POCA WORK & ASSET FORFEITURE: An Introduction

The Proceeds of Crime Act 2002 [‘PoCA’] has changed considerably over the last 18 years. It started as a consolidation of two different schemes that had, since 1984, dealt separately with confiscation for drugs and other indictable crime. As well as providing for all-crimes confiscation, the new act created civil recovery, allowed for taxation of 'criminal income' and provided for the forfeiture of cash wherever it was found and no longer just at ports of entry.

Over time the asset forfeiture scheme has become one that increasingly seeks to control and remove the proceeds of crime, without requiring a criminal trial and conviction. From the lowering of cash amounts steadily from £10,000 to £1,000 there are now provisions for the summary forfeiture of bank balances (Account Freezing & Forfeiture Orders –‘AFOs’), and listed assets (certain precious metals, and moveable items such as watches) applying similar processes and procedures as the original cash proceedings.

Since last year’s update, there has been an increasing number of applications using the summary process before the Magistrates’ Court to forfeit significant bank balances. A question arises as to whether or not the summary processes are being correctly engaged in all cases. This is worth considering as the legislative intent was, after all, to allow law enforcement agencies to take “quick and effective action against funds held in bank accounts because of the use made by criminals of the banking system” (Ben Wallace, 2016). It was a tool intended to “plug a gap” to “support the forfeiture of funds in bank accounts that have been suspended by the banks when they have serious concerns regarding the use of the accounts” (ibid). With the general reduction in the level of criminal prosecutions brought by the authorities, the trend towards a civil, summary-based pursuit of criminal proceeds is accelerating rapidly.

The increased use of Deferred Prosecution Agreements (DPAs) in relation to significant corporate financial wrongdoing further reveals this trend. Avoiding lengthy and expensive criminal prosecutions, confiscation and enforcement, this approach demonstrates the government's endorsement of non-conviction outcomes for some of the most serious financial wrongdoing. Against that backdrop, it is hardly surprising that a scheme intended to “plug the gap” has been deployed more extensively in respect of less serious financial wrongdoing. In the more complex cases, practitioners in this area will need to consider whether or not the summary forum is the correct one – or whether the matter is better suited to the civil recovery provisions. One concern which practitioners in this field will be alive to is the potential for misuse of AFOs, where other provisions relating to the restriction of access to money would be more appropriate.

Equally fraught is the increase in use of cryptocurrency, e-money and the consequent means of securing virtual rather than fiat currency. This presents unique challenges for enforcement authorities and individuals alike given, respectively, the tools available under the legislation and the burden on the subjects of proceedings under PoCA.

The unexplained wealth order [‘UWO’] is a useful investigative instrument for the authorities in efforts to assemble evidence for a civil recovery action. Such orders were intended to force “politically exposed persons” [‘PEPs’] (and serious criminals) to explain how their assets were acquired. A failure to respond to such an order creates a presumption in civil recovery proceedings that the property is the proceeds of crime. This is a necessary and central ingredient to effect the property’s forfeiture in High Court proceedings without a prosecution under PoCA.

The recent decision of Lang J in National Crime Agency v Baker [2020] EWHC 822 (Admin) should generate interest amongst professional trustees and lawyers practising in this field. It was widely publicised in the national press as a case where the NCA could not sustain UWOs because there was insufficient evidence connecting the property to any criminality, PEP or criminal. It also highlights a serious fault in the drafting of the legislation, rendering its utility against trustees questionable.

In Baker the NCA obtained UWOs without notice in respect of three real properties in London on the basis that they were connected to Rakhav Aliyev, a (deceased) Kazakhstan national and a PEP. The order was sought against a number of respondents, the first of which was Mr Baker, an English solicitor, functioning as a professional trustee for the foundations holding the three properties.

There are three requirements for the making of a UWO against a person (the “respondent”) requiring an explanation in respect of property: (i) the property must be “held” by the respondent; (ii) the property must be inconsistent with the “known income” of the respondent (the “disparity requirement”); and (iii) the respondent must be a PEP or there are grounds for suspecting he is involved in serious crime.

The court explained that Mr Baker fulfilled none of these criteria. As to (i) the “holding” requirement, Mr Baker did not hold the property within the definition of PoCA; Mr Baker was not the title-holder; although president of the foundation; Mr Baker did not have “effective control” over the property. On requirement (iii) there was no evidence of any connection between Aliyev and the property or Mr Baker (who was not approached to be president of the foundation until after Aliyev had died). So there were no reasonable grounds for any suspicion that Mr Baker was involved in serious crime. More importantly for the wider interest was the Court’s consideration of (ii), the disparity requirement. The wording of the statutory provisions does not currently capture professional trustees who rarely hold an interest of any value in the property which is unexplained by their known income. The quirk of the legislation is that the person most likely to give an accurate account is bound to be the professional trustee yet, on this ruling, that person cannot properly be made subject to a UWO at all. The consequences of this ruling are yet to be seen.

The result of the developments in the legislation and their use is the increasing reach and significance of PoCA. This in turn has led to an increased role for lawyers to advise and represent individuals, companies, trust companies and trustees on their potential liability for confiscation, forfeiture or civil recovery. In effect, a multiplicity of circumstances involving the burden of explaining the source of funds. Advice must be soundly based, plainly, and sometimes that means using greater experience to make an evidential and inference-based decision. As is often the way with PoCA, things are not necessarily what they seem.