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HOW DO CONFISCATIONS OF WEALTH WORK?

Confiscation of criminal wealth is an opportunity for the Crown to earn substantial income. Statistics reveal that the authorities recover substantial proceeds of crime each year through the confiscation process, over half of this being the forfeiture of seized cash. The most recent figures show that the Crown recovered more than £350 million in total during 2021/22.

Figures for the monitory value of crime are notoriously vague. It is only possible to measure amounts stolen if the victims report it. Some commentators put the level of fraud in the UK at around £190 billion (National Fraud Indicator 2019). This indicates that the total stolen may be much more if you include crimes such as money laundering associated with drug trafficking.

The simple relationship between amounts recovered and the level of crime indicates that only 0.2% is being recovered. It strikes me that the authorities are missing a trick and failing to maximize a self funding process or take advantage of a massive source of income.

Confiscation of Criminal Money – a Missed Opportunity?

I can only guess at why recovery levels are so low based on my experience providing regular expert accountant responses to confiscation of criminal wealth reports prepared by Accredited Financial Advisors on behalf of the Crown. The Proceeds of Crime Act 2002 generates these “S16 Statements of Information”. A conviction for a qualifying crime will generate a confiscation. This is where victims have lost money and the perpetrator may have been actively stealing over a period of time.

I have been reviewing these reports for well over twenty years as a criminal defence expert accountant. Previously the Criminal Justice Acts legislation generated such reports. I can say that the Crown does try to exploit the assumptions permitted by law when estimating the amount of benefit it is alleging. Because the legislation allows assumptions, it is up to the defendant to prove his earnings and wealth are legitimate. This is of course a complete reverse of the process convicting the person in the first place. Then it was up to the Crown to demonstrate guilt to the Court beyond any reasonable doubt. This reversal of obligations during the confiscation process generates the need for a detailed rebuttal by the convicted person. It is why a forensic accountant specialising in proceeds of crime cases routinely acts for the defence team.

Illustrative Case Example

For example, a businessman commenced a mail order business 10 years ago. He grew the business which was quite profitable. Three years ago, following a car accident, he was unable to manage the business properly for a while and debts increased while he convalesced. On return to work he experienced increasing pressure from creditors and had to let one of his two staff go. He started cutting corners and looked for some easy income. He found that he could buy counterfeit designer goods abroad and sell them in the UK for the high price of the genuine article. Eventually he was caught and found to have sold £100,000 of counterfeit goods over a period of one year. He was convicted and received a custodial sentence. Such an offence would naturally lead to confiscation proceedings.

What Does a Criminal Confiscation Order Look Like?

What should the confiscation order look like in this simple example? The question is how much has the defendant benefited from his crime? He hasn’t benefited to the extent of £100,000 because he has still had to bear costs associated with his business including buying the cheap counterfeit goods from his suppliers. However, the Crown would assume is benefit to be £100,000. This would be his proceeds of crime from his particular criminal offence. This figure would form part of the S16 Statement of Information, which is effectively a request for the Court to order the defendant to pay back this amount in a confiscation of criminal wealth.

This is arguably a fair request, because the defendant has taken £100,000 illegally even if he has incurred some of his own overhead costs on the way. Similarly it would be wrong to deduct the cost of a burglar’s bus fair traveling to the scene of the crime! However, the S16 Statement would not stop there. The Crown can assume that the criminal had a “criminal lifestyle”. It can look back over the defendant’s financial affairs – up to six years prior to charge – and potentially further if a crime has been going on for many years.

In this case, a financial review revealed that there were some £200,000 unusual deposits into the defendant’s bank accounts over the 6 years. Also, he owned a car with a three year old valuation of £10,000 and twas living in a house worth £290,000. This is a total of another £500,000 increasing the £100,000 to £600,000.

To Pay £100,000 or £600,000?

The Crown established that the only assets the defendant currently owned was the house. Furthermore, the car was only worth £5,000. There was also £5,000 sitting in the business bank account. A total of £300,000 was available to pay a benefit order of £600,000. The defendant would leave prison with nothing. He would still have the £300,000 excess benefit over his head for the rest of his life. Most people would suggest that such a result would be unfair. The Crown was already punishing the defendant with a prison sentence and had not even profited by his crime by £100,000.

Fortunately, a balanced critique of the S16 Statement of Information by the defence might reveal the following:

  • The business records matched half of the unusual bank deposits. This meant that they were revenue during the normal course of the business. The other half were transfers between bank accounts and so were not benefit.
  • A cheque payment for £10,000 for the car came from the business bank account.
  • The defendant bought the house twenty years ago and the mortgage paid off ten years later.

Perhaps £600,000 Would Be Added Punishment?

Perhaps a £100,000 confiscation order would be more reasonable? The defendant could raise this as a mortgage on his house. Thus he would have received a prison sentence for his crime. He would also have paid back all the money obtained illegally. Furthermore, he was potentially in a position to build his life back up free of any residual benefit order.

In practice for most cases, a S16 Statement of Information will have been based on reasonable assumptions being made by the Crown. It will raise many bone fide areas where the defendant must rightly justify the source of his wealth. This is the whole purpose of the confiscation legislation. However, the Crown routinely includes strands of added benefit similar to those that I am describing above. There is often a legitimate explanation that can reduce the level of benefit.

My conclusion is that it is not the effort the Crown makes to confiscate that is to blame for the little confiscation of criminal wealth that is recovered. It is more likely the massive amount of financial crime that either goes undetected or otherwise un-prosecuted.

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