Mark Jenner & Co Limited – Forensic Accounting Services

GARY JOHN WILKES [2003] EWCA Crim 848  No: 200102859 Z3

Court of Appeal Criminal Division – Lord Justice Latham, Mr Justice Gross and Mrs Justice Cox – Friday 7 March 2003 @ Royal Courts of Justice, The Strand, London WC2

I have had cases where the Crown has included substantial benefit in its S16 assessment that is represented by stolen goods that has subsequently been recovered and returned to the owners. Therefore, the defendant has not benefited within the real meaning of the word. In these cases, the appeal of Mr Wilkes is quoted as precedent for a large benefit and corresponding payment order when somebody has in fact not benefited in financial terms from their crimes.

Mr Wilkes was convicted of burglary, assault and wounding during the course of robberies where the stolen goods were all recovered. He was subject of confiscation proceedings under section 71 of the Criminal Justice Act 1988 where on 20 April 2001 a payment order of £41,380 was made by HHJ Greenwood.

It had been held that his benefit amounted to £60,300 which considered of £40,000 in respect of his criminal lifestyle (because he was living beyond the means of his supplementary benefit claims) together with £7,920 balance from the defendant’s bank account and a further £12,380 that was found buried in his garden.

During the trial and confiscation proceedings the value of the stolen goods from the recent crime (around £7,000) and from a previous crime for which the defendant had been convicted (around £1,270) was discussed as was the fact that in both cases the goods had been recovered by the police in full. It had been held by HHJ Greenwood that the fact that the stolen property had been recovered was irrelevant. Accordingly the benefit was the value of the property obtained in both offences. Despite this it seems that HHJ decided the benefit figure on lifestyle amounts. Much of the thrust of the legal argument within the appeal revolved around whether or not the benefit consisted of any money that was “tainted” by the actual criminal proceeds (i.e. goods that were stolen but then recovered). It seems that the prosecution had not proved that the defendant had actually benefited from the crimes that he had been convicted for, and the benefit figure left out the actual proceeds of crime that had triggered the application of the confiscation under s72 CJA 1988.

The appeal was dismissed, and rightly so. The confiscation proceedings were right to have applied lifestyle assumptions on a career criminal. Also, the benefit had excluded the value of the stolen goods, and given that these had been recovered anyway this seems appropriate. It does seem to me however that although the issue of inclusion of returned criminal proceeds within benefit was aired, in the end it was excluded and lifestyle assumptions adopted.

Discussion

I approach every confiscation matter where I am instructed by the defence lawyers with an open mind. Although I am bound within a maze of legal principles I am not a lawyer. Therefore, while paying heed to the obvious provisions contained within the legislation and case law, my overriding guideline is the application of common sense. I cannot think of many cases that I have handled (from the twenty or more each year that I accept and prepare an expert accountant’s report for) where this common sense has not prevailed over strict legal argument.

In R – v – Wilkes a career criminal was forced to pay £41,380 in realisable assets from a lifestyle benefit of £60,300. That his sole declared means of living was supplementary benefit, that he had some £20,000 cash in the bank and at home, that he owned substantial equity in his home, that he had been caught and convicted of burglary offenses more than just the “one off” occasion….rather suggests a just outcome for the confiscation which was subsequently held in appeal.

The issue of the inclusion of assets that had been stolen but recovered was never in the end tested, and indeed may or may not have become relevant if the lifestyle benefit could all have been proved to have been obtained from legitimate sources. In the end it did not, and it seems sensible to have left it out, satisfying a punitive confiscation through the lifestyle assumptions.

Notes:

• Even though all current cases are being handled through the provisions of the more punitive Proceeds of Crime Act 2002 legislation – the principles being discussed in this earlier case seem still relevant.  The case does not assist in matters where stolen goods, subsequently recovered, are still alleged to be the particular benefit of a crime.
• I consider R – v – Wilkes to be an unsuitable case to use as precedent where lifestyle assumptions are not adopted – i.e. where stolen goods since recovered are included only as particular criminal benefit.

