Depriving criminals of their ill-gotten gains: is it happening?

Background

In October 2009 the inspectorates that monitor the Crown Office and the police in Scotland reported on the effectiveness of the use of their powers under the Proceeds of Crime Act 2002 (“PoCA”). This Act had brought additional types of offence within the scope of criminal confiscation, and introduced civil recovery of assets that were obtained unlawfully. It had also widened the range of offences within the ambit of money laundering.

The Act has separate parts for criminal confiscation in England & Wales, Northern Ireland, and Scotland that recognise their different legal systems. However, the same text was replicated in each part of the Act to ensure that identical provisions applied, as far as was practical, throughout the United Kingdom.
The full text of the Scottish report is available by clicking here.

A previous article (Adamson, “Dirty Money?”, Journal, June 2008, 18) dealt with the different ways in which Crown prosecutors and accountants north and south of the border have tackled their responsibilities under PoCA. The intention here is not to walk on ground previously trodden. Instead, the principal aim is to comment on the findings of the Scottish report from the perspective of a forensic accountant. The main remit of the report was to find the extent and reasons for apparent inefficiencies in the use of PoCA in Scotland.

Overview

The joint thematic report found that knowledge of PoCA was concentrated in the financial crime unit set up within the National Casework Division of Crown Office, within the Civil Recovery Unit which is also at Crown Office, and in the Scottish Money Laundering Unit of the Scottish Crime and Drugs Enforcement Agency, as well as in the police forces’ own financial investigation units. Otherwise, knowledge of PoCA was thin on the ground and, to use an expression repeated oft-times in the report, required to be “mainstreamed”. As a result the police and Crown were overlooking opportunities to apply their powers under PoCA, particularly in respect of “lower level criminality”.

One particular problem was the single, narrow route by which cases can be referred for civil recovery. The National Casework Division refers only those cases where criminal prosecution has failed, or proceedings have been abandoned altogether. To remedy the perceived current failings the report recommended a grand strategy; this was called the Scottish Proceeds of Crime Strategy and, to emphasise the need for involvement of all parties, it would be led by a cross-agency group called the Serious Organised Crime Taskforce. (Had it been called the Serious Organised Financial Taskforce the acronym might have given the wrong message.) Such a taskforce would need additional resources, in other words money and people.
Some of this could come from money recovered from crime, an incentive to maximise the take from criminal confiscation and civil recovery and which would further disrupt crime and deter would-be criminals. If the recommendations are implemented the process should take no more than three years.

Room for improvement

Some of the more detailed findings were of interest: para 41 states that 440 Scottish confiscation orders were made between April 2003 and March 2009, of which 80% resulted from offences under the Misuse of Drugs Act 1971. This information contrasts with the table in para 273 which, when totalled, records 461 confiscations following drugs offences and 96 non-drugs confiscations, a total of 557 confiscation orders (not 440) in that period.

Whichever figures are correct, the bias towards drugs offences is evident and leads the authors to believe (report, para 275) that PoCA was not being fully applied to other financially-motivated crimes.

The Crown cited the paucity of defence answers to the statements of information in the early stages of the confiscation proceedings as a source of frustration for them (para 144). They apparently see no mote in their own statements of information, and do not hear the howls of frustration from the defence and the respondents when served with statements of information deficient in information and rather short on comprehensibility. Perhaps the comment that the NCD has identified some areas for further training in relation to the quality preparatory work by police analysts when drawing up statements of information (para 154) is a diplomatic way of acknowledging these failings. Surely only competent statements of information should be issued in the Crown’s name. In practice, inaccuracies in the initial statement often remain undetected, and sometimes are compounded, in subsequent revisions.

The authors are concerned (para 149) that the Act of Adjournal (Criminal Procedure Rules Amendment) (Confiscation Proceedings) 2009, which came into effect in August 2009 following Lady Dorrian’s review, would apply only to High Court actions, allowing those in the sheriff courts to continue to drag through interminable notional diets. The Crown must, under the Act of Adjournal, make productions available to the defence promptly once the statement of information has been served so that the defence can submit answers within the proposed timeframe (para 147). This is all very laudable and it remains to be seen whether this will work; if the initial statement of information is drawn up by someone in need of further training, can the initial answers submitted by the defence be drafted to a similar standard?

