Answer ... (a) What confiscation mechanisms are available in your jurisdiction?
In the United Kingdom, the main mechanism for confiscation is a confiscation order under POCA 2002. A confiscation order requires the offender to pay back the equivalent of the benefit from his or her criminal conduct, which is determined by:
- the value of the defendant’s benefit;
- the total value of the defendant’s free property;
- any priority obligations; and
- the value of any tainted gifts – that is, gifts which directly or indirectly represent criminal property obtained by the defendant which have been given, or sold at an undervalue, to other parties.
Restraint orders are an interim measure under POCA 2002 and have the effect of freezing property and preserving a defendant’s assets which may be necessary to meet a confiscation order. A restraint order can also be effective against third parties. A restraint order has the effect of preventing any person with notice of the order from dealing with the restrained person’s realisable property under threat of being in contempt of court. As part of a restraint order, the applicant can also apply for the appointment of a receiver, who is appointed to manage the assets subject to the order.
Enforcement authorities also have the power to apply for a civil recovery order under Part 5 of POCA 2002. Generally, criminal confiscation proceedings upon conviction are the preferred method of seeking confiscation, on the basis that the powers and assumptions that apply post-conviction are wider than those available under civil recovery orders, making it easier to obtain an order and for any such order to be for a greater amount.
(b) How do these different mechanisms work in practice?
Confiscation orders: Confiscation orders are available to the court on conviction of an offender for an offence involving an element of financial gain and can be made in addition to any other type of sentence or fine. A confiscation order is not deemed to be a penalty but rather a mechanism whereby a convicted defendant is deprived of the benefits of his or her criminal conduct. Any such order is recoverable as a civil debt, but there is a period in custody set in default of payment which acts as an incentive to make payment. An accredited financial investigation officer will produce a statement of the alleged amount of the defendant’s criminal benefit to the court. An order can only be made in the Crown Court and where the following conditions apply:
- The defendant has been convicted or committed for sentence in the Crown Court or committed for confiscation to be considered by the Crown Court; and
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Either:
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- the prosecutor has asked the court to proceed to confiscation; or
- the court believes it is appropriate to proceed to confiscation.
Before making an order, the court considers factors such as:
- whether the defendant has a ‘criminal lifestyle’ (as specifically defined in law);
- whether the defendant benefitted from his or her criminal conduct;
- the value of the benefit the defendant obtained; and
- the sum that would be recoverable from the defendant.
If a defendant is found to have had a criminal lifestyle, as defined, certain automatic assumptions are applied which mean that income and assets obtained over a defined period will be assumed to be the proceeds of crime and thus relevant to the calculation of any confiscation order, unless the defendant can show otherwise. The criteria for applying the lifestyle provisions are that either:
- an offence they have committed is specifically listed under POCA 2002 as a ‘lifestyle’ offence (eg, drug trafficking, terrorism, blackmail, money laundering); or
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they were convicted of an offence which formed part of a ‘course of criminal conduct’:
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- from which the benefit was at least £5,000; or
- where an offence was committed over a period of at least six months and the total benefit was at least £5,000.
Once the lifestyle provisions are found to apply, four assumptions will apply:
- Any property transferred to the defendant in the six years up to the start of the confiscation proceedings was obtained as a result of his or her criminal conduct;
- Any property held by the defendant at any time after the date of his or her conviction was obtained as a result of his or her criminal conduct;
- Any expenditure by the defendant at any time in the six years up to the start of the confiscation proceedings came from the proceeds of his or her criminal conduct; and
- For the purpose of valuing any of the property obtained by the defendant, it is assumed to have been obtained free of any other interest in it.
The court will go on to decide the total benefit amount from criminal conduct, including by the application of the lifestyle assumptions where relevant. As is apparent from the wide-ranging nature of these assumptions, it will frequently be the case that the defendant will not have assets available to him or her to the total value of the calculated benefit amount – or the defendant will wish to argue that he or she does not. However, the regime is strict in this regard and the court will determine that the available amount for the purposes of confiscation is equal to the defendant’s benefit from criminal conduct unless the defendant can show otherwise. The court does have an overriding discretion and should assess whether it would be disproportionate to make an order in a particular amount before doing so.
In considering the above factors, the court will:
- make an order in the sum of the amount of the benefit; and
- issue a sentence in default of payment of the order.
This can range from six months’ to 14 years’ imprisonment, depending on the sum ordered. Generally, time to pay any order will be allowed, taking into account the likely time required to liquidate any assets valued as part of the order – most often property, shares or vehicles, but potentially any real property. If payment is not made by the end of the allowed period, proceedings can be commenced to seek to activate the period in custody in default of payment. While it is possible to contest the making of a confiscation order post-conviction by way of a full hearing with witness evidence, in the vast majority of cases the confiscation order is ‘settled’ and agreed between the parties. This is largely due to the imbalance of power between a convicted defendant and the prosecuting authority, which makes it unattractive for a defendant to risk running and losing a fully contested hearing and having an order made in a greater sum than was able to be agreed in advance. For prosecuting agencies, the advantage of agreeing confiscation orders in advance is the reduced need for resources to pursue full proceedings.
