The Court can make a Confiscation Order to recover alleged proceeds of crime from a defendant following conviction.
The confiscation regime is often criticised for being too complex, unrealistic and severe so it is little surprise that the Law Commission is consulting on proposed reform.
In the meantime, Catherine Jackson and Ed Hodgson summarise the key elements of the confiscation framework.
- What are confiscation proceedings?
- What evidence will the Court consider?
- How does the Court decide the amount of a Confiscation Order?
- What does ‘criminal lifestyle’ mean?
- What is the difference between ‘general’ and ‘particular’ criminal conduct?
- What is meant by ‘benefit’?
- How does the Court calculate the recoverable amount?
- What are ‘tainted gifts’?
- What are ‘priority obligations’?
- Is the Confiscation Order disproportionate?
- Do Confiscation Orders have to be paid immediately?
- What happens if a Confiscation Order does not get paid?
- Why instruct Bindmans?
Confiscation proceedings can take place in the Crown Court after a defendant has been convicted of an offence that involves an element of financial gain. The Court will follow a process of gathering information from the prosecution and the defence before making a Confiscation Order. The Confiscation Order requires the defendant to pay a sum of money that represents their alleged ‘benefit’ from criminal conduct.
The first step is for the defendant to serve a Statement of Assets setting out their financial circumstances.
The prosecution then respond by serving a Statement of Information that sets out the facts believed to be relevant in determining whether the defendant has a criminal lifestyle, whether they have benefitted from their criminal conduct, and the amount of their alleged benefit. This statement is usually accompanied by evidence such as witness statements and exhibits.
The defendant then serves their own statement, confirming the extent to which they accept or deny the prosecution’s assertions, and detailing the facts and evidence that supports their position. This is the defendant’s opportunity to challenge any inaccuracies or unfair assumptions made by the prosecution.
If an agreement cannot be reached between the parties, the Court will determine the extent of the defendant’s benefit and the amount recoverable after hearing evidence at a hearing.
The Court first decides whether the defendant has a ‘criminal lifestyle’. If the Court decides that the defendant has a criminal lifestyle, it must decide whether they have benefitted from their ‘general criminal conduct’.
If the Court decides that the defendant does not have a criminal lifestyle, it must decide whether they have benefitted from their ‘particular criminal conduct’.
If the Court finds that the defendant has benefitted from their criminal conduct, they must determine the ‘recoverable amount’ and make an order for the defendant to pay that amount.
A defendant will be considered to have a criminal lifestyle if they were either convicted of certain ‘lifestyle’ offences set out in Schedule 2 of the Proceeds of Crime Act 2002 (e.g. drug trafficking, terrorism, blackmail, money laundering and people trafficking) or they were convicted of an offence which formed part of a ‘course of criminal activity’ in which they benefited to the value of at least £5,000, or where an offence was committed over a period of at least six months and the total benefit was at least £5,000.
Conduct forms part of a ‘course of criminal activity’ if the defendant is convicted of at least four offences from which they have benefitted, or they were convicted on at least two separate occasions in the six years prior to the confiscation proceedings of offences in which they have benefitted.
The crucial distinction is that ‘particular’ criminal conduct is restricted to the offences which were proved, admitted or taken into consideration in the proceedings that led to the confiscation process.
‘General’ criminal conduct is far broader. It means all of the criminal conduct of the defendant, regardless of when it occurred. In R v Steed  EWCA Crim 75, the defendant was unable to demonstrate that the source of his property and expenditure was legitimate and the Judge concluded that:
It may be that the defendant […] would not be convicted on the criminal standard of all the matters to which I have referred. It is a question of viewing an overall picture and the conclusion I come to is that overall picture supports the contention that it is more likely than not that he was involved in criminal conduct over and above the count to which he pleaded guilty […] Those findings of criminal activity […] demonstrated that the appellant was unable to establish on the balance of probabilities the extent to which the sources of his assets and expenditure were legitimate.
Having established whether the confiscation enquiry is into benefit from particular criminal conduct or general criminal conduct, the Court will then consider the extent to which the defendant benefited from that conduct.
