Annex A
CIVIL RECOVERY
Suggested Amendment Part 5—Civil Recovery
— Part 5 to be amended to allow for
a time limits within which respondents must lodge their defence
to civil recovery proceedings.
Reason
The South African civil forfeiture legislation,
in its Prevention of Organised Crime Act 1998, provides that a
respondent who wishes to defend such proceedings must submit to
the court, within a specific timescale, an affidavit specifying
the nature of his interest in the property and the basis of his
defence to the proceedings. Similar provision might be considered
but in such a way as to ensure that the court had the power to
require further and better particulars if the respondent failed
to properly engage with the court on this issue.
Suggested Amendment Part 5—Civil Recovery
— Section 247(2)(b) to be amended to
remove the words "in relation to the "same unlawful
conduct"
Reason
This inhibiting subsection detracts from the
purpose of identifying proceeds of unlawful conduct irrespective
of where the conduct took place. It provides a technicality through
which property can escape on the basis, for example, that the
initial investigation centred on theft whilst the receiver believes
that a Ferrari has been purchased with drugs proceeds. Whilst
ultimately the car might be recovered, doing so could necessitate
a whole new set of proceedings.
Suggested Amendments Part 5—Civil Recovery
— Amend section 305 to extend the tracing
provisions to include property which represents, in whole or in
part and directly or indirectly, the original property. Alternatively,
to accomplish a similar objective by the amendment of section
242.
Reason
ARA has encountered a situation where a person
was using proceeds of crime to pay for incidental expenses and
child benefit to pay a mortgage. The child benefit would obviously
have been required to meet these incidental expenses, but for
the use of money which was the proceeds of crime. The tracing
provisions are not currently wide enough to guarantee that the
payments toward the mortgage are recoverable. An alternative approach,
which could be more effective, might be to add a provision in
section 242 to the effect that where a person uses limited clean
income on purchasing property, while using criminal proceeds to
fund general lifestyle expenses (which could not have been otherwise
afforded) the property which has been obtained by the unlawful
conduct.
Suggested Amendment Part 5—Civil Recovery
— Amendment of Part 5 to allow for
the civil recovery of instrumentalities of crime.
Reason
Civil forfeiture worldwide is divided into two
categories. Some jurisdictions have laws for civil forfeiture
of the proceeds of crime (as the UK does under POCA Part 5), some
have laws allowing civil forfeiture of instrumentalities of crime,
and some jurisdictions have both. An instrumentality is something
which is used to commit a crime. It might be for example a plane
used to fly drugs into the country or a house where the garden
or the attic has been used as a growing place for cannabis plants.
The UK deals with instrumentalities of crime
in two ways. Firstly, upon conviction, an instrumentality can
be made the subject of a deprivation order. So if a person is
convicted in the Crown Court for importing drugs by boat, the
Court can order the forfeiture of his boat. The second possibility
is in terms of cash forfeitures under Part 5 of POCA which allow
the Magistrates Court to order the forfeiture of not only the
proceeds of criminal conduct but also cash which is intended to
be used in crime. So clean cash (say borrowed from a relative)
which a person intends to use to buy drugs with can be forfeited
as an instrumentality.
Arguably the UK is falling behind the international
benchmarks. The Commonwealth Model legislation which the Justice
Ministers recently agreed and published on the Commonwealth website
has civil forfeiture of instrumentalities of crime. The UK does
not yet allow for this.
Thus in cases of human trafficking, drugs trafficking,
intellectual property crime, civil forfeiture of the instrumentalities
of crime could be effective to strip out of the hands of organised
crime all their business tools even where law enforcement cannot
get their proceeds. They could then be auctioned. This would make
it more difficult for organised crime to function without the
tools of their trade. The objections sometimes raised in this
area are stories from the USA where action has been taken which
is perceived as unproportional to the original action. The UK
would have a major safeguard in this area, namely the need for
proportionality under ECHR. Thus the courts could not make a forfeiture
order where it would be out of proportion to the underlying conduct.
Suggested Amendment—Part 5 Civil Recovery
— Amend Part 5 to allow for the giving
in evidence of previous convictions which would otherwise be inadmissible
due to the effect of the Rehabilitation of Offenders legislation.
Reason
A significant number of civil recovery cases
have been hampered by the courts' refusal to admit evidence of
spent convictions during civil proceedings as well as refusing
applications for investigative orders where they are being sought
for the purpose of civil recovery investigations.