There is substantial evidence that many confiscation orders are never paid in full, or at all. Views as to why this is the case differ, but one significant factor is that orders are frequently based upon criminal lifestyle assumptions or involve hidden assets, meaning that they extend to the value of assets which are not necessarily directly held by the defendant, and require them either:
- to recover those moneys from third parties by the sale of assets; or
- to obtain equivalent moneys from other sources.
Frequent disputes hinge on the value of property assets, shares or other such property which must be sold in order to pay off the confiscation order. While there is a process for orders to be revised where assets sell for less than they were valued at, this is not straightforward and those subject to orders will often find themselves unable to realise the full value of assets deemed to be owed under the order. Failure to pay a confiscation order in full can result in the period of imprisonment in default being activated in whole or in part. Serving that period in custody does not wipe out the corresponding debt; and indeed, any interest accruing on the late payment of the sums owed can itself result in a further period of custody in default, although this is rare in practice. All these factors contribute to the gap between the value of orders made and the amounts actually recovered.
Restraint orders: Applications for restraint orders are made in the Crown Court and can be made even before arrest or charge has taken place; they are usually made without notice (ex parte). If made without notice, the applicant is under a duty of candour to provide full and frank disclosure to the court. There are five conditions that can be met for the making of a restraint order, of which the most common are the following:
- A criminal investigation has been started and there is reasonable cause to suspect the alleged offender has benefited from his or her criminal conduct; or
- Proceedings for an offence have started but not concluded and there is reasonable cause to suspect the alleged offender has benefitted from his or her criminal conduct.
A restraint order:
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may contain provisions for:
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- the appointment of a receiver; and/or
- search and seizure to prevent removal of property; and
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will make exceptions for:
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- reasonable living expenses;
- legal expenses; and
- the carrying on of business.
Breach of a restraint order is dealt with by committal for contempt of court. A restraint order can be challenged, but this is often difficult in practice where criminal proceedings are pending and the courts will often be reluctant to lift a restraint entirely where there is a reasonable prospect of a future conviction for serious offences which could trigger confiscation proceedings. There are frequently disputes about the proper amount that should be allowed for reasonable living expenses and other costs, with the restrained party required to provide evidence as to his or her usual expenditure and the costs associated with it. The courts will not necessarily permit restrained assets to be used to pay legal fees, which can be a difficult in practice for those subject to restraint to resolve.
Civil recovery orders (CROs): Civil recovery proceedings are brought before the High Court. In an application for a CRO, the enforcement authority must prove (on the balance of probabilities):
- whether unlawful conduct has occurred; and
- whether property has been obtained through that unlawful conduct.
If it has, then the property is recoverable. The consequences of a court granting a CRO are that:
- an interim receiver is appointed;
- property may be detained;
- any ongoing civil recovery investigations must cease; and
- anybody who has property to which the order applies is prevented from dealing with it (subject to limited exclusions).
c) Are any procedural tools available in your jurisdiction that can enhance the effectiveness of the confiscation regime or capture a wider range of assets?
Section 67 of POCA 2002 provides powers to order money in a bank or building society to be paid in satisfaction of a confiscation order. This can apply:
- to accounts held in the defendant’s name; or
- where it is determined that the defendant has an interest in an account held in the name of a third party.
These orders are frequently made by courts upon the making of a confiscation order and are generally considered to be the easiest step in recording moneys owed under an order.
Section 67 of POCA 2002 also provides the power to confiscate money in the form of cash seized from defendants under any power by any enforcement authority that can lawfully exercise that power and detained in connection with an investigation or prosecution. This power can be used as an alternative to obtaining consent from a defendant for paying over money.
Further measures which can assist with the enforcement of confiscation orders are compliance orders. These allow the Crown Court to impose restrictions, prohibitions or requirements that it considers appropriate to ensure that a confiscation order is effective. A key example is a restriction/prohibition on overseas travel by an order for surrender of the defendant’s passport. Given that a period in default of payment is effective only if a defendant can be brought before the courts, such orders will often be made where there is a perceived risk of them fleeing the jurisdiction or evidence of significant assets overseas.
The court can also appoint an enforcement receiver under Section 50 of POCA 2002 where a confiscation order has not been satisfied. Enforcement receivers have wide powers to assist in taking possession of, managing and realising property to satisfy the order.
(d) Can secondary proceeds be confiscated in your jurisdiction?
