Out-Law / Your Daily Need-To-Know

MPs back quicker freezing of criminal assets among proceeds of crime reform recommendations

Out-Law News | 29 Jul 2016 | 10:11 am | 2 min. read

The House of Commons Home Affairs Committee has made a number of recommendations for reform of the proceeds of crime legislation, which include freezing the assets of suspected criminals earlier in the investigation and greater involvement of the private sector including civil fraud solicitors in the recovery process.

Civil fraud and asset recovery expert Alan Sheeley of Pinsent Masons, the law firm behind Out-Law.com, welcomed the committee's report, which backed many of the proposals made by Pinsent Masons in its written evidence submitted to the committee as part of its inquiry.

"With authorities consistently failing to recover victims' losses resulting from criminal activity, it is encouraging to see the report addressing the issues and identifying recommendations for increased effectiveness," he said.

"The report sends a clear message that not enough is being done by the relevant authorities to ensure the efficient recover of the proceeds of crime and of victims' losses. Too often, cases are investigated and prosecuted without due consideration for how a confiscation order would ultimately be enforced; and the focus on conviction rather than recovery results in the amounts actually confiscated being small," he said.

"Confiscation orders will of course be enforced with greater success rates if a criminal's assets are frozen simultaneously with the criminal becoming aware of an investigation. The current method of often waiting until a conviction is obtained to freeze assets needs to be addressed, and it is pleasing to see the report adopt Pinsent Masons' proposals in this regard," he said.

"The committee's endorsement of Pinsent Masons' proposal to outsource the recovery and enforcement of confiscation orders to dedicated civil fraud and asset recovery solicitors is a step in the right direction. The relevant agencies need to make the recovery of victims' losses a priority, rather than merely obtaining a conviction," he said.

The committee began investigating the effectiveness of the proceeds of crime legislation, in particular the use of confiscation orders, in January. Its inquiry was prompted by reports that around half of those issued with confiscation orders to deprive them of the proceeds of criminal activity by the Serious Fraud Office (SFO) over the past three years had failed to pay, with an estimated £1.61 billion remaining outstanding as of September 2015. In 2013, public spending watchdog the National Audit Office (NAO) estimated that only 26p in every £100 demanded via a confiscation order was actually collected.

Among its recommendations, the committee called for the creation of a specialist 'confiscation court' to tackle what it saw as a "lack of interest and expertise in confiscation orders" among prosecutors and judges. Criminal assets should be frozen simultaneously with the individual becoming aware of the investigation for the first time, rather than waiting for a conviction; while non-payment of a confiscation order should be made a separate criminal offence.

The committee found that the main method used by the financial services and connected industries to report suspicious transactions, known as the 'ELMER' system, was "desperately overloaded" with reports and no longer fit for purpose. Supervision of the London property investment market in particular was "totally inadequate", and risked making the city a "safe haven for laundering the proceeds of crime" without much stronger supervision of agents, buyers and sellers.

The report recommends that oversight of the recovery of criminal assets should be centralised at the National Crime Agency (NCA), which should be made responsible for co-ordinating and overseeing the various local asset recovery agencies and operations. Once established as the lead agency and accountable as such, it should then be given "the necessary resources and tools to influence performance", including control of an overhauled 'asset recovery incentivisation scheme' (ARIS), according to the committee.

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