Rendering accountable the wealth of criminals

5 Medi, 2018 | Areithiau

Alun Milford, General Counsel, at the Cambridge International Symposium on Economic Crime 2018, Jesus College, Cambridge.

I am very grateful to Professor Rider for the invitation to speak at this year’s symposium.

This morning we embark on an inquiry into how best to identify and render accountable the wealth of criminals and in particular organised crime. That is a very broad subject, as much the work of a thesis as a ten minute presentation. So I thought the best way to approach this morning’s session was by drawing out six points from the system that law enforcement and prosecutors operate in England and Wales with the aim of feeding this morning’s debate.

Point 1 – You need not limit yourself to a single theory of liability.

When our first proceeds of crime statutes were passed in the 1980s, the criminal courts were given a single route by which offenders could be made to account for their criminal gains, namely confiscation. It required a conviction and an assessment of benefit which, subject to an analysis of the offender’s capacity to pay and – now – of proportionality, forms the basis of the confiscation order. Crucially, that order takes the form of a debt and so it can be enforced against any asset the offender owns, whether it was lawfully acquired or not. It is an in personam remedy – one that is focused on the individual.

Over time investigators and prosecutors became more adept at using confiscation, and receipts from enforced orders increased. But it became clear that this scheme, operating on its own, was too narrowly drawn. It needed to be complemented by something else and so it was that the Proceeds of Crime Act 2002 introduced civil recovery into our legal system. To secure a civil recovery order, a designated investigator or prosecutor must prove, on the balance of probabilities, that particular property is or represents the proceeds of crime. They do not need to prove a conviction or indeed any fault on the part of the person holding the property. On securing a civil recovery order, ownership of the property is transferred to the State. This is an in rem remedy – one that is focused on the property.

A good illustration of how these two theories can work together comes from the case of Dylan Creaven. Mr Creaven was tried and acquitted of a conspiracy to defraud. Companies he controlled however had control over property that that the state could prove was criminal property. Mr Creaven’s innocence of the conspiracy to defraud was no defence against the civil recovery claim.

Powers to forfeit cash and the contents of bank accounts work on a similar basis.   

The third route to recovery is through the tax system. Exceptionally, the NCA is empowered to raise an assessment plus penalties and interest for tax where it has reasonable grounds to suspect that a person or company has earned income or otherwise gained at least partly through criminal conduct which they did not declare to HMRC.

Point 2 – You need bespoke powers of investigation

One of my favourite TV shows is The Wire. Over five seasons it examined drugs crime in Baltimore through a number of different perspectives. One of its central characters was Det. Lester Freamon, who observed, “You follow drugs, you get drug addicts and drug dealers. But you start to follow the money, and you don’t know where it’s gonna take you.” To which I would only add that the one place you do know the money trail will not take you to is addicts and street dealers. The money most definitely goes elsewhere.

This essential truth means that you have two investigations: the first into crime and the second into its proceeds. Those two investigations will take you to different people and different places. The proceeds of crime investigation will need to be based on its own set of powers. Criminal powers do not and cannot apply because it is not crime but its proceeds which are being investigated. For that reason, our system created a set of investigative powers specifically designed for financial investigations. Some – such as production orders and search and seizure warrants – are direct equivalents of criminal powers. Others, such as disclosure orders, customer information orders, account monitoring orders and – more recently – unexplained wealth orders are designed specifically for use in proceeds of crime cases.

These investigations cannot operate in isolation from the wider financial system. The SARs regime is a means by which the financial services industry provides intelligence to law enforcement, and a well-directed SAR can be very useful. But it is not the only means by which investigators can acquire financial intelligence with which to start an investigation or to support an existing one. One which I can talk about is the Joint Money Laundering Investigation Team made up of banks and law enforcement, and built around the NCA’s power to receive information provided voluntarily in circumstances in which the supplier of the information is deemed by statute not to breach any duty of confidence or other restriction on disclosure. We heard yesterday how successful this has been.

Point 3 – You need to be able to protect against dissipation

There is no value in dwelling on this obvious point beyond noting that we have a range of tools available to us such as power to seize cash and valuables pending forfeiture together with the ability to seek restraint, receivership orders or freezing orders – depending on the nature of the case. It is important to remember that no court will make those orders for you on demand. You need to have evidence both of your properly founded suspicions that underpin your investigation and of the risk of dissipation. Without making good that risk’s existence you will not get the order you seek.

Point 4 – You need effective powers of enforcement

It is all very well getting a big order but it is important to remember that an order is not an end itself. Rather, it is the legal basis for you actually to recover the proceeds of crime or their value. In confiscation cases, the core technique will be to identify property the offender owns and to force its sale so that the proceeds are used to pay off the debt. The other technique, that of requiring the offender to serve an additional sentence of imprisonment in default of payment, is only realistically available as a last resort.   

In theory at least, enforcement is less of a hurdle in civil recovery cases because the effect of the order is to transfer ownership of the asset to the State. But if you have not already done so, the challenge is to get control over the property so it can be sold and its value paid to the Treasury.

Point 5 – You need practitioners with the right skills to deal with these cases.

To follow that money route you need investigators and prosecutors who know what remedies to seek and which investigative powers to use. They need to have the skills and experience to judge when to seek a restraint order and what enforcement strategy to deploy.

Let’s examine what that means in a confiscation enforcement case. Here, you are dealing with a debt to be enforced against the offender’s property. That apparently simple process can lead to any number of challenges to the offender’s ownership of that property. What happens if he is insolvent? What of a spouses rights on matrimonial proceedings? Or claims that the property in fact belongs to a third party. Navigating these claims is difficult, complex work. You need specialists to undertake it.

Point 6 – Domestic systems cannot operate in isolation. We must make them work together.

Crime, particularly organised crime, is international in its scope. Commodities and money cross borders with ease, and in order effectively to separate criminals from the proceeds of their crimes, we need to make our legal systems support each other with similar ease. That entails helping each other enforce our orders. It also entails giving assistance in cases where the requesting state is pursuing a legal route, for example civil recovery, that is not available in the requested State. We need to remember that criminals will readily exploit any gaps in our arrangements and it is incumbent on us to work together to plug those gaps. Collaboration of the sort that our Director, Lisa Osofsky, spoke of yesterday is what we need.