The Rehabilitation of Offenders Act allows for
a certain amount of judicial discretion to be employed in deciding
whether or not to admit evidence of spent convictions. However
the bar for this is set very high. Evidence of spent convictions
can only be admitted if justice cannot be done except by admitting
the spent conviction. Nonetheless experience is demonstrating
that this is no longer adequate. In one recent case the court
gave a clear indication that it was only likely to accede to such
an application in extremis. It also indicated that it seemed illogical
that, while in a particular case evidence of the facts underlying
the conviction could not be admitted because the conviction was
spent, the evidence could have been admitted if the defendant
had been acquitted.
POCA exists because many criminals reach a point
where they are able to insulate themselves from arrest. Over time,
their convictions gradually become spent and it is therefore increasingly
difficult to prove that financial empires were built on a base
of criminal activity.
Suggested Amendment Part 1—Assets Recovery
Agency
— Section 2(3) to be amended so as
clarify that the Director may engage in fair reporting of actions
taken by her in pursuance of her statutory functions under the
2002 Act.
Reason
The Director has adopted the view that fair
reporting of action taken by her under the Act is likely to have
an impact in terms of reduction of crime. The amendment would
provide a more secure and unambiguous legal basis for her doing
so.
Suggested Amendment Part 5—Civil Recovery
— Section 242(2) to be amended so that
a case for civil recovery may be sustained in circumstances where
a respondent has no identifiable lawful income to warrant his
lifestyle and purchases.
Reason
In Assets Recovery Agency v Green Mr Justice
Sullivan held that, to be successful in civil recovery proceedings,
while the Director need not allege the commission of any specific
criminal offence, she must set out matters that are alleged to
constitute the particular kind or kinds of unlawful conduct by
or in return for which the property was obtained. However, the
court concluded that if the Director satisfied the court that
property represents the proceeds of unspecified unlawful conduct,
but was unable to show any particular kind of unlawful conduct
in relation to that property, the court would not make a recovery
order. Mr Justice Sullivan commented that if Parliament had wished
the Director to be able to recover property by simply alleging,
and thereafter persuading the court, that, on the balance of probabilities,
it had been obtained by or in return for some unspecified unlawful
conduct, it could have said so, but it did not.
Suggested Amendment Part 5—Civil Recovery
— Amend section 266 to require a court
making a recovery order against property held by a limited company
or held by a director of a limited company to consider whether
the director or directors ought to be disqualified as company
directors.
Reason
Corporate vehicles are frequently used to hide
property obtained by unlawful conduct. Courts which conclude that
corporate structures have been abused should be able to take preventative
action to ensure that such abuse does not occur.
Suggested Amendment Part 8—Investigations
— Section 376 to be amended to allow
the Director to issue Letters of Request in respect of civil recovery
investigations.
Reason
Certain countries may be willing to respond
to Letters of Request on a bilateral basis in respect of non-conviction
based investigations into criminal proceeds as long as there is
a statutory power for the issuing of the Letter of Request.
Suggested Amendment Part 10—Information
There are a number of additions to the "permitted
persons" category in Part 10 which are necessary. The facility
to update Section 438 is available through the Home Office and
is currently underway. This is a lengthy process and is dependent
upon the Parliamentary Timetable, but is important to the efficient
operation of the regime.
Suggested Amendment—Contempt of Court Orders
Amend POCA so as to provide that the maximum
penalty for contempt of a court order made by any court under
POCA should be five years imprisonment and/or an unlimited fine.
Reason
Those who are defending restraint proceedings,
confiscation proceedings, or civil recovery proceedings will frequently
be subject to court orders requiring them to perform certain actions.
These may include court orders to repatriate funds to the jurisdiction,
and orders to swear a disclosure affidavit, orders to bring documents
within the jurisdiction. Experience has shown that defendants
and respondents will often show unwillingness to comply with such
orders. Where a confiscation order has been made against a defendant
in criminal proceedings and he fails to comply, the default sentence
can be as much as ten years imprisonment. Where, however, the
non-compliance is in terms of non-repatriation of £1 million
of funds to the jurisdiction, the maximum penalty for contempt
is two years imprisonment. This seems inconsistent. A greater
degree of compliance with court orders could be engendered by
increasing the maximum penalty for contempt.
RECEIVERS.
There are a number of items which would clarify
the powers of the Interim Receiver.
