Draft Modern Slavery Bill - Draft Modern Slavery Bill Joint Committee

Draft Modern Slavery Bill - Draft Modern Slavery Bill Joint Committee Contents

6 Asset recovery

Background

196. In the White Paper, the Government states that "serious organised criminals become involved [in modern slavery] because they believe it is lucrative. We must demonstrate that this crime does not pay".[302] The draft Bill contains two provisions which would allow for forfeiture and detention of land vehicles, ships and aircraft used or intended to be used in connection with a human trafficking offence.[303] In addition to these provisions, the Government proposes that a range of existing powers available to the authorities for the restraint (freezing) and confiscation of assets be used to deprive modern slavery suspects and offenders of the proceeds of crime. These include:

· The provisions of the Proceeds of Crime Act 2002 ("POCA"), which provide extensive powers to restrain or confiscate the proceeds of crime.[304] These powers are set out in more detail below.

· The general powers of forfeiture set out in the Powers of Criminal Courts (Sentencing) Act 2000, which will continue to apply to the consolidated offences set out in the draft Bill.[305] Section 143 of the 2000 Act gives courts the power to deprive a convicted offender of his rights to certain property and that property shall (if it has not already) be taken into the possession of the police. Relevant property is property which has been used for the purpose of committing, or facilitating the commission of, any offence or was intended to be used for that purpose; and property which was unlawfully possessed by the offender, where the offence was one of unlawful possession.

197. The most draconian powers are those contained in POCA, which sets out the statutory regime for the recovery of criminal assets; investigatory powers for law enforcement agencies; money-laundering offences; and the Suspicious Activity Reporting regime mandating persons in regulated financial services to report suspicious activity. Those powers most relevant to recovering the proceeds of modern slavery offences are the powers of restraint and confiscation set out in Part 2 of POCA.

RESTRAINT ORDERS

198. A restraint order under section 41 in Part 2 of POCA prevents a specified person from dealing with any realisable property held by him, subject to certain exceptions for reasonable living and legal expenses and for carrying on any trade, business, profession or occupation. "Realisable property" includes all types of property, including money, personal property (such as a car), real property (such as buildings), and even intangible property (such as intellectual property rights). Prosecuting authorities may seek a restraint order as soon as a criminal investigation has started, even before arrest and charge. A restraint order may, therefore, be sought at any stage in a criminal investigation or proceeding in order to prevent dissipation of assets which might, eventually, become the subject of a confiscation order. It should also be noted that a restraint order, if granted, might as an ancillary matter be a useful method of disrupting criminal activity where the assets restrained were used in connection with an offence.

199. To obtain a restraint order, the prosecuting authorities must show that a criminal investigation or proceedings have commenced; and that there is reasonable cause to believe that the alleged offender has benefitted from his criminal conduct.[306] In addition, current case law requires that the prosecuting authorities demonstrate that there is a risk of dissipation of the assets.[307] The bar for obtaining a restraint order is set quite high, particularly if the suspect has held relevant assets for some time as this would suggest a reduced risk of dissipation. The Director of Public Prosecutions told the Public Accounts Committee ("PAC") during its recent inquiry into confiscation orders that the current test made obtaining a restraint order extremely challenging, particularly in the early stages of an investigation where intelligence and evidence were still being gathered.[308] Greg McGill, Head of Organised Crime at the CPS, gave us similar evidence, highlighting the difficulty of proving the risk of dissipation.[309]

CONFISCATION ORDERS

200. Confiscation orders are applied post-conviction by the Crown Court. The Court is required to:

a) decide whether the defendant has a criminal lifestyle;

b) if the Court finds that he has a criminal lifestyle, decide whether, on the balance of probabilities, he has benefited from his general criminal conduct;

c) if the Court finds that the defendant does not have a criminal lifestyle, decide whether he has benefited from his particular criminal conduct;

d) if the Court decides that the defendant has benefited from his criminal conduct, decide the recoverable amount and make a confiscation order requiring him to pay that amount; and

e) if the Court believes that any victim has started or intends to start proceedings against the defendant in respect of loss, injury or damage sustained in connection with the criminal conduct, the mandatory duty in d) becomes a discretionary power.[310]

