POCA and Confiscation Proceedings: A Practical Guide

Introduction: what this means for you

Confiscation proceedings under the Proceeds of Crime Act 2002 (POCA) are intended to deprive criminals of the benefit of their crimes. As a result, these are proceedings that flow from a conviction for certain offences, such as supplying drugs, money laundering, terrorism, slavery, people trafficking, counterfeiting currency, etc etc. Essentially, any conviction for an offence where an offender stands to make a significant amount of money is likely to result in confiscation proceedings.

The POCA provisions are extremely draconian and complex.

These hearings are separate from the criminal trial and require specialist advice from an experienced solicitor.

The court will produce an order with two figures in it: first the benefit figure; second the recoverable amount. The recoverable amount must be paid from whatever assets the person subject to the order has available. The benefit figure doesn’t go away. If the person comes into money later in life that cash can still be taken away, so these orders have long-term consequences.

What does the law say?

The Proceeds of Crime Act 2002 provides the framework for confiscation proceedings. There are five stages to consider:

• Stage One – Determining Criminal Lifestyle
• Stage Two – Determination of Benefit from Criminal Conduct
• Stage Three – Determination of the Recoverable Amount
• Stage Four – Determination of the Available Amount
• Stage Five – Proportionality

Once the court has worked its way through the five stages, it will make the Confiscation Order or refuse to do so depending on the outcome of the hearing.

Let’s take a look at each stage in turn.

Process of making a confiscation order

Stage 1 – Determining criminal lifestyle

This is the first and, usually, most straightforward of the stages. It is nonetheless important because it informs what assumptions are made by the courts in the later stages of the confiscation proceedings.

A defendant will have a criminal lifestyle if he has been convicted of a criminal offence that is: a. specified in Schedule 2 of POCA, b. constitutes a course of criminal activity, or c. is an offence committed over a period of at least six-months and the defendant has benefited from the conducted. The defendant must have received at least £5000 from his criminal conduct where the prosecution relies on b. or c.

A complete list of scheduled offences can be found in Schedule 2. But broadly speaking they include things like drug dealing, money laundering, counterfeiting currency, arms trafficking, people trafficking, certain sexual offence committed for profit, blackmail, and intellectual property offences.

Conduct will be criminal activity if the defendant has received a benefit from the conduct and was either convicted of three or more offences at trial from which he received a benefit. Or he has been convicted or at least two separate offences from which he received a benefit in the six-years leading up to the start of the most recent criminal proceedings against him.

Stage 2 – Determination of benefit from criminal conduct

Now the court will consider how much the defendant has earned from his crimes. This could be in the form of money but can also include other assets where appropriate.

Obtaining property

Property is ‘obtained’ if the defendant acquires an interest in the property. That can mean by physically taking possession of the property but can also mean a legal right over the property or equitable interest in the property. It includes money, land, personal property as well as things in action and intangible property. Thus, property can include cryptocurrencies. It is irrelevant whether the property is in the UK or outside of it.

The prosecution must prove that the property was obtained as the benefit of a crime. It should be noted that in a criminal trial, the prosecution must prove their case so the jury is sure the defendant is guilty, or ‘beyond reasonable doubt’. In confiscation proceedings, the prosecution need only prove their case ‘on the balance of probabilities’, that means it is much easier for them to succeed and thus defence preparation must be that much more thorough by ensuring every piece of evidence is uncovered and exploited.

It is important to establish the involvement of the defendant in the criminal conduct. Let’s imagine a drug supplying case. Paul is the head of a criminal operation who employs several smaller dealers to work for him. He uses Mark to carry drugs to Gavin who sells the drugs to consumers and then to return the cash to him. Gavin takes a percentage of the sales; Mark is paid a fixed fee for each run he undertakes. Paul keeps the bulk of the proceeds from the sale. Paul and Gavin clearly have a ‘legal’ interest in the drugs and money in that they have a power to control and dispose of both the money and the drugs. Mark on the other hand is merely a courier with no power over the disposal or control over the drugs or the money.

Because Mark lacks that ‘legal’ power of control and disposal over the drugs and money he is unlikely to have benefited from the criminal conduct beyond the fixed fee he is paid for running the drugs.

Paul and Gavin both have power to control and dispose of the drugs and money and so are both likely to have benefited from the full value of both! In practice, it is likely that Gavin in particular will argue that he is a low level member of the organisation who acts under direction and thus he has little or no real control. This is exactly the sort of thing that requires experienced lawyers to argue in court.

Crystallising the benefit

A person need only obtain the property momentarily. In our drug dealing example, Gavin might argue that he only held the drugs and money for a second if he took the delivery from Mark and immediately handed it to a customer then reversed the process with the money. But momentary obtaining is enough to have benefited. There may well be an argument arising from that about whether it would be proportionate to conclude that Gavin did benefit to the value of the drugs and money but that’s a separate point we will discuss later.

