POCA WORK & ASSET FORFEITURE: An Introduction

Paying the Price for Crime 

Toughness and tension 

The continuing development of the various aspects of the Proceeds of Crime Act 2002 (POCA) can be best understood in terms of the tension necessarily involved in what is both an increasingly complex and technical area of the law on the one hand, and a political hot potato on the other. As pressure escalates on both the public and private sectors to tackle all forms of acquisitive crime, that tension is continuing to increase.

As most criminal practitioners will know, until recent years most of the judicial and legislative attention to POCA was focused on the regime for imposing confiscation orders on convicted defendants, which is both draconian and often baffling for the uninitiated. Though from first principles there would seem little basis to argue with a regime that required the court to assess a defendant’s “available amount” and “benefit” from criminal conduct, whether he or she had a “criminal lifestyle”, had “hidden assets”, or had made any “tainted gifts”, serious difficulties with it have arisen for two reasons. The first is that POCA defines literally all the relevant concepts (starting, indeed, with “confiscation” itself – many defendants are shocked to find that the order can effectively force them to part with even “clean” assets) in a way that runs counter to most people’s understanding of the words used. The second is that almost every important step in the process excludes the possibility of judicial discretion, often actively preventing judges from doing justice to the case in front of them, preferring instead to be seen to be inflexibly tough on the proceeds of crime.

The rise of civil recovery 

More recently, the focus of legislative change has been on other aspects of POCA, principally its regime for civil recovery of assets that represent the proceeds of (or, in some cases, are intended for use in) crime, without the need for a criminal investigation or conviction. The introduction by the Criminal Finances Act 2017 (CFA) of Unexplained Wealth Orders (UWOs) added an intriguing potential first step to that process, by enabling the High Court to order a holder of property (in certain circumstances, including where they are a Politically Exposed Person (PEP) or suspected of involvement in serious crime) to explain their interest in it and how they came to acquire that interest. Provisions to enable the summary seizure, detention, and forfeiture of certain assets also expanded substantially the scope of the civil recovery regime, and the role played in it by the magistrates’ courts. These include the increasingly common Account Freezing and Forfeiture Orders (AFFOs), and now a set of powers aimed at the freezing and forfeiture of crypto assets.

The changes introduced by the CFA prompted various high-profile news stories, invariably referencing the TV drama McMafia, along with eye-watering sums and exotic details of spending and (alleged) offending. Mrs Zamira Hajiyeva, recipient of the first UWO, along with a GBP1 million Cartier ring and GBP16 million worth of goods from Harrods, may have provided most value to the press thus far, followed by Vlad Filat, the former Moldovan prime minister whose son was the respondent to AFFO proceedings. Less welcome headlines for the authorities came with the high-profile discharge of the UWO against Baker and others, with a judgment (endorsed by a refusal of permission to appeal) that heavily criticised the analysis of the evidence carried out by the National Crime Agency (NCA).

More options, more problems 

A less eye-catching, but practically just as important, set of changes was made by the CFA to POCA’s “consent regime”, by which a person can obtain a defence to an act that would otherwise amount to money laundering by applying for consent to do it, and awaiting the end of a specified period. The new provisions enabled multiple extensions of that period by the Crown Court, which could effectively block access to assets for nearly eight months in some cases. The trigger for the process will typically be a Suspicious Activity Report (SAR) by a bank or other regulated-sector business, perhaps based on a safety-first policy or prompted by a piece of compliance software.

The net effect of all of this is a public asset-recovery regime that is increasingly complex and confusing. As an example, a PEP accused of corruption could now find their bank account affected in various ways – a restraint order in the Crown Court, a freezing order in the civil courts, an extended moratorium following a SAR, a UWO, or simply a decision by a bank. Without specialist advice, they may quickly stumble over a legislative quagmire that has been amended so much that it now rejoices in section numbers such as 303Z19.

The future for POCA 

It was in this context that the Law Commission was asked to look at various aspects of POCA, starting with the consent regime, but quickly moving on to a “blank slate” review of its provisions on confiscation. Its proposals on the former were predictably modest, perhaps of most interest to those who study details like the benefit of conduct (such as cannabis sales) that is lawful overseas but would be unlawful if it occurred here, and how to deal with “mixed” accounts that contain both “clean” and “tainted” funds. It was much bolder on the latter, recommending the return of judicial discretion and common sense to the confiscation process, while prompting some additional resource to enforcing those orders that can reasonably be enforced.

It has come as no surprise to practitioners that legislative and political efforts on POCA have (with the notable exception of “mixed” funds) not been about tackling the less rational aspects of the regime, but about broadening and modernising it, and toughening it up still further. Removing the requirement (in some cases) to show insufficient legitimate funds, for example, has rendered the UWO merely the latest example of a misleading term (as the asset holder’s wealth need no longer be “unexplained”). There have also been creative attempts to use POCA to engineer the forfeiture of assets subject to financial sanctions.

The complexity and the practical impact of POCA, meanwhile, is beginning to clash with efforts to make corporates both more transparent and more accountable in connection with economic crime. Increasing requirements to submit information about beneficial ownership, coupled with a greater role for Companies House in checking such information, gives banks and other regulated firms an extra tool to stop the use of corporates for money laundering purposes. Responsible corporates, meanwhile, are encouraged to police their supply chains, even as the NCA and the High Court (in the case brought by the World Uyghur Congress) send mixed signals about their risks. Undoubtedly, the attribution of senior managers’ knowledge or suspicion to corporates will also have an impact on corporates’ approach to POCA compliance. The precise impact, in the absence of clear guidance or provisions in POCA itself about companies’ liability, is open to interpretation. The problem with making changes to POCA, of course, is a political one. Any change that reduces the volume of SARs, or the amount nominally subject to confiscation orders, inevitably poses problems for the government, whose main objective in this area is likely to remain a very simple one: to send a clear message, not just to offenders but to the public at large, that crime does not pay.