POCA WORK & ASSET FORFEITURE: An Introduction

POCA Work and Asset Forfeiture 

The 2022 Directory Introduction by 33 Chancery Lane recognised the complexity of the Proceeds of Crime Act 2002 (POCA), which it described as essentially a civil property statute operating in a criminal context. It remarked on the growth and evolution of the statute in response to new developments in financial crime, and identified the growing preference of authorities for recovering assets through civil orders as opposed to the “traditional” route of pursuing confiscation after conviction. Other significant developments have changed the practice area in other ways, not always along the lines expected in 2022.

Perhaps the most important (and predictable) trend has been the further expansion of civil orders as a swift and cost-effective means to recover assets. Enforcement agencies increasingly turn to civil orders (especially in the magistrates’ courts) to seize the “low-hanging fruit” of recoverable property without resorting to costly and protracted criminal proceedings. This trend has been confirmed by striking statistics published by the Home Office in September 2023. For example, receipts from civil recovery orders increased by 544% to GBP63 million over 2021–22. Also notable was the increase of the amount seized via Account Freezing Orders (AFOs) from around GBP133 million to GBP142 million over that same period. A practical example of the sums at stake was the first AFO secured by the FCA, in respect of over GBP2 million held by QPay Europe Limited, in April 2022.

2022’s Directory Introduction also emphasised sanctions as a practice area with direct and growing relevance to POCA. That emphasis remains unchanged as the Russian invasion of Ukraine persists and the challenge of enforcing sanctions abides. Unsurprisingly, the introduction of new and stringent sanctions has intensified the focus of authorities on preventing their evasion. The Economic Crime (Transparency and Enforcement) Act 2022 was enacted in part as a reaction to this problem. Among other measures designed to enforce sanctions, the Act created a register of overseas entities to combat the use of UK properties for sanctions evasion as well as money laundering. A separate but related development was the introduction of regulations that will limit the ability of UK lawyers to act for individuals or businesses connected to the Russian regime.

Also significant (although not yet in force) is the Economic Crime and Corporate Transparency Bill, which received its first reading in September 2022 and is (as of October 2023) undergoing final amendments. The Bill promises radical changes, including the possibility of a new offence of failing to prevent fraud and false accounting.

Less eye-catching, but of immediate significance to financial institutions, was the amendment to Section 339A of POCA. The amendment increased the threshold amount at which a customer transaction could cause a bank to commit money laundering offences. As of 5 January 2023, the amount rose from GBP250 to GBP1,000 in a way that will lighten the regulatory burden on financial institutions.

As well as legislation, recent judgments reflect the fast-changing nature of the practice area in the civil context. R (Marandi) v Westminster Magistrates’ Court [2023] EWHC 587 (Admin) confirmed that respondents in AFO proceedings may obtain anonymity orders if there is “clear and cogent” evidence in favour of such a measure. R. (NCA) v Westminster Magistrates’ Court [2022] EWHC 2631 (Admin) addressed the burden and standard of proof to apply on an application to vary a freezing order under Section 303Z4. Chief Constable of Merseyside v Bennett [2022] EWHC 2533 (Admin) clarified cash forfeiture powers under Section 298. Among other points, the High Court confirmed that there is no minimum amount required for cash forfeiture.

In the criminal context, R v Wood [2022] EWCA Crim 1243 confirmed that the Crown can apply to recalculate the available amount in circumstances when the assets of a defendant increase in value. R v Miller [2022] EWCA Crim 1589 provided guidance on when property obtained by a company could be attributed to the benefit figure of a defendant director. R v Botting [2023] EWCA Crim 44 concerned the calculation of benefit in circumstances when a defendant obtains a beneficial interest in real property (in this case, gold). In R v Cooper [2023] EWCA Crim 945, the Court of Appeal set out the correct approach to totality when sentencing a defendant for POCA offences. In Manchester City Council v T&M Property Investment Ltd (May 2023, unreported), the Crown Court found that rent taken by a landlord could become criminal property in circumstances involving planning and environmental offences.

In the Supreme Court, complex issues concerning corporate criminal liability for POCA offences arising from modern slavery in supply chains was considered in R (on the application of World Uyghur Congress) v SoS for the Home Department [2023] EWHC 912 (Admin). The Supreme Court also clarified the contractual duties of care on banks in cases of “push payment fraud” in Philipp v Barclays Bank UK Plc [2023] UKSC 25. Similar issues concerning the duties of care owed by banks in circumstances of fraud were addressed by the Privy Council in RBS v JP SPC [2022] UKPC 18 and the High Court in Tecnimont Arabia Ltd v National Westminster Bank [2022] EWHC 1172.

Two further authorities with importance to financial institutions are Fresh View Swift Properties Ltd v Westminster Magistrates’ Court [2023] EWHC 605 (Admin) and R v Jiang [2021] Lloyd’s Rep. F.C. 315. Both concerned the correct approach to asset recovery in the civil and criminal jurisdictions when dealing with breaches of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. In brief, their effect is that all moneys obtained by an unregistered money services business in the course of its business (including fees for the business but potentially also customer moneys) are at risk of being treated as recoverable or criminal property.

The swift pace of change is likely to continue. Among other likely issues will be the debate around the future of the SFO. The City of London Law Society has called for its “focused reform” over the next three years. Crypto-assets are also likely to become a focus of policy and legal reform, as well as the yet unclear threats and opportunities posed by artificial intelligence. The Law Commission recently considered digital assets in a report that commented on the complexities they create in the context of financial crime (Law Com No 412, 2023). The most significant change could, however, be the reform of POCA itself. A report by the Law Commission on this point (Law Com No 410, 2022) attracted much attention. It summarised the flaws of the existing regime under POCA (an Act described by the Supreme Court itself as “complex and difficult” in R v Harvey [2015] UKSC 73). The Commission proposed numerous reforms, including innovations such as a system of “Early Resolution of Confiscation”. Practitioners were broadly receptive to many of the proposals, which merit a full reading. It is another matter whether a distracted Parliament can pursue reform at a time when general election is imminent.