It very important to establish whether a benefit has been crystalised or whether it is still theoretical:

‘… do not confuse criminal conduct and resulting benefit.’

In a case called Frost, a school business manager produced fake invoices that allowed his school to reclaim VAT. The money was received into the school bank account, but he was unable to withdraw the money for his own use before the fraud was uncovered. Therefore, he had not crystalised the benefit he planned to make and so the money could not be confiscated from him.

Stage 3 – Determination of the recoverable amount

This can be a complex subject and it is often necessary to obtain expert evidence as to the value of the property in question.

The law is such that the benefit will the greater of the market value at the time the defendant obtained the property adjusted for inflation; or its value at the time the court makes an order if the defendant still has the property; or what the defendant got when he sold the property.

Evidence is crucial to limiting the benefit value. For example, in the case of a mortgage fraud there should be defence evidence that deals with the property value in the current local market and that evidence should set out any factors that reduce the value of the property.

This figure can have a lifelong impact, so it is vitally important that it is correct. In a moment, we will look at the ‘available amount’, which is to say the amount a defendant will be required to pay in the immediate future. If the recoverable amount is higher than the available amount, then the remaining amount can become recoverable in future. Let’s go back to our drug dealer for a moment. Paul is the head of the drug gang, and a confiscation order was made that gave a recoverable amount of £1.5mn. However, it was only possible to find £500k of assets. In 20-years’ time, Paul wins the lottery is paid £1mn except there is still a confiscation order hanging over him so he should expect the prosecution to come along and take that money from him!

Stage 4 – Determination of the available amount

Although the rules for determining the benefit figure, or recoverable amount, are quite draconian, the law does accept that it cannot seize more than a defendant has. Thus, stage 4 is all amount making an assessment of what property can properly be recovered to pay towards the benefit figure.

In determining the available amount, the court will consider any assets available to the defendant and in which he has some ‘interest’. That could include the family home, it could include a pension, it could include cash already seized by the police.

It is important to establish whether the property is realisable. In the case of land owned by a trust the court will proceed – in the first instance – on the basis that a defendant will either obtain consent from the owners or a court order to force the sale of the property. Pensions can be included; however, they may be excluded where it is not possible to surrender the policy before it matures. That does not preclude the prosecution coming back to review the available amount at the point the policy matures.

Where property is jointly owned, such as a family home, the ordinary position is that the court should not interfere with an innocent owner’s property rights except where they arise from a tainted gift. This can become extremely complex to the point the Court of Appeal has highlighted the risk of injustice where Crown Court judges – who are very unlikely to have experience of property law – are asked to make determinations about property rights without the assistance of specialist advocates.

It is for the defendant to show that he has spent any money he earned from his criminal conduct and thus that it is no longer available to be recovered by the prosecution. It is wise to remember that at this stage, the defendant will have been convicted by a court and thus the court deciding on confiscation will not place a huge amount of faith in assertions that he has disposed of property. It is therefore vital to have evidence to back up those assertions.

Tainted gifts

Tainted gifts are those given by a defendant with a criminal lifestyle during the six-year period immediately preceding the beginning of criminal proceedings against the defendant. These gifts need not be the actual thing obtained through the commission of a crime, but where it is that gift will always be tainted regardless whether the defendant was found to have a criminal lifestyle in stage 1. Where a defendant was found not to have a criminal lifestyle in stage 1, then any gift given after the commission of the offence is tainted.

If a gift is tainted, then its value must be included in the available amount figure. The value will be the greater of the market value at the time the gift was given, adjusted for inflation; or its value at the time of the confiscation order.

Third-party interests

As has been previously stated, the court will not interfere with the property rights of an innocent third-party unless their rights in the property arise from a tainted gift.

Where the gift is tainted, the court can make an order forcing the third-party to give up their property! By way of example, in the case Re Kone, Mr Justice Morris appointed a receiver over the family home.

Third parties have the right to challenge these orders at various stages during the proceedings. There are a number of attack lines that can be employed when challenging as a third party. Perhaps two of the most useful are Article 8 of the European Convention on Human Rights that requires courts to act proportionately, and we will deal with that issue in stage 5 below. The second is the impact of matrimonial proceedings where the third party is seeking transfer of the tainted gift property as ancillary relief, which would remove the property from the available amount.

Stage Five – Proportionality

The question of whether an order is proportionate or not applies solely to stage 4, the available amount. It does not apply to stage 3, the realisable – or benefit – amount.

Put simply, the court must make a determination whether it is proportionate to include assets that might be available in the available assets figure arrived at in stage 4.

