POCA Work & Asset Forfeiture: An Overview

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, historically 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. 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”. However, serious difficulties with it have arisen for two reasons.

The first is that POCA defines literally all the relevant concepts 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 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 substantially expanded the scope of the civil recovery regime, and the role played therein 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 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 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 foreign politician 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, a designation under financial sanctions regulations, 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 303Z66.

The future for POCA 

It was in this context that the Law Commission was asked to look at various aspects of POCA, including the consent regime and confiscation. Its proposals on the former were predictably modest, perhaps being of most interest to those who study details like how to deal with “mixed” accounts that contain both “clean” and “tainted” funds. It was much bolder on the latter, recommending the return of some judicial discretion to the process, while prompting some additional resources for enforcing those orders that can reasonably be enforced.

It has come as no surprise to practitioners that legislative and political efforts regarding POCA have largely been focused not on tackling the less rational aspects of the regime, but on 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”).

The complexity and practical impact of POCA, meanwhile, are 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, give 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, as the NCA and the Court of Appeal (in the case brought by the World Uyghur Congress) send unclear signals about the extent of their risks. Undoubtedly, the attribution of senior managers’ knowledge or suspicion to corporates will also have an increasing impact on corporates’ approach to POCA compliance. Clarity on precisely when a corporate should submit SARs would be welcome, but as ever, the problem with making changes to POCA is a political one. Any change that reduces the volume of SARs, or companies’ liability for money laundering, inevitably poses problems for the government, whose main objective in this area is likely to remain very simple: to send a clear message, not just to offenders but to the public at large, that crime does not pay.