201. POCA therefore defines the criminal "benefit" which may be subject to a confiscation order either by reference to a specific crime or on the basis of a judgment that an offender has lived a "criminal lifestyle". If an offence is designated as a "lifestyle" offence, any assets and expenditure over the previous six years can be included in the benefit assessment. The court must impose an order of a value based on the amount of criminal benefit unless the offender does not have the assets, in which case the value of the order is based on the amount of assets assessed to be available.[311]

202. The interpretation of "criminal lifestyle" is set out in section 75 of POCA. Schedule 2 lists those offences which are automatically "lifestyle" offences and these include human trafficking under the existing legislation. If an offence is not specifically listed in Schedule 2, it may still be possible for the court to find that a defendant has a criminal lifestyle if the other conditions in section 75 are satisfied. These conditions are based on the number of offences, the value of the benefit derived from the offences, and the duration of the offences. Where an offence is a "lifestyle offence", the Court must consider a confiscation order at the sentencing stage.

203. The Secretary of State may by Order amend Schedule 2 of POCA. The Government's White Paper suggests that the Secretary of State will seek to amend Schedule 2 of POCA to include not only the new human trafficking offence set out in clause 2 of the draft Bill (Schedule 2 currently refers to the existing human trafficking offences) but also the new forced labour offence under clause 1. This would be in line with the recommendations of the Report of the Modern Slavery Bill Evidence Review and with evidence given to us by the NCA and the CPS.[312]

204. We recommend that the Home Secretary use her powers to introduce an Order to amend Schedule 2 of the Proceeds of Crime Act 2002 (POCA) specifically to include the offences set out in Part 1 of the Government's draft Bill as "lifestyle offences" for the purposes of obtaining confiscation orders.

Challenges with Part 2 of POCA

205. Given that successful asset recovery in modern slavery cases will largely rely on the use of existing powers, it is important to understand how effective those powers currently are. In a recent report looking at the use of confiscation orders generally, the Public Accounts Committee ("PAC") of the House of Commons found that the use of powers to confiscate the proceeds of crime under POCA was seriously inadequate. The PAC stated that, "Identifying and confiscating criminal assets is difficult, but the failure to put in place an effective system to act promptly, prioritise, co-ordinate and incentivise this work, demonstrates that the various bodies involved [within the criminal justice system] have simply not done enough."[313] We consider below some of the particular problems which arise in the context of modern slavery.

IMPROVING RESTRAINT ORDERS

206. In evidence to this Committee, Steve Barclay MP, a member of the PAC, set out the challenges which need to be met in the area of asset recovery. He stated that, in order to recover assets effectively under confiscation orders post-conviction, restraint orders freezing those assets should be sought at the earliest possible opportunity, preferably within 24 hours of arrest. This was necessary in order to prevent offenders dissipating their assets before they could be confiscated. However, Mr Barclay considered that there were a series of problems preventing early restraint and, later, confiscation of assets. He noted principally that the test which must be satisfied in order to get a restraint order is very difficult to satisfy (see above). In addition, there are cost implications for an unsuccessful application which act as a brake on CPS activity in this area given that they are operating with constrained resources.[314] He stated that both the police and the CPS have insufficient resources to tackle asset recovery effectively and that there are insufficient financial incentives for the investigating authorities to undertake detailed, lengthy and costly financial investigations which, if they deliver any results at all, will only do so some way into the future.[315]

207. In its response to Mr Barclay's evidence, the Home Office has confirmed that it is "committed to improving the early and increased use of restraint orders in order to prevent the dissipation of assets," and that it is seeking to introduce legislation to lower the test for obtaining a restraint order from "reasonable cause to believe" to "reasonable suspicion" as soon as parliamentary time allows.[316] The CPS has endorsed this approach to modifying the test and has specifically approved the removal of the need to prove the risk of dissipation in seeking a restraint order.[317]