As I regularly see a dozen or more new confiscation proceedings every year as a forensic accountant appointed on behalf of the criminal defence team, I can’t fail but to notice the lack of consistency with the Crown’s approach in dealing with a defendant’s home or investment properties.

When the Crown’s accredited investigator sees a property or two within the estate they immediately apply the assumptions available to them under the Proceeds of Crime Act 2002 which allows the said assets to be deemed criminal property – unless good reason can be shown that they are not.

Therefore, I will see a number of things within the Section 16 Statement of Information that attempt to bring the property into the benefit estimate.

• The full current market value of the property.
• The purchase price of the property.
• The value of any mortgage obtained when buying the property.
• Any further advances taken out against the value of the property.
• Rental income in respect of the investment.
• The sales proceeds of the property.
• On some occasions a spouse’s share is included, other times it is not.

All of these sums of money might be appropriate in certain cases. However, it is often the case that a simple current value for the property is used regardless of the circumstances. Even worse, several of these different methods for placing value on a property can be taken together thus providing a source of benefit strands for the Crown’s favourite tool in confiscations – double counting!  I have also seen a full “Zoopla” valuation used, using selling prices for similar properties in the street dating back to 2006 well before the property crash!

My first step when approaching a property is to compare its acquisition date to the relevant date, i.e. six years before proceedings were commenced against the defendant in the predicate matter.  If it was purchased outright before this time then the property has no bearing on the benefit calculations, though it may be treated as an available asset for realisation in due course.

If the property was purchased before the relevant date with a mortgage then this potentially complicates matters. Then I will consider two issues separately:

• I will calculate the equity owned at the relevant date as this must be kept out of the benefit.
• Then I will look at the increase in equity since the relevant date, and determine the proportion of this that has been funded using legitimate funds and the amount that may have been funded by the proceeds of crime.

Thus I will attempt to produce a value for the equity held in a property that could potentially have been funded by criminal activities.  It is often the case after the property crash in 2008 than many properties are in negative equity, or at least have lost value since a typical relevant date for current matters (presently around 2003 to 2005).  This can mean that there is little or no criminal property held by the defendant.

Another favourite approach by the Crown’s investigator is to accuse the defendant of obtaining a mortgage fraudulently.  Then they will often simply bring in the full market value of the property again as a result.  The basis for such an allegation, which will never be tested by a jury, is that the declared income on the mortgage application form has been inflated.  Unfortunately, this was industry practice leading up to the credit problems which commenced around 2008.

Notwithstanding the fact that usually any fraud was being committed by the mortgage broker and not the defendant, my approach to dealing with such a case would be to consider whether or not the mortgage represented a transfer of funds to the defendant.  Normally, a mortgage is advanced directly from the lender, via the solicitors to the seller. The buyer never holds the funds and given that the lender holds security over that part of the equity represented by the loan, will only ever receive the benefit of the equity relating to his deposit and any subsequent increase in value.

Therefore, I would consider a mortgage advance typically not to be a transfer of criminal property, and focus on the source of deposit and repayment funds, together with the value of any increase in equity since purchase (or the relevant date).

Every property case has been different in my experience, and cannot just be treated as current market value.  I have had properties purchased outright prior to the relevant date included as benefit, properties inherited with all taxes paid legitimately, and cases where the purchase price, subsequent sale price and the separate value of the loan have all been added into the benefit mix  – triple counting ! Therefore, any estimate of benefit that includes a property or two must be properly scrutinised before the inevitable negotiations between prosecution and defence counsel begins.

Mark Jenner & Co was involved in a confiscation case recently where the principles established in the case of R – v – Allpress were argued, including within the forensic accountant’s report!

This was the case of a successful businessman who had a very large property portfolio – but who also enjoyed gambling.  As a result of the company he kept, it was alleged that he was recruited by a group of criminals to assist with the laundering of their criminal funds by gambling.