‘Benefit’ has been construed widely by the courts. A defendant has benefitted from criminal conduct if they have obtained property or a financial advantage as a result of, or in connection with that conduct. A defendant obtains property if they have control over it.
If the Court decides that the defendant has a criminal lifestyle, it will make four assumptions (known as the ‘lifestyle assumptions’) when determining the amount of benefit they have received from their general criminal conduct.
The lifestyle assumptions will apply unless it can be shown by the defendant that applying these assumptions would be incorrect, or lead to them suffering a serious risk of injustice. The assumptions are as follows:
- any property transferred to the defendant in the six years prior to the confiscation proceedings being instigated was obtained by them as a result of their criminal conduct;
- any property held by the defendant at any time after the date of their conviction was obtained by them as a result of their criminal conduct;
- any expenditure by the defendant at any time in the six years prior to the confiscation proceedings being instigated was met from property obtained by them as a result of their criminal conduct;
- for the purpose of valuing any of the property obtained by the defendant, the defendant obtained the property free of any other interests in it.
The defendant cannot be ordered to pay a sum which they would find impossible to pay, however great the payments the defendant may have received or the property they may have obtained. Therefore, having determined the value of the defendant’s benefit from crime, the Court must then calculate the ‘available amount’.
The available amount is equal to the defendant’s benefit from criminal conduct unless the defendant demonstrates that the amount available is less than the benefit figure. If the Court is satisfied that the defendant’s assets are insufficient to meet the benefit figure, then the ‘recoverable amount’ will be set at the ‘available amount’ or, where the available amount is nil, a nominal amount which is often the sum of £1.
The recoverable amount will be assessed by the Court by calculating:
- the value of the defendant’s ‘free property’, which is any property which is not caught by any other order made by the Court (a forfeiture order under section 27 Misuse of Drugs Act 1971, for example); plus
- the value of all ‘tainted gifts’; minus
- the value of any ‘priority obligations’.
‘Tainted gifts’ might arise if a defendant attempts to distance themselves from the proceeds of crime by, effectively, giving them away. If a defendant is found to have a criminal lifestyle, a gift will be considered tainted if it was made by the defendant at any time after the relevant day, or where the gift was obtained by the defendant as a result of, or in connection with, their general criminal conduct.
If the Court decides that the defendant does not have a criminal lifestyle, the gift will be tainted if the defendant gave it away any time after the date of the offence.
To ensure that confiscation proceedings cannot be defeated by a defendant giving away their assets, the value of tainted gifts is included when determining the defendant’s recoverable amount.
Priority obligations are any pre-existing obligations to pay a sum of money to the Court following an earlier conviction (e.g. a fine, or an earlier confiscation order, and a preferential debts which would be owed by the defendant should they become bankrupt, such as debts to pension schemes and certain debts to employers.
Before making the Confiscation Order, the Court is required to consider whether it would be disproportionate to require the defendant to pay the recoverable amount. For example, a Confiscation Order will be disproportionate where a defendant had either repaid or stood to repay the victim in full.
When making a Confiscation Order the Court must specify whether the defendant should pay the full amount immediately, or whether it should be paid in instalments over a specified period. The Court will specify the term of imprisonment that will be imposed if the defendant fails to pay the order.
A Compliance Order can also be imposed in order to enhance the likelihood of the Confiscation Order being paid. This might include an order restricting a defendant from foreign travel.
If a defendant fails to pay a Confiscation Order, enforcement action will usually be taken. A defendant may be summonsed to appear at the Magistrates Court where they will decide whether to activate the term of imprisonment in default. When considering whether to activate the term of imprisonment in default, the Court must be satisfied that the non-payment is due to the offender’s wilful refusal or culpable neglect and that all other methods of enforcing payment of the sum are inappropriate or have been unsuccessful. If the Court does impose a term of imprisonment, the defendant must serve half the term imposed, unless the original order was for more than £10 million. In this case, the defendant must serve the whole of the term. Even where a term of imprisonment in default is served, the defendant remains liable to pay the Confiscation Order. An unpaid Confiscation Order will also accrue interest.
Our Fraud, Business Crime and Regulatory Solicitors have extensive experience defending confiscation proceedings and negotiating manageable settlements on behalf of our clients.
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