Suggested Amendment Part 5—Civil Recovery
— Section 247 to be amended so as to
allow an interim receiving order to require police to assist the
receiver by being present on premises.
Reason
Currently, police may not attend with a receiver
on property unless there is an imminent or actual breach of the
peace. Accordingly receivers are forced to hire private security
at costly rates.
Suggested Amendment Part 5—Civil Recovery
— Sections 251 and 260 to be amended
to allow a discretionary power expressly provided in the Act for
the interim receiver to apply ex parte and on an urgent basis
for directions where necessary.
Reason
POCA requires that any application for directions/variation
etc by, inter alia, the interim receiver, must be on notice. This
is too cumbersome. There may be occasions where the receiver considers
that he needs to ask the court whether he should extend the order
to property not currently within its ambit or to seek directions
on a matter where the property owner should not have prior notice
of the application in case he uses that notice period to dissipate
property or conceal evidence or otherwise act to the detriment
of a potential recovery order.
Suggested Amendment Part 5—Civil Recovery
— Section 251 to be amended to allow
an IRO to be varied by the Court of its own motion following receipt
of information from a receiver during an application for directions.
Reason
Currently what occurs is that from time to time
receivers require to seek the directions of the court. To support
an application for directions, the interim receiver will furnish
the court with information as to his findings so far. The issue
then can be whether the Order should be amended in the light of
what the receiver has told the court. The Agency has no information
other than what is in the possession of the court and the respondent.
To eliminate confusion, it should be clear that the court has
the power of its own motion to amend the order and include additional
property in the IRO following receipt of information from the
receiver.
Suggested Amendment Part 5—Civil Recovery
— Section 247(3) to be amended to extend
the Receiver's protection.
Reason
Section 247(3) deals with loss or damage caused
by the interim receiver and limits liability to those instances
where such is caused by the interim receiver's negligence. It
seems that there is considerable scope for attacks to be launched
against the interim receiver regarding the contents of her reports,
claims of injury to reputation etc. Such claims might be used
to delay civil recovery proceedings. It could therefore assist
to afford the interim receiver some form of immunity in respect
of such claims.
Suggested Amendment Part 5—Civil Recovery
— Part 5 to be amended to allow an
interim receiver to issue Letters of Request in respect of civil
recovery investigations.
Reason
Certain countries may be willing to respond
to Letters of Request from a receiver in respect of investigations
into criminal proceeds as long as there is a statutory power for
the issuing of the Letter of Request.
Suggested Amendment Part 7—Money Laundering
— Section 330 to be amended so as to
relieve an interim receiver of the obligation of making a disclosure
to NCIS in respect of material covered by his investigation for
the High Court.
Reason
Section 330 of POCA makes it an offence for
a member of the regulated sector to fail to disclose. This is
an impossible burden upon the interim receiver. Where the information
comes to the receiver and/or her staff via her appointment or
proposed appointment in such roles she should be exempt from regulation.
Suggested Amendment Part 11—Co-operation
— Amend section 443(2) to include references
to Part 5.
Reason
Currently, an interim receiver appointed in
England and Wales under Part 5 has no powers in Northern Ireland
or Scotland. Thus, if a receiver knows that property exists in
one of the other UK jurisdictions, he has no powers to deal with
it. In such circumstances, the Agency must go to the expense of
obtaining an order in the other jurisdiction, duplicating costs.
It is preferable to have the matter dealt with before one court
rather than have two considering the same underlying unlawful
conduct.
Suggested Amendment Schedule 6
— The following should powers should
be added to Schedule 6:
(i) A power to effect a forced entry to
any premises which are either themselves recoverable property,
or are premises where she reasonably believes recoverable property,
or evidence which will assist her in locating recoverable property,
may be found.
(ii) A power to extend the order to property
not expressly detailed therein where the interim receiver believes
upon reasonable grounds that it may be or represent the proceeds
of unlawful conduct
(iii) A power to require a respondent to
swear a power of attorney.
(iv) A power for the interim receiver to
delegate his functions and powers to his staff to allow for simultaneous
operations at multiple premises.
Reason
Schedule 6 represents a non-exhaustive list
by way of example of powers which may be granted to the interim
receiver. It is desirable that some of the more frequently granted
powers which do not currently appear in Schedule 6 were incorporated
in order to reassure recipients of orders and their legal representatives
of the legality of the order.
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