In fact gambling is a very inefficient method for money laundering for two main reasons. The first and most obvious reason is that gambling is definately a mugs game – and the likelihood is that losses will be made. However, if the criminals are prepared to put up with this risk then so be it. However, in today’s casinos there are controls in place to prevent money laundering. The most obvious control is that if you win money, you will be paid back your winnings with the cash that you introduced in the first place! Therefore it is impossible to launder large amounts of money in this way.

However, this defendant was given the task of gambling criminal funds and presumably took a cut every time he won. Therefore the capital that he gambled was not the proceeds of any crime that he had been involved with. The question was – was he a money launderer or was he a simple recruit carrying out a paid activity for the criminals?

In R – v – Allpress it had been established that a mere courier or custodian did not in fact benefit from the entirety of the cash being laundered, if he was paid for his duties by the criminals. A distinction was drawn between a money launderer and his employees.  The important fact to establish is whether the courier or custodian had an interest in the sums being laundered. In the gambling case it is likely that the Defendant did not.

As with most cases that go unreported, this case settled without the legal arguments involving decided cases being properly aired. In the end it came down to the Crown and the Defendant agreeing a moderately large benefit figure and a sum for realisable assets that it was possible for the Defendant to pay without suffereing a default sentence!

Other cases:

R – v – Banks [1997] 2 Crown App. R(S)110

Sometimes property can be obtained only partially in connection with criminal conduct – however in Proceeds of Crime cases the benefit will be assessed at the value of the property actually obtained.

In R – v – Banks it was determined that it was not just the net profit of criminal behaviour that determined benefit, but the amount of money passing through the defendant’s hands leading to that net profit.

The judgements made by the House of Lords in 2008 in the three cases of R – v – May, R – v – Jennings and R – v – Green are considered to be landmarks for the process of confiscations under the Proceeds of Crime Act 2002.  The cases clarify a number of important issues, but also begin to establish a firmer set of principals governing the way in which Courts approach their decisions.

For example Lord Bingham’s speech in R – v – May advises the courts to focus on the language of the statutory provision rather than the proliferating case law. This means that each different case must be considered on its unique facts but that clear questions such as “Does the appellant have a criminal lifestyle?”, “What property has been obtained or is controlled by the appellant” or “Has the property been obtained from the criminal activities for which this appellant has been convicted?” must be answered properly and in a sensible sequence.

R – v – May

This case confirmed that actual profits made are immaterial when assessing benefit. Just because a criminal incurred costs or if some or all of the benefit of the crime was shared with other criminals does not reduce the amount of benefit that can be established. If a crime is committed resulting in money flowing through several hands, all convicted parties are jointly and severally obtaining the benefit of the total flow of value without deduction for costs incurred.

This situation often arises where for example a husband and wife are convicted of supplying drugs. If drugs receipts total £1 million for their joint business, each person will be deemed to have the £1 million benefit. However, in such cases the defence must establish the limits that each party then possess in terms of realisable assets to ensure that they are not penalised for being unable to settle any benefit order.

R – v – Jennings

Mr Jennings was deemed to be a party in an advance fee fraud. The leading perpetrator was Mr Phillips who was sole director and controlling shareholder of UK Finance (Europe) Limited which was the company used to get individuals to part with their money.  Mr Jennings was an employee of the company and received a salary.

The benefit for each fraudster was calculated by the Crown to be £584,637 – being £460,809 that had passed through the company bank account and accounting records and £123,828 that had been cashed separately at a local post office. Mr Jennings argued that he had only received his salary and a few of the cashed payments at the post office (made when Mr Phillips was away), totalling £50,000.

In this case it was upheld that Mr Jennings did not jointly share in the whole benefit. The all inclusive (joint liability) approach had been too broad in this case.

