First use of HMRC civil proceeds of crime powers

Out-Law News | 09 Sep 2020 | 11:32 am | 1 min. read

HM Revenue and Customs (HMRC) is increasingly turning to non-criminal remedies as part of a pattern of increased enforcement by its specialist fraud investigations unit, legal experts have said.

Eight gold bars worth an estimated £750,000, which were seized from a Dubai-bound passenger at Manchester Airport in November 2018, will be sold at auction this week, according to the BBC. The passenger was not prosecuted, but HMRC told the BBC it had applied for “forfeiture of the bars” in the first use of its civil proceeds of crime powers under the 2017 Criminal Finance Act.

Powers introduced by the Criminal Finance Act allow assets seized by law enforcement agencies under the 2002 Proceeds of Crime Act (POCA) to be subject to forfeiture without the need for a prosecution. The same powers already applied to cash seized under POCA.

Alistair Wood

Solicitor

HMRC is a tax administration, a law enforcement agency and a supervisory body for money laundering regulations. This power is yet another tool in its growing arsenal equipping it to ‘follow the money’ and seize the proceeds of crime.

Corporate crime expert Alistair Wood of Pinsent Masons, the law firm behind Out-Law, said: “HMRC is a tax administration, a law enforcement agency and a supervisory body for money laundering regulations, and so this power is yet another tool in its growing arsenal equipping it to ‘follow the money’ and seize the proceeds of crime, whether that be cash or other high value assets which are the product of criminal conduct”.

“This enforcement action is just another example of the increased level of enforcement by HMRC’s Fraud Investigation Service, who generate around 800 financial crime cases each year - more than all other UK economic crime agencies combined. A recent freedom of information request revealed that HMRC has increased its use of account freezing orders and forfeiture orders in 2019/20 when compared to the previous year, up 177% and 379% respectively,” he said.

Wood said that HMRC was increasingly demonstrating its willingness to pursue non-criminal remedies "where it feels that is the right course".

"The National Crime Agency currently leads the way in use of the powers granted to it under the Criminal Finance Act to obtain unexplained wealth orders in respect in respect of politically exposed persons or others suspected of involvement in serious crime," he said. "However, HMRC has increasingly used its new civil proceeds of crime powers combined with the increased use of freezing orders - for example, freezing funds held in a bank account relating to the business of the 57-year-old suspect in the recent furlough dawn raid," he said.

Tax investigations and corporate crime expert Andrew Sackey of Pinsent Masons said that HMRC's approach in these cases demonstrated the "selective prosecution policy" that set it apart from "pure" law enforcement agencies.

"These are powers which are likely to come into greater focus in the coming weeks and months as those suspected of abusing the coronavirus furlough scheme come under the microscope," he said.

"Dealing with an administration with such a blended portfolio requires a nuanced approach, and those impacted by such investigations are advised to seek specialist advice at the earliest opportunity," he said.