The Treatment Of Property In Confiscation Matters

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.

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About Mark Jenner

Mark Jenner is an experienced forensic accountant specialising in fraud and white collar criminal matters. He provides independent financial investigation and expert accounting witness services to police forces, fraud regulators and criminal defence lawyers, also providing assistance and solutions to organisations embroiled in financial disputes.

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