R – v – Green

This case confirmed the underlying principle that proceeds of any crime were to be dealt with as equivalent benefit for each of the conspirators convicted of the crime.  It also enforced the needs for the sequential approach by the Court in its approach to determining benefit:

1. Has the defendant benefited from the relevant criminal conduct?

2. Is so – what is the value of the benefit he has obtained?

3. What sum is recoverable from the Defendant?

Courier or Custodian

These cases provide a background for an important aspect of benefit calculations – more normally within money laundering situations.  If a defendant was a mere courier or custodian of criminal property – he obtains no direct benefit from that property. Thus if a person is recruited to carry a bag of criminal proceeds abroad, for the purpose of money laundering say, or to pay a drug dealer, and is paid a modest sum for the work, then the benefit cannot be the money contained in the suitcase being transported.

BENEFIT – USE OF MIXED FUNDS

READ THE FULL ACCOUNT AT BAILII.ORG

This case concerns Mr Waya who purchased a property using £310,000 of his own legitimate funds and £465,000 obtained as a loan. As he made false representations in order to obtain the loan – the loan funds were considered to be criminal proceeds.

After a conviction for obtaining a money transfer by deception contrary to S15A of the Theft Act 1968 he was sentenced to a community punishment order for 80 hours. In the subsequent confiscation proceedings an order was made against him in the sum of £1,540,000, at a time when the value of the property in question had risen to £1,850,000. The Court had seen fit to deduct the amount of legitimate contribution of £310,000 from the current value when making the order.

On appeal it was decided that the benefit must be fixed pro rata at the proportion of illegitimate funds originally invested in the property. At the time of purchase, the fraudulent loan represented some 60% of the purchase price. The benefit therefore was determined as 60% of the current value – at £1,110,000, somewhat lower than decided by the Crown Court.

A similar principal is seen where somebody obtains property using criminal proceeds alongside a mortgage that is deemed to have been obtained legitimately. In R – v – Nadarajah for example which was a confiscation decided under POCA 2002, the benefit was deemed to be the Defendant’s equity in the property purchased after deducting the value of the outstanding mortgage (which had been obtained legitimately).

The case law surrounding the tracing of mixed funds (which include funds tainted by criminal proceeds) used to obtain property is substantial, but appears to be heading mostly towards an equitable (or common sense) position. The application of common sense when conducting a forensic accounting review of a S16 Statement on behalf of a defendant is crucial. More often than not one or more properties are considered when estimating the level of benefit from criminal lifestyle. Generally the whole value of the acquisition is included as property held, though where the property has been sold it may be included as both expenditure and funds received. Such double counting is commonplace and a routine part of a forensic accounting review of the case.

When Mark Jenner & Co assists the defence team in a confiscation matter there is always an attempt to introduce the common sense interpretation even where legislation and case law say otherwise. This is generally done acknowledging the legal position but presenting specific facts in a reasonable fashion.  For example, in a recent case we were faced with a benefit strand of around £300,000 being expenditure on drugs. The Prosecution had seized a couple of pieces of paper from the Defendant’s house when they originally arrested him. The papers contained nothing but numbers, that when they were all added up totalled 300,000.

Being conscious of the decision in R – v – Mark Whittington, where a forensic examination of similar sparse documents resulted in £millions of benefit estimate being ordered, the scraps of paper were examined alongside the Prosecution’s interpretation.  It could be seen that the numbers on the documents could quite easily represent amounts of drugs – or they could be amounts of wages paid out. Furthermore, by adding up every number, the Prosecution were including numbers that were totals of other numbers or carry forward figures – i.e. double and triple counting each entry.

Fortunately, in this recent case, a settlement in terms of benefit was agreed that did not include the massive and rather speculative sum relating to drugs expenditure. The Prosecution and the Defendant both obtained a reasonable result!

DIFFERENT BURDENS OF PROOF (CIVIL OR CRIMINAL) WHEN DETERMINING BENEFIT

RELIANCE ON PARTIAL RECORDS WHEN CALCULATING BENEFIT IN DRUG TRAFFICKING CASES

READ FULL JUDGEMENT AT BAILII

This criminal defence case is an appeal in the Supreme Court of Judicature involving a disputed benefit order made under the proceeds of Crime Act 2002 in the sum of £9,672,176.69. The judgement is dated 30 July 2009 and although the appeal failed, it raises a number of issues in relation to the interpretation of POCA 2002 and the impact recent confiscation case law such as R – v – May and several other cases is having on the way such confiscations are being decided. The issue is whether or not a Court should apply the criminal or civil burden of proof when considering evidence that a person has benefited from crime – and circumstances where the different burdens are applicable.

