Law enforcement need to give more priority to asset recovery in criminal cases, says expert

Out-Law News | 08 Oct 2015 | 11:42 am | 3 min. read

New figures showing that criminals have still to re-pay a total of £774 million in ill-gotten gains highlights the need for law enforcement agencies to give greater priority to asset recovery in their criminal investigations, an expert has said.

The London Evening Standard reported on Friday last week that figures it had obtained from the Crown Prosecution Service showed that 190 criminals between them owe £774m in unpaid confiscation orders imposed on them after conviction. Each of those individuals has been ordered to repay at least £1m to account for gains they made illicitly, according to the newspaper's report. It said some of the debts have been outstanding for more than a decade.

The Standard reported that the Home Affairs Select Committee at the UK parliament had opened an inquiry to look into the ability of law enforcement agencies to seize illegal gains of criminals.

However, a spokesperson for the Committee confirmed to Out-Law.com that such an inquiry had yet to be officially launched. The Committee is due to consider the issue, include the potential scope and terms of reference of such an inquiry, when the House of Commons returns from recess next week and will "make a formal announcement thereafter", the spokesperson said.

Fraud and asset recovery expert Alan Sheeley of Pinsent Masons, the law firm behind Out-Law.com, said he hopes the parliamentary inquiry "will identify and recommend the reforms necessary to provide law enforcement agencies with the upper hand in dealing with the recovery of illicit gains" and help restore public confidence in their efforts to clamp down on criminal activities.

"The main driver for law enforcement agencies is imprisonment of the fraudster, not necessarily the recovery of the money," Sheeley said. "Law enforcement investigations need to respond more quickly and obtain restraining orders, which are similar to civil freezing orders, to stop dissipation of assets and trace criminals' assets immediately; hitting the Mr Bigs’ directly in the pocket. Obtaining restraint orders months, or even years after the events is simply unworkable as evidenced by there being £770 million in unpaid court orders."

Sheeley said businesses that have been the victim of organised crime do not need to rely on law enforcement bodies to help them recover assets. Sheeley said that law enforcement bodies should be under a statutory duty to advise victims of crime of the advantages of civil proceedings as against criminal proceedings.

He said: "Civil fraud litigators focus on one issue only; the money. We obtain freezing orders within days of being instructed on matters. We then focus on the repatriation of the assets back to the victim. After the assets have been recovered we then hand the matter over to law enforcement agencies and allow them to consider bringing criminal proceedings which may lead to imprisonment. Until the law enforcements’ primary drivers change to the cash, as oppose to the custodial sentence, the only option is civil proceedings to maximise the chances of recovering the victims’ assets."

Sheeley said that one of the problems faced by law enforcement agencies, as well as by civil fraud solicitors in private practice looking to assist victims of fraud and wrongdoing, is the fact that with such large sums at stake, criminals and fraudsters often utilise complicated offshore corporate structures and deposit their ill-gotten gains in overseas jurisdictions. He said this makes the process of locating and recovering the misappropriated assets much more difficult.

"Whilst it is possible to obtain disclosure orders against financial institutions to identify where the stolen funds are, this is a costly and time consuming exercise, and one which is always subject to the court’s discretion," Sheeley said.

Sheeley said he welcomed comments made by former government minister Sir Eric Pickles, who now acts as the UK government's anti-corruption champion in a Guardian story published on Saturday. Pickles said there is a need for the true owners of offshore companies in the crown dependencies and overseas territories to be identified by way of public registers and said the government could legislate on the issue, according to the report.

"For far too long, unscrupulous individuals have been able to obscure their ownership of corporate structures without justification," Sheeley said. "Whilst I am sure Pickles will face considerable opposition from the crown dependencies and overseas territories, if the fight against criminals and fraudsters is to be successful, their ability to hide their ill-gotten gains and distance their connection to those assets through the use of offshore structures needs to be curtailed."