, or (2) in light of third party interests, there are reasonable grounds to believe that the defendant’s share of the asset will not be made available for realisation by the expiry of the time-to-pay period. If activated, the court would then be able to use various powers, including the power to enable persons to take control of the goods and sell them on.
The Report also recommends improving the confiscation process by codifying various legal principles into statute, such as the ‘risk of dissipation factors’ (such as the defendant’s ability to transfer assets overseas), which a court must consider when deciding whether to grant a restraint order. It also suggests giving the confiscation regime a clear statutory objective, depriving criminals of the benefit of their criminal conduct, removing any prior emphasis on punishment, on the basis that punishment is a principle that should be considered in the substantive part of sentencing, rather than confiscation.
With regard to fairness, the Report suggests a different approach to assessing a defendant’s criminal assets – more aggressive at the outset of proceedings but with greater flexibility if payment becomes a remote prospect. For instance, it proposes reducing the number of offences required for a “criminal lifestyle” to be found and that attempted offences be considered as well as offences that were actually committed. However, it also proposes allowing downward adjustment of a confiscation order if an asset’s value depreciates through no fault of the defendant, and allowing a defendant to substitute different assets to satisfy the order.
The Report also recommends changes to the management of confiscated assets, and advocates setting up a “Criminal Asset Recovery Board”, that would take charge of national strategy and policy in managing and realising those assets. This would generate a number of clear benefits, including the pooling of expertise that would otherwise be dispersed among local police forces, and the increased bargaining power of a single, large organisation.
The Report’s recommendations are sensible and if implemented should go some way to improving its three target areas (process, fairness and enforcement). However, the most striking aspect of the report is its projected impact on the level of recovery. As of 31 March 2021 the outstanding amount of unrecovered confiscation orders amounted to over £2 billion, £143 million of which is considered ‘recoverable’.2 If all its recommendations are enacted, the Report estimates that it may lead to an additional recovery of just £8.82 million per annum.3
Although the Report’s proposals are worthwhile, they also show the limitations of law reform in improving the recovery of more than a small fraction of the proceeds of crime.
1 Policy Paper: Tackling error and fraud in the Covid-19 support schemes, HM Revenue and Customs, 13 October 2022.
2 Paragraph 1.13.
3 Confiscation Under Part 2 of the Proceeds of Crime Act 2002 Impact Assessment, November 2022, page 2.