The salient facts involve the interpretation by the Crown of partial records said to evidence substantial dealing in amphetamines. A large part of the benefit was inferred by the Crown from jottings in a notebook discovered at the defendant’s residence. Figures within the notebook included the number 29,800 several times which the Crown contended was the wholesale price for a kilo of cocaine. Other figures suggested a total of 295.8 which the Crown contended was kilos. Thus they said that the defendant had dealt with 295.8 x 29,800 = £8,814,840 which was a sum that was added to more readily identifiable sums forming the defendant’s overall benefit.

The Court had established that the defendant had a criminal lifestyle – there was no doubt here. To determine if the defendant had benefited from his criminal conduct, they needed to determine whether he had obtained property as a result of this conduct. The prosecution must prove the existence of such property to the civil standard of proof. Once the existence of the property has been established in respect of transfer, being held or by incursion of expenditure [sections 10.2, 10.3 and 10.4 POCA 2002] – the question of source of that property arises, as the defendant may seek to show that it is from a legitimate source – with the Crown only needing to prove their case on the balance of probabilities.

However, there is one circumstance that has been decided in R – v – Briggs – Price (Lord Rodger[76-79], Lord Brown [96] and Lord Neuberger [152]) the Crown must establish the possession or expenditure to a much higher criminal standard. This is where benefit was being assessed on past activities not subject of the current indictments for which the defendant had been charged. The Crown had to prove that the defendant obtained property in the past by showing proof of criminal offences for which he had not been charged.

The application of this case law is not straight forward as the fact that the matters are ending up in in the Courts of Appeal shows! However, it is clear that the potential need for better evidence being submitted by the Crown is also evidence of the need for a common sense approach by the defence team (including their expert forensic accountants) when responding to S16 statements that attempt to “throw the book” at defendants with little or no factual evidence backing up very substantial benefit figures.

In a forensic accountancy report providing expert evidence in a criminal defence confiscation it is clearly not appropriate for legal issues to be argued. However, at Mark Jenner & Co we take the view that certain matters should at least be highlighted to provide a base for such legal arguments to be fought – for example if a transfer considered to be benefit occurred prior to the relevant period (six years up to the date of charge), and the transfer was clearly unconnected to the indictments subject of the particular matter, then any forensic report would highlight the following:

• the evidence presented concerning the existence of the alleged criminal property
• the evidence presented concerning the source of the alleged criminal activity
• a business or financial critique of such evidence

It is quite possible that the transfer of property must be established to be derived from separate criminal activity – i.e. proved beyond reasonable doubt.  This is rarely, if ever done by the Crown when often reaching back in time to add to the level of benefit being estimated – where it is often believed that the assumptions will still apply or that a civil burden of proof is all that is required.

Confiscation Proceedings and POCA indictments within fraud cases impact a large proportion of the work carried out at Mark Jenner & Co. We see case after case involving anything from a few £1000 being stolen from the DWP to confiscations following major organised attempts to defraud government agencies of £millions.  However, in all cases the initial amount of benefit and hopeful level of realisable assets figure usually bear no relation to the severity of the crime committed, and in most cases after lengthy and expensive proceedings the Crown accepts much more modest terms…

There is no doubt of the commitment of the present Conservative and previous Labour Governments to the Proceeds of Crime Act 2002 and its intended use to cripple organised and career criminals. Criminal lifestyle (no obvious income) cannot always be linked easily to a specific offence – however the recent legislation moves the burden of proving innocence firmly over to the criminals. It has been applied in the field now for a number of years and is becoming a routine process in many cases.

Sometime the process is so routine that prosecutors do not bother to prepare a comprehensive Section 16 Statement, using the freedom they have to make certain assumptions to the extreme! However, this does often lead to a robust defence that can result in more lenient orders for sums being confiscated.

