POCA WORK & ASSET FORFEITURE: An Introduction

Now that the Proceeds of Crime Act 2002 (“the Act”) has been in force for 20 years, it is worth reflecting on its achievements, weaknesses and challenges for practitioners.

Practitioners will know that the Act (i) introduced the Assets Recovery Agency (since abolished), (ii) consolidated existing statutory schemes for the confiscation of the benefits from crime following conviction by confiscation orders and transferred powers to freeze assets and enforce confiscation orders from the High Court to the Crown Court, (iii) introduced new powers to forfeit criminal proceeds in the High Court without conviction, (iv) consolidated and expanded the scope of money laundering offences, (v) provided expressly for the taxation of criminal proceeds, and (vi) expanded the summary forfeiture in the magistrates’ court of drugs cash found at borders to any cash wherever found.

The Act is essentially a civil property statute in a criminal context dealing with difficult issues. It is necessarily complicated, the Supreme Court describing it recently as “complex and difficult to interpret” (Harvey [2017] AC 105). It originally comprised 462 sections and 12 schedules. It is also the parent of dozens of pieces of subsidiary legislation. Parliament has adopted the usual technique of adding sections to it on numerous occasions, so that it is now 722 sections and 13 schedules, covering over 900 pages, an increase in size of over 50%. This has not contributed to easy navigation; if the practitioner wants to find the power to forfeit bank accounts, they will have to wander about until they stumble over Section 303Z14.

It is no surprise, therefore, that the Act has spawned a proliferation of case law. Twenty-eight cases have had to be decided by the Supreme Court/House of Lords, principally on statutory interpretation with a good dollop of European Convention on Human Rights thrown in. In the last year alone, the Court of Appeal heard 23 cases concerning the Act and its application. A recurring theme, unfortunately, is the misallocation by Parliament of complex civil law issues to the Crown Court, which may not be equipped properly to decide them and often is not given the best assistance by the advocates. The most recent example is Moore [2021] EWCA Crim 956, where the Court of Appeal took the view that the issues raised (common intention and Quistclose trusts arising out of a commercial relationship) were best suited to the Business and Property Courts.

It is strongly arguable, however, that the Act has gone some way towards achieving its primary objective: to improve the recovery of the proceeds of crime, at least in statistical terms. The figures show that overall recoveries (confiscation orders enforced by monies collected plus civil recovery and bank account forfeitures) have increased steadily from £30 million in 2003 to a peak of over £250 milliom in 2015, then falling back slightly, hovering around £200 million for the last four years.

Of course, these statistics do not necessarily demonstrate success of the Act; one of its principal aims is financial crime deterrence. Increased recoveries may illustrate failure of deterrence and increased incidence of financial crime. The research conducted by the National Audit Office in 2012 appeared to demonstrate this, the NAO finding that confiscation order recoveries (about 80% of total recoveries) in fact only recovered one-quarter of 1% of the total fraud carried out in the UK. On this analysis, therefore, the Act does no more than scratch the surface.

Naturally, successive governments try to improve recoveries, and recent legislation, particularly the Criminal Finances Act 2017, continues to increase the deployment of the Act, particularly in non-conviction-based forfeiture. The key provisions in the 2017 Act are not the widely trumpeted Unexplained Wealth Orders, which were practically stillborn, with the High Court interpreting them narrowly. Instead, the most important new provisions in the 2017 Act are clearly the power in the magistrates’ court to forfeit bank accounts. It is understood that there is over £250 million frozen under these provisions so far, with many cases comprising multimillion-pound actions in a commercial context, usually following a suspicious activity report made by the bank. These cases have now begun to come to trial, and a corresponding increase in total amount recovered can be expected.

Another difficult and burgeoning area for the practitioner is the suspicious activity reporting (“SAR”) regime under Part 7 of the Act, where banks and others in the financial industry are required to report money laundering to the National Crime Agency. There are now 600,000-odd of these every year, and the system cannot cope. Reporting often raises tricky problems, for example, the licensed overseas cannabis production issue. Here, there is divided opinion that the product of this activity (usually arising out of the Canadian cannabis market) is the proceeds of crime caught by the Act and so engaging anti-money laundering and reporting obligations.

The Government asked the Law Commission to look at both the SAR regime and the confiscation order powers and to make recommendations. The Commission produced a 244-page report on the SAR system, making recommendations in June 2019. These have yet to be implemented. It also published a 744-page consultation paper on confiscation in September 2020 and is currently in policy development for recommendations. The consultation paper confines itself to maintenance of the existing regime, but with many far-reaching changes.

Significant legislative change, building on existing powers, can therefore be expected. There is no doubt PoCA is here to stay and set to grow.

By Kennedy Talbot KC, 33 Chancery Lane