Yes, on the basis that secondary proceeds are assets subject to confiscation which do not directly result from the criminal activity which is the basis for the confiscation proceedings. The defendant must pay the total amount of the confiscation order; but while the amount of the order is calculated with reference to specific assets, the debt owed is independent from those assets. Before the order is made, an investigation will be conducted to determine the assets available to the defendant. Where a defendant makes a gift or transfers property to someone else at an undervalue within six years of the start of the proceedings, or at any time if the property was acquired through or in relation to general criminal activity, this will constitute a ‘tainted gift’. For the purposes of a confiscation order, a tainted gift is treated as the defendant’s property/secondary proceeds and is assumed to be part of his or her criminal benefit unless the defendant can prove the contrary.
(e) Is value-based confiscation allowed in your jurisdiction? If so, how does this work in practice?
Yes. A confiscation order is calculated by reference to the total value of the ‘criminal benefit’ obtained by the offender. However, the order itself is not asset based and does not generally involve the confiscation of specific property (save for orders for the payment over of moneys held in bank accounts). It rather requires the person subject to the order to pay an amount equivalent to the assets taken into account as part of the order. The order operates as a civil debt that the offender must pay. The law does not require the prosecution to establish a direct link between a particular asset and the criminal activity in particular when the criminal lifestyle provisions are applied.
(f) Can the property of third parties or close relatives be confiscated in your jurisdiction? How are third-party interests addressed?
Yes.
Property in the hands of a third party can be subject to enforcement of a confiscation order if it is determined that the defendant has an interest in the property, whether in whole or in part. POCA 2002 provides a framework for Crown Court judges to determine a defendant’s interests in property when a confiscation order is made. The court may decide:
- the amount of a defendant’s ownership in a property at the time a confiscation order is issued; and
- the extent of any third-party interests.
Third parties have a right to make representations about property held and the court may order a third party to provide specific information by a particular date to help it decide on the respective interests of the defendant and the third party in any particular asset.
(g) Can confiscated assets be used to provide restitution to the victims of crime?
Yes, the court can provide restitution to the victims of crime in the United Kingdom by the grant of a compensation order. Where the court believes the defendant does not have sufficient means to satisfy both a confiscation order and a compensation order, it can:
- order the defendant to pay the confiscation order; and
- direct that those payments be used to pay the compensation order first before the rest of the confiscation order is distributed.
Two points are worth noting in this context:
- Compensation orders are generally for relatively small amounts compared to the large figures often found in confiscation orders, save in cases of financial crime where there is clear and definable loss to a victim which can be easily quantified; and
- A proportion of any confiscation order recovered by the courts is payable to the investigating and prosecuting agencies to contribute towards their costs in investigating and bringing the confiscation proceedings. The remainder is then payable to the government.
(h) Can confiscated assets be used to satisfy civil claims for damages or compensation arising from the offence?
It is possible for the court to issue a compensation order that requires the defendant to pay for any personal injury, loss or damage arising from the offences committed. Where the court believes the defendant does not have sufficient means to satisfy both a confiscation order and a compensation order, the court can direct that confiscated assets be paid out to satisfy the compensation order. If a victim starts or intends to start proceedings in respect of the conduct, the court’s duty to make a confiscation order becomes a power to make any order the court sees fit (including no order at all). Any civil claim for damages will generally be distinct from criminal confiscation proceedings; albeit that if an order has already been made against a defendant in civil proceedings, that will need to be taken into account in the calculation of the available amount when determining the total value of any confiscation order.
(i) Is confiscation possible without a conviction in your jurisdiction? If so, how does this work in practice?
Enforcement authorities have the power to apply for a CRO under Part 5 of POCA 2002. In an application for a CRO, the enforcement authority must prove (on the balance of probabilities):
- whether unlawful conduct has occurred; and
- whether property has been obtained through that unlawful conduct.
If it has, then the property is recoverable. The consequences of a court granting a CRO are that:
- an interim receiver is appointed;
- property may be detained; and
- any ongoing civil recovery investigations must cease.
Anybody who has property to which the order applies is prevented from dealing with it (subject to limited exclusions).
Unexplained wealth orders (under Part 8 of POCA 2002) require a defendant to provide information and documents to explain how property was obtained. If the defendant fails without reasonable excuse to comply with the requirements of the order, the property is presumed to be recoverable property in civil recovery proceedings. These orders can be made against politically exposed persons or those suspected of involvement in serious crime. A company can also be subject to an order following the Economic Crime (Transparency and Enforcement) Act 2022.
The Criminal Finances Act 2017 extends cash forfeiture powers to money held in bank and building society accounts. This allows investigators to detain and forfeit cash in bank accounts in proceedings in the magistrates court instead of the previous procedure in Crown Court via confiscation following a conviction.
Property can also be made subject to forfeiture without criminal conviction by companies through a deferred prosecution agreement. These agreements involve the corporate defendant agreeing to pay financial penalties and cooperate with prosecutors in return for suspending an indictment against the corporate entity. All deferred prosecution agreements are subject to approval by the court.