The Section 16 Statements are statements of information that provide the reasons, but not necessarily all the evidence, for applying criminal lifestyle assumptions to the source of a defendant’s assets. The Statement will set out the level of criminal benefit based both on the specific crimes that have been committed and also on the assumptions that other activities are also criminal (i.e. the defendant has a criminal lifestyle). The Statement may also indicate the assets that the defendant owns to satisfy any confiscation order and even give an indication, again not necessarily with evidence, of any assets thought to be hidden away.

With such a broad remit for indicating what is benefit and what may be available as realisable assets to satisfy the order it is clear that the prosecutors are simply setting out some of the information they have in relation to the defendant. This is on the basis that they are hopefully covering the level of the actual criminal activity and challenging the defendant to explain everything else. In effect they are often seeking to do just enough to ensure that the defendant loses all he currently owns.

This approach does happen in practice. Unfortunately, although it may deliver draconian but deserved justice for some, it creates a somewhat unfair situation for some other defendants. For example take the case where a defendant has been convicted of trafficking drugs, has not kept details of any financial transactions and in all likelihood has not paid any tax on any legitimate work he has been undertaking as a cover for his drug dealing. If only one or two of the defendant’s bank accounts are analyzed and demonstrate adequate transactions to ensure the ensuing confiscation order is large enough, then the defendant will lose everything and no doubt the prosecution (and indeed the rest of us as well) will accept that justice has been served.

However, compare the last case to another, where a businessman has been caught defrauding his employer by substantially inflating his corporate expense account for a number of months running, by several £1000s. He is caught, convicted and must serve a prison sentence as punishment for theft. Of course he will also have to pay back the money through subsequent confiscation proceedings. If he is technically deemed to have a criminal lifestyle because he has stolen more than £5,000 over a six month period, the prosecutor will have the opportunity to throw the book at him, preparing a Section 16 Statement that will seek recovery of not only the money that he stole, but everything he owns and has ever transacted – going back 6 years from the time of arrest or charge. When all the receipts into the bank accounts over 6 years are totted up, this “benefit from general criminal conduct” can reach huge sums. The scale of such an assumed level of benefit, if awarded against the defendant as a confiscation order, can never be paid back. The unfortunate defendant would have to serve a default sentence having more years added to his original penalty.

Of course it is possible to defend such a situation. The defendant’s legal team would realise that whereas it would be necessary to repay the level of money stolen, it would be somewhat unfair to have to repay income earned legitimately over recent years. This is what an uncontested confiscation order would involve in such a case. Therefore, the defence must show to a civil standard of proof that his income (other than the actual proceeds of crime) was from legitimate sources.

This is where the defence forensic accountant would be called in. He will examine the Section 16 Statement together with all the defendant’s financial evidence (such as bank statements, business records etc) and demonstrate the legitimate nature of the income. This usually means that he must go further than the prosecutor because he will need to undertake a comprehensive review of everything – it is up to the defence to demonstrate the legitimacy of income or assets. To do this may mean examining accounts that the prosecutor has not bothered with, to show the source of all transfers for example.

The big problem arises because the public funding of such cases is under threat. The public sector is having its budgets cut drastically by the Government in an attempt to redress the fiscal measures put in place to counter the pressure on banks over the past year or so. As an example the Legal Services Commission is losing a big part of its annual operating budget. It is reducing its spend on expert witnesses, including the forensic accountants, by a disproportionately large amount – 20% was initially swiped of the annual bill with promises of even more cuts. This is around £20 million less being spent on defence experts in the coming year.

The mechanics for doing this were proposed in a consultation paper regarding levels of experts’ fees. It is proposed that a forensic accountant would be paid between £47 to £100 per hour with the upper rate unlikely to be ever paid. For those that think that £100 per hour is a lot, remember this is the total cost – out of which must be paid pension, sickness, disbursements and the high cost of running a business. To put the rate into comparison, my work for my Masters Degree in Fraud Management showed that the average cost of a forensic accountant and of a police officer or member of the Court (clerk/manager etc) or of the Criminal Prosecution Service were broadly comparable. In fact the real cost of putting an officer on the beat is a lot more than £100 per hour, let alone the cost of a detective in an economic crime unit.