208. It is imperative that law enforcement authorities should be able to freeze relevant assets at the earliest possible stage in an investigation, and rarely, if ever, more than 24 hours after arrest. We therefore strongly recommend that the test for obtaining a restraint order be amended to make it less stringent. We note that the Government has already committed to reducing the test from "reasonable cause to believe" to "reasonable suspicion". We approve of this formulation. We also recommend that the existing requirement to demonstrate risk of dissipation be explicitly removed. We urge the Government to bring forward the necessary amending legislation before the end of this Parliament.

209. In deciding whether to seek early restraint of assets, investigators and prosecutors must make difficult judgements. Applying for an early restraint order, perhaps even before arrest, may have the effect of tipping off a suspect and hampering investigations and, perhaps, putting victims in danger. Investigators and prosecutors must exercise good judgement in such circumstances in order to protect the vulnerable and progress the case effectively. Although we support a presumption in favour of early restraint, this must always be subject to considerations about any risk to victims and we believe that the Association of Chief Police Officers might properly have a role in giving guidance on this issue.

210. We recommend that the Association of Chief Police Officers sets out in guidance essential considerations for the use of early restraint powers in the context of modern slavery offences, giving due consideration to the vulnerability of victims. Law enforcement agencies should be encouraged to seek restraint of all assets, including those of low value, which may be used in the exploitation of victims with a view to causing maximum disruption to such activities.

IMPROVING CONFISCATION ORDERS

211. The PAC made a significant finding that not enough confiscation orders were imposed and that, of those that were, not enough were enforced effectively. The problems with enforcement were particularly acute for the higher-value orders.[318] The NAO report on confiscation orders, which formed the basis for the PAC inquiry, set out key findings in relation to why collection rates are so low:

· There is no coherent overall strategy within the criminal justice system for the use of confiscation orders.

· A flawed incentive scheme and weak accountability compounds this problem.

· The absence of good performance data or benchmarks across the system weakens decision-making.

· Throughout the criminal justice system, there is insufficient awareness of proceeds of crime legislation and its potential impact.

· Enforcement, efficiency and effectiveness are hampered by outdated, slow ICT systems, data errors and poor joint working.[319]

212. Mr Barclay made similar points in his evidence to us.[320] The Home Office has since reaffirmed that it is coordinating the prioritisation of asset recovery and financial investigation across the criminal justice system. The multi-agency Criminal Finances Board, chaired by a Minister, oversees strategy and operational activity in this area.[321] The PAC also heard evidence that the National Crime Agency, Crown Prosecution Service, Serious Fraud Office and HM Courts & Tribunals Service have recently jointly identified 124 high priority cases for additional enforcement activity.[322] We wish to see the Criminal Finances Board, and the Minister in particular, monitoring the use and enforcement of confiscation orders closely and making asset recovery in modern slavery cases a particular priority.

213. We recommend strongly that the Government places modern slavery at the top of its list of priority areas for the pursuit and enforcement of confiscation orders.

ENFORCEMENT

214. Sanctions for non-payment of a confiscation order are set by POCA, which provides for 8% annual interest to be payable on the order, and prison sentences of up to 10 years, depending on the order size. The order plus interest remains payable once the prison sentence is served. Although there is a lack of data to test effectiveness, these sanctions were thought by the NAO to be ineffective as a deterrent.[323] Where orders were high-value, it was claimed that some offenders saw the prison sentence as an occupational hazard for the protection of their considerable assets.[324] This point was also made to us in evidence by Mr Barclay.[325] Keith Bristow, Director General of the National Crime Agency, gave the PAC an example of an offender choosing a default sentence rather than paying up on the confiscation order.[326]

215. The Home Office told us that its Serious and Organised Crime Strategy makes clear that the Government is "committed to legislating to substantially strengthen the default sentence for those who do not pay their confiscation orders".[327]

216. We would welcome stronger sanctions for non-payment of confiscation orders which are designed to make modern slavery offenders highly unlikely to opt for a longer prison sentence in order to protect the proceeds of their crimes.

