| OBTAINING AND ENFORCING CONFISCATION ORDERS
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Q 116
C&AG's Report, para 2.13 and Figure 5
| 3. In total, by the end of 1996, confiscation orders obtained by Customs and Excise totalled £64.8 million. The C&AG's Report noted that, for 133 confiscation orders, totalling £21.8 million, made between 1989 and 1994, the Department had identified assets worth £8.5 million, or 39 per cent of the value of the orders.
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| Q 6
| 4. Our predecessors asked the Department why they had managed to identify assets for only a minority of the value of the proceeds obtained by drug traffickers. The Department said that the legislation allowed for a two-pronged approach to securing assets. The simplest and most satisfactory approach was by directly identifying assets. The legislation recognised, however, that this was not always possible, and that a drug smuggler might have gone to considerable lengths to conceal assets. The court was therefore empowered to make assumptions about the likely benefits from drug trafficking, and to make a confiscation order for values in excess of identified assets, with a contingent default sentence if the defendant did not satisfy the order.
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C&AG's Report, para 2.20
Q 6
| 5. The C&AG's Report found that, during the period of the National Audit Office study, no recoveries had been made against unidentified assets and no further assets had been identified following the issue of confiscation orders. The Department told our predecessors that they recognised the importance of identifying assets and the relative success of that approach. They said they accepted, and were implementing, the National Audit Office recommendation that they should give greater emphasis to the identification of assets.
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| Qs 7, 32, 126
| 6. In view of the difficulties of making recoveries against unidentified assets, our predecessors asked the Department why they sought to obtain confiscation orders which were not based on identified assets. The Department said that the legislation intended the combination of a high value confiscation order and a contingent default sentence to act as a lever on defendants to cause them to disclose assets. Moreover, if an order was not satisfied and the Department subsequently identified further assets, they could enforce the debt straightaway without the need to return to the court for a further confiscation order.
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Evidence, Appendix 1 p 18
Qs 32, 108
| 7. The Department had acted on the National Audit Office recommendation that they should revisit cases after confiscation orders had been made, to see whether they could identify previously undisclosed assets, and had identified further assets in three cases. Their forthcoming management plan would include, on a trial basis, performance indicators for the value of additional assets identified through revisiting cases and they would monitor the results achieved to assess the cost effectiveness of this work.
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C&AG's Report, para 2.14
Qs 7, 8, 100
Q 101
| 8. The C&AG's Report noted that, in the cases examined by the National Audit Office, not one defendant had disclosed the existence of new assets to the court in order to avoid a default sentence for failure to satisfy the confiscation order. The Department said that the cases examined by the National Audit Office were covered by the original legislation, which had not been as effective as they would have liked because the serving of a default sentence expunged the debt. Defendants often chose to serve default sentences rather than disclose hidden assets. Under the Drug Trafficking Act 1994, however, serving a default sentence does not expunge the debt for anyone charged after 3 February 1995. The Department said that the new legislation should be a more effective lever on defendants, but that it was too soon to say what difference the new arrangements would actually make.
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C&AG's Report, para 2.15
Qs 103, 104, 131
| 9. Our predecessors asked the Department what could be done to improve the situation whereby some defendants had not served default sentences following completion of their sentence for the criminal offence, for example because they had disappeared before the completion of procedures to impose the default sentence. The Department said that they had developed an action plan to follow through the National Audit Office recommendations, and intended to improve liaison with the Prison Service so that they became aware when a trafficker was about to be released from prison. They also said that they would revisit old cases to identify people who had not served their default sentences and had been released. Where they could find them, it would be open to the Department to seek a warrant of commitment to return defendants to prison to serve their default sentences.
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C&AG's Report, para 1.14 and Figure 3
Qs 10, 114 to 116
| 10. By December 1995, total recoveries notified against Customs and Excise confiscation orders, made between 1987 and 1994, stood at £12 million or 23 per cent. The Department told our predecessors that, by March 1997, the value of recoveries against these orders had increased to £14.7 million, or 28 per cent. The Department said that a further £2 million was no longer recoverable due to the debt having been expunged by the service of default sentences, or reduction of the value of confiscation orders by the courts where they were satisfied that defendants' means were inadequate. In total, by the end of 1996, £16.1 million, or 25 per cent, had been recovered in respect of all of the Department's confiscation orders.
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C&AG's Report, para 3.1
Q 135
Evidence, Appendix 1 p 18
| 11. The enforcement of a confiscation order involves a complex legal process. Our predecessors asked the Department whether they were taking any action to propose simplification of the legal procedures surrounding confiscation and enforcement, and what changes to their present powers would increase the amount of recoveries made. The Department said that the Home Office chaired a working group on confiscation legislation which brought together all government departments and agencies with an interest in this area. The group was exploring what might be done to improve what was generally an unsatisfactory position.