There is a strong argument that it will be disproportionate to order the sale of a family home where that will cause serious hardship to innocent family members. There is also a point to be made that although tainted gifts will usually be included in the available amount, where it is impossible for the defendant to recover the gift or its value then it is unlikely to be proportionate to include that gift. This is because the defendant will plainly fail to do the impossible and so will serve a period in prison in lieu of the payment and he will be unable to do anything to prevent that happening.

Common defence strategies

Challenging the benefit calculation in stages 2 and 3

The prosecution case should not be accepted without proper scrutiny. It is important to consider what the prosecution say is a benefit of crime and the value they attribute to that benefit.

Evidence should be obtained wherever possible to minimise what counts as a benefit in stage 2 and to reduce the value assigned to it in stage 3.

Challenging ownership of assets in stage 4, 5 and during enforcement proceedings

Where property is owned by a third party, that should be clearly put to the court at each stage.

In the first instance, the argument in stage 4 should be that the property is not that of the defendant and so should not be included. At stage 5, the argument will be that it is not proportionate to include the property.

We haven’t discussed enforcement proceedings yet as that is a whole guide in and of itself. But, even if a court decides to include property in the available asset figure that doesn’t mean it is proportionate to actually enforce the order and so challenge can again be brought when the court seeks to enforce the order.

Evidence showing the serious hardship that will be caused if the property is taken from the third party is essential.

Providing accurate financial information

The court needs a clear picture of the defendant’s finances in stages 2 and 4.

In stage 2, clear financial evidence might show that an asset was purchased before the criminal conduct began and thus it is not the benefit of criminal conduct.

At stage 4, financial evidence showing that an innocent third party has an interest in the property that should not be interfered with and which is not the result of a tainted gift will help reduce the available amount and protect family assets.

A lack of information will make it much harder to challenge the prosecution’s position.

Evidence that may help your case

Financial evidence is central to POCA proceedings.

Important documents may include bank statements, property records, mortgage documents, business accounts, loan agreements and evidence showing the source of funds.

The aim is to explain the financial history clearly and show where the prosecution’s assumptions are inaccurate.

It is important to preserve financial records and avoid deleting documents or communications, as missing evidence can create further difficulties.

Common mistakes defendants make

A common mistake is treating confiscation as an automatic process that does not need to be challenged.

The prosecution’s figures are not always correct, and a detailed review can reveal important issues.

Another mistake is assuming that confiscation only concerns money still held. The court may consider wider financial benefit, even where funds have already been spent.

It is also important not to ignore requests for financial information. Failing to engage with the process can leave the court relying heavily on the prosecution’s evidence. Remember, if the court makes an order and you fail to pay up then you will go to prison in lieu of payment. The money will still be payable when you are released.

What happens if a confiscation order is made?

Once a confiscation order is made, the defendant will normally be required to pay the amount ordered within three-months of the order.

The court can make various orders to ensure the confiscation order is paid, these are called Compliance Orders. A compliance order can include travel restrictions that prevent a defendant leaving the UK.

If the order is unpaid it will accrue interest. A defendant who does not pay the order can expect to be sent to prison for the period specified in the order. At the time of writing, they are based on the amount of the confiscation order:

• Under £10k – six months imprisonment.
• £10,001 to £500k – five years’ imprisonment.
• £500,001 to £1mn – seven years’ imprisonment.
• £1mn+ – fourteen years imprisonment.

These are maximum periods of imprisonment, and a court can order a shorter term where appropriate, for example, where there has been a part payment.

A prison sentence in lieu of payment does not remove the underlying debt, meaning the financial consequences can continue after any additional sentence has been served.

How Chetwode can help

Confiscation proceedings require a careful review of both the legal issues and the financial evidence. Chetwode can help by reviewing prosecution calculations, analysing financial records, identifying weaknesses in the case and preparing representations on your behalf.

We can also advise on the practical consequences of a confiscation order and represent you at the hearing.

Professional advice can make a big difference to the outcome.

FAQs

Can confiscation happen after a guilty plea?

Yes. Confiscation proceedings can follow either a guilty plea or conviction after trial.

Can I challenge the amount claimed?

Yes. Both the alleged benefit and the available assets can be disputed.

Can my home or savings be affected?

Potentially. Assets may be considered as part of the confiscation process and may be subject to enforcement. This can be a very complicated area and you should have advice from a qualified solicitor.

Can confiscation lead to prison?

Failure to comply with an order can result in a further sentence for default, although this does not normally cancel the amount owed.

Next steps

If you are facing POCA confiscation proceedings, early advice is important.

Understanding the prosecution’s calculation, gathering financial evidence and presenting your position properly can significantly affect the outcome.