Clauses 7 and 8 of the draft Bill

217. Clauses 7 and 8 of the draft Bill provide, respectively, for the forfeiture (upon conviction on indictment) and detention (upon arrest) of land vehicles, ships and aircraft used or intended to be used in connection with a human trafficking offence under clause 2.

218. The Government is considering whether to extend these powers so that they apply to any property the court deems to have been related to the offence.[328] Mark Sedwill, Permanent Secretary at the Home Office, noted that under clauses 7 and 8 ownership was not a necessary ingredient for a successful forfeiture or detention order and that this was an important distinction from the POCA regime of confiscation and restraint. The test under clauses 7 and 8 applies to the property itself, which must be used or intended to be used in connection with a relevant offence. It follows that these powers are aimed, not at the proceeds of crime, but at the means by which a crime is committed.[329]

219. We support the substance of clauses 7 and 8 of the draft Bill but would like to see the powers of forfeiture and detention extended to include, not just land vehicles, ships or aircraft, but other property as well, including premises. Depriving offenders of the premises where they hold their victims would be a meaningful method of disrupting their activities. The Government's formulation in the White Paper for describing relevant property which might be forfeit or detained under an extension of clauses 7 and 8 is, "any property that the court deems to have been related to the offence," and this seems sensible.[330]

220. Support for the extension of these powers to other types of property has been given in evidence to the Committee. Greg McGill, Head of Organised Crime at the CPS, supported an extension of the powers under clauses 7 and 8 to premises on the basis that they tend to hold their value and meaningful amounts of money can be realised from them through sale post-conviction.[331] In the context of a question about seizing premises, Liam Vernon, Head of the UK Human Trafficking Centre at the National Crime Agency, pointed to the importance of the disruptive effect on criminal networks of seizing property and supported any progress in that direction.[332] Greg McGill, however, cautioned that there are human rights implications inherent in the seizure of premises and noted that, although a judge could make such an order, he would have to take into account the provisions of the Human Rights Act 1998, both as it applied to the defendant and to any dependent people as well.[333]

221. We have set out suggested clauses in the Committee's Bill as an illustration of our recommendation to extend the effect of clauses 7 and 8 of the draft Bill. The intention here has been to keep the drafting simple in order to make our intention clear. However, we recognise that these suggested clauses may need some revision to ensure that they are in conformity with rights at common law, and consistent with the European Convention on Human Rights under the Human Rights Act 1998.

222. We recommend that clauses 7 and 8 of the draft Bill be extended to cover any property that the court deems to have been related to the offence. We consider it especially important that premises used in connection with modern slavery should be removed from the control of those involved in such offences.

302 Cm 8770, p 12. Back

303 Clauses 7 and 8 of the draft Bill. Back

304 Cm 8770, p 12. Back

305 Cm 8770, p 13. Back

306 Proceeds of Crime Act 2002, section 40. Back

307 R v B [2008] EWCA Crim. 1374 (Moses LJ). Back

308 Oral evidence taken before the Public Accounts Committee on 15 January 2014, HC (2013-14) 942, Q 94 (Alison Saunders). Back

309 Q 765 (Greg McGill) Back

310 Proceeds of Crime Act 2002, Section 6. Back

311 Since the Supreme Court case of R v Waya [2013] 1 All ER 889, in order to comply with Article 1 of the First Protocol to the ECHR (entitlement to peaceful enjoyment of possessions - as set out in Schedule 1 to the Human Rights Act 1998), a confiscation order must be proportionate to the statutory objective of removing the proceeds of crime and must not simply amount to another financial penalty. Back

312 Report of the Modern Slavery Bill Evidence Review, p 18; Q 761 (Steve Wilkinson); Q 763 (Greg McGill) Back

313 Public Accounts Committee, 49^th Report of Session 2013-14, Confiscation Orders, HC 942, p 2. Back