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| Qs 21, 124
| 12. The Department told our predecessors that they had consistently played an active part in the Home Office group and that many of the changes which had been made to the legislation over the last few years had been partly as a result of the Department's suggestions. The Drug Trafficking Act 1994 had addressed their most pressing concerns, but if they saw further gaps in the legislation which Parliament might be prepared to fill, they would draw them to the attention of the Home Office.
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C&AG's Report para 1.16
Q 22
Q 22
| 13. The Home Office had issued guidance to prosecutors and courts on the exercise of their respective powers, and on the liaison and co-ordination required of them. The guidance instructed magistrates courts to assume that they were responsible for enforcement of orders under £10,000, unless they had been notified that High Court action was involved. Our predecessors asked the Department about their relationship with the courts, and whether it could be improved. The Department said that liaison with the magistrates courts had sometimes been lacking, and that it was important to improve it. The law made it clear that confiscation orders were the equivalent to fines and that the responsibility for enforcement and collection rested with the magistrates courts. Customs and Excise, as the prosecutor, had various powers to assist that work, particularly in relation to civil remedies such as restraint orders.
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| Qs 22, 23, 133
| 14. The Department said that they had originally seen their enforcement role as helping the courts to exercise their statutory responsibility but that, in the larger cases, they had gradually been taking a more active role. As the Department paid more attention to the early identification of assets and the use of restraint orders and receivers, it was inevitable that they would become more involved. This was an area where powers overlapped, and greater clarity was needed as to whether they, or the magistrates courts, had lead responsibility for enforcement and at what stage in each case. The Department had accepted the recommendations of the National Audit Office on the management of cases, and they were now writing formally to magistrates courts to say when they were transferring responsibility to them.
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| C&AG's Report, paras 1.17, 1.18
| 15. During a financial investigation, the Department may seek to prevent the dissipation of assets or their removal from the Court's jurisdiction by applying to the High Court for restraint or charging orders and for the appointment of a receiver if necessary. Once an order has been made, the Department have an additional power to enforce payment by seeking, where they have not already done so during the financial investigation, the appointment of a receiver to take possession of and realise the defendant's assets.
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| Qs 17, 112, 134
| 16. Our predecessors expressed concern about the delays that inevitably occurred between the arrest of a drug trafficker and the start of action by the Department to acquire their assets. The Department said that, where they had good grounds for suspicion, they could apply to the Court for the early appointment of a receiver to restrain and manage a trafficker's assets. The Court was unlikely to agree, however, if the defendant had not had the opportunity to co-operate with the Department or had indicated willingness to co-operate. The Department agreed with the National Audit Office recommendation that they should seek the early appointment of receivers in all cases where there were identified assets of any significant value, and where it would be cost effective to do so. They were looking to achieve more competition in the appointment of receivers to ensure that costs were kept to a reasonable minimum.
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| Conclusions |
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| 17. We are concerned that the Department identified assets worth only 39 per cent of the assessed criminal proceeds for which confiscation orders had been made and that, during the period under investigation by the National Audit Office, no recoveries had been made against the remaining 61 per cent of the value. We endorse the Department's intention to give greater emphasis to the identification of assets during future financial investigations.
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| 18. We note that, having obtained confiscation orders in excess of identified assets, the Department are able to pursue previous debts without further recourse to the courts. We note that, as a result of revisiting cases, the Department recently secured further recoveries in three cases. We look to the Department to ensure that all significant cases in which there is a reasonable prospect of further recovery are revisited.
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| 19. We are concerned that some drug traffickers may enjoy the benefits of hidden assets following their release from prison. We note that the Department expect the changes introduced by the Drug Trafficking Act 1994 to act as a more effective lever on convicted drug traffickers to disclose previously hidden assets.
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| 20. We note the Department's intention to improve liaison with the Prison Service regarding the impending release dates of those convicted traffickers who have not fully satisfied the terms of confiscation orders, and also to revisit cases where previously released offenders had not served their default sentences. We look to them to seek to obtain further recoveries of proceeds, or to ensure that default sentences are served, in such cases.
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| 21. We are disappointed that, by the end of 1996, only £16.1 million (25 per cent) had been recovered in respect of confiscation orders totalling £64.8 million. We are concerned that the intention of the legislation to deprive drug traffickers of their illicit proceeds is not being fully achieved. We note the steps taken by the Department to secure improvements in the law through their membership of the Home Office Working Group on Confiscation Legislation, and look to the Department to seek further simplification of procedures and strengthening of their powers as appropriate.
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| 22. We are concerned that a lack of effectual liaison between the Department and the magistrates courts may sometimes have limited the successful confiscation of assets. We endorse the Department's initiative to assume lead responsibility for the recovery of assets in all major cases, and we look to them to agree clear procedures with the courts for assigning responsibility for the enforcement of confiscation orders in all cases.
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| 23. We are concerned that the full potential value of assets may not be realised due to delay in the appointment of receivers. We recommend that the Department consider appointing receivers at an early stage in all sizeable cases. We recognise that the costs of appointing receivers may sometimes be high in relation to the value of the recoveries made and endorse the Department's intention to promote greater competition in order to contain costs.
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