Settling before proof

Since criminal confiscation was introduced in Scotland, very few cases have been taken to proof, instead being settled by negotiation. The Crown’s view was that such negotiated settlements were evidence of its strong position, giving the defence no option but to settle rather than to argue the case in court (para 150).

While there are no doubt some cases that support the Crown’s view, this writer appears to be instructed in what must, if the Crown view is correct, be a minority of cases where the Crown negotiates a settlement for a sum that falls below what appears to be recoverable. In some cases the shortfall has been far from trivial.
Restraint orders are routinely applied in Scotland (para 151). While this can cause difficulties for the respondents, if applied quickly they can ensure that all assets are available for confiscation and therefore that the exercise is worthwhile.

The English approach is to apply restraint very selectively and, as a result, the Crown Prosecution Service fails to net some of the assets that would otherwise have been available.

There was some evidence of police disquiet that Crown Office took a less than robust approach to confiscation (para 155), but this was put down to a lack of communication from Crown Office in the final stages of settlement negotiations. There was no formal system of monitoring compliance with settlement guidance (para 156) but, reassuringly, each case examined did follow the settlement guidance (para 151).

Apparently, for cost reasons, Scottish police forces did not routinely seek help from forensic accountants (para 215). However the Crown has been fortunate to have the services of a range of experienced accountants on a part time basis who are able to give evidence as independent experts, and a full time in-house forensic accountant was employed in November 2008 (para 222). Their skills and knowledge are highly valued. The writer has to negotiate with some of the experienced part time accountants from time to time, and almost always finds them to be fair and reasonable. However, there is more than one way to skin a cat, and the same experienced accountants may eventually accept that using a blunt knife is not as efficient as using a sharp one.

Some more figures

The authors took a trip to Dublin, that favourite city for short holidays, but on this occasion only for the very proper purpose of meeting members of the Criminal Assets Bureau and the Office of the Director of Public Prosecution. In summary, the Irish approach to confiscation is to use taxation as the heavy rod for beating the backs of miscreants. In 2007 the Criminal Assets Bureau reported the recovery of 255,000 euro from civil recovery cases, and just over 10,000,000 euro from taxation. Criminal confiscation did not even have a single, specialised proceeds of crime unit until 2007, and even now it appears to consist of one man and a dog.

In Ireland anyone can report their suspicions to the Criminal Assets Bureau, and this open reporting channel has benefited communities that had been suffering from all levels of criminality. The authors believe that this ability, plus the taxation of criminal property, is effective in reducing harm to communities, and that Scotland would benefit by adopting these tactics.

The statistical findings of the report are detailed in chapter 7. The principal aims of the powers within PoCA are to disrupt criminals and to reduce the harm that they inflict upon Scottish communities, but there are no current means of measuring this reduction in harm (para 262). The Scottish systems for recording PoCA’s effectiveness are currently patchy; for example, until 2007 amounts recovered from confiscation orders were not separately identified from other fines, and there is no means of matching the number of confiscation orders with the amounts recovered and with the types of crime (para 265).

Despite these shortcomings the report found that confiscation orders totalling at least £17 million had been made in the seven years up to 31 March 2009, according to Crown Office records (para 271). The value of assets recovered through civil means in the same period exceeded £10 million, two-thirds of which were cash forfeitures; the authors attribute the lower figure for civil recovery to the smaller size of the CRU relative to the National Casework Division, and to the narrow channel for civil referrals (para 276).
Cash seizures were examined in greater detail and, over a seven year period, only Strathclyde Police regularly seized more cash than Scotland’s smallest force, Dumfries and Galloway Constabulary (para 278).

Summary

Over the period 2003 to 2008 a total of £497 million was recovered in England & Wales under PoCA; the equivalent figure for Scotland was only £27 million (para 281). The relative levels of population are insufficient to account for the difference. The authors suggest (para 282) that the reasons may be the different approach to calculating criminal benefit for confiscation in England & Wales, and financial investigation’s higher profile south of the border when compared to its relatively peripheral position in Scotland (para 283).

A small number of high value confiscations can render comparisons meaningless, so it would be wrong to suggest that Scotland has been less successful than England & Wales in implementing PoCA based upon a comparison of sums recovered. However, the apparent Scottish concentration on confiscation following drugs convictions, where proceeds have often been used to feed a habit leaving little to confiscate, may contribute to the lower levels of recovery in Scotland.

Whatever the reasons, there is room for improvement in Scotland’s use of PoCA and it remains to be seen how far, and how well, the report’s recommendations are implemented.