If a well trained and experienced forensic accountant were to be paid £100 (assuming he or she can achieve this top rate) then they would be unable to remain in even a small firm of accountants as they would be unable to earn enough to fund their firm’s overheads. There is evidence that the Legal Services Commission sees the solution as forcing the forensic accounting services into the hands of retired practitioners and “one man bands” who can survive (albeit barely) on the rates that are proposed. In a previous consultation paper several years ago this very outcome was mooted as the way forward. At that time all that came out of the consultation perhaps was more determination by the public sector funding body to restrict and delay payments for experts.

The most recent news is that from 3 October 2011 a new payment framework for expert witnesses is to be implemented by the LSC. A London based firm may charge between £50 – £144 for its forensic staff:

£50 – general staff

£80 – accountant

£108 – manager

£144 – partner

The regional firms are not much different – being allowed rates of between £50 and £135.  At the end of the day, the payments will depend on the competitive tendering nature of the assignation of cases – but composite average rates of £100 seem to be what the LSC are expecting to pay experts on all but the biggest of cases.

Mark Jenner & Co provides specialist forensic accounting services to criminal defence lawyers throughout the UK.

In the UK, the interpretation of the Proceeds of Crime Act 2002 when using asset confiscation as a weapon in the criminal regulators’ arsenal of sanctions will continue to develop and solidify over time.  However, in recent years it seems that the courts, lawyers and regulators alike struggle to understand the spirit of the law.  On one hand the prosecutors seem to be applying the “lifestyle” assumptions with complete abandon whereas the court, while certainly not ignoring the law, on occasions comes up with common sense judgements when enforcing what many commentators have labelled as “Draconian” legislation.

What is criminal benefit and how much might be realised during confiscation is commonly disputed and was a notable issue in the recent R – v – May appeal during 2008.  The judge had originally reduced an individual’s benefit by the amount of monies recovered elsewhere in a fraudulent matter.  It was subsequently ruled that he had erred in doing this as he had been confusing realisable assets with benefit.

What is clear after this decision is that the benefit obtained from money laundering for the purpose of the Proceeds of Crime framework is not the profit (or commission earned) of carrying out the crime but the sum of the criminal property dealt with.  This means that if you facilitate the laundering of a million pounds for a friend for a £10,000 fee, your benefit will be assessed at the level of one million pounds. Put simply, it is the amount of criminal proceeds flowing through your hands.

The quantum of recovery can therefore be much more than the cash earned by doing the crime!  This is the case if a person is deemed to have a criminal lifestyle.  Then it is not just the value of the particular criminal conduct that has taken place that becomes the benefit, but the value of all assets owned and monies transacted during the previous six years.  So in theory, if you fail to pay a few parking tickets you stand to lose your house, car and life savings.

It is up to a defendant to prove that all monies passing through his or her bank account do not represent the proceeds of criminal activity.  This means that all income must be verified.  This is easy for an average employee whose main income will be a salary through the PAYE system with perhaps an occasional injection of funds from an identifiable source such as parental gift or lottery win.  It is not so easy for the person who has lived as a wheeler and dealer, often paying little or no tax and certainly keeping only minimal accounting records.  Explaining cash receipts into a bank account can be difficult and the Prosecution will always assume these to be benefit.  Furthermore, when assessing realisable assets all payments out of a bank account will be deemed to be dispersal of criminal proceeds as “hidden assets” unless the purchase can be identified clearly.  Identifying these transactions, which are often simply innocent household outgoings, can be difficult without a properly documented paper trail.

The system penalises those that do not live a conventional lifestyle, dealing in cash and therefore very often not paying appropriate taxes. It is a lesson for those that do deal in cash but otherwise keep their legal obligations up to date – to keep good records!