UK: Confiscation And Money Laundering: A System In Need Of Repair

Last Updated: 18 April 2018
Article by Jonathan Fisher QC

Technical issues concerning the application of the criminal confiscation regime in Part 2 of the Proceeds of Crime Act 2002 ("POCA") continue to occupy the time of the Court of Appeal and the Supreme Court. Meanwhile, the official figures obtained following freedom of information requests show that the collection rate of monies ordered to be confiscated by the criminal courts remains very low, with somewhere in the region of £1.9 billion outstanding. The figure may be inflated artificially by the courts making orders to confiscate "hidden assets" which most probably do not exist, or multiple benefit figures in the case of co-defendants when there is a single benefit. However, even allowing for these distortions, the endeavour to separate criminals from their illicitly obtained monies is not working.

The story with money laundering is no different. The headline figures emerging from the Suspicious Activity Reports Annual Report 2017 published by the National Crime Agency show that in the period October 2015 to September 2016 there were 419,451 reports filed under Part 7 of POCA. Of these, 83.13% of these reports came from credit institutions (banks) and a meagre 0.12% from the real estate sector. However, the number of reports submitted by estate agents increased 44.79% from the 2014-2015 period. Of the reports filed between October 2015 to September 2016, where consent to proceed was refused, approximately £14 million was restrained, £16 million in cash seized, and 28 arrests recorded. This suggests that a cost - benefit analysis is urgently required since on the face of the figures the amount of sums restrained or seized, and the number of arrests, seems remarkably low.

A broader question relates to the proportionality of the anti-money laundering regime and whether the UK is out-of-line with its European counterparts. Totalling the suspicious activity reports submitted in European Union member States between 2006 and 2014, Europol has reported that of the 1.1. million reports submitted in 2014, 36% of the reports have come from the UK. This contrasts with 5% from Italy, 3% from France, 2% from Germany and 0.5% from Luxembourg. Europol raises the issue of whether the financial sector in the UK over-reports for defensive reasons. Echoing Europol Director, Rob Wainwright, the 1.1 million reports received during the period demonstrates not only the sheer number of resources, both in time and money, spent on sending, receiving and handling these reports but also the amount of activity in the regulated sector. However, in light of the fact that only a small number of these reports materialise into investigations or enforcement activity the question arises as to whether these resources are being misdirected. Alternatively, more resources may be needed to better scrutinize the 1.1 million reports.

The disparity in reporting levels across the EU members states may be telling of a more fundamental issue. Although governed at the supranational level, via 4MLD, the anti-money laundering regime is very much operated and implemented in the domestic setting. With the overall system only leading to 1% of criminal proceeds being confiscated its worth questioning whether the model currently used truly reflects the reality of an inherently international phenomenon. Does the answer lie in improved international cooperation and information exchange, in a singular specialist governing body to tackle global money laundering or somewhere in between?

On several occasions Select Committees in Parliament have reviewed the operation of the criminal confiscation regime and called for changes to be made. Some years ago, the House of Lords European Union Committee added its voice by suggesting changes to the width of the anti-money laundering reporting obligation, but the protestations were ignored. Now, the Law Commission is taking up the mantle. At the end of last year, the Law Commission announced in its Thirteenth Programme of Law Reform that it would be addressing both confiscation and money laundering aspects of the POCA.

In relation to confiscation, the Law Commission's project will examine the entire regime, and strive to identify a more effective way of making confiscation orders and increasing the recovery rate. As the Law Commission notes, the law in this area is notoriously difficult to apply and enforce. They cite two principal causes. First, confiscation rules are excessively complex, and judges do not always have the necessary expertise and confidence in this area. In short, the state of the law in this area remains unclear. The Law Commission refers to National Audit Office statistics from December 2013 which estimate the total annual cost of court hearings and appeals on confiscation orders to be £31.8 million. Second, enforcement processes are inefficient and the lack of discretion afforded to enforcement bodies and courts when it comes to confiscation orders once made. As referenced at the beginning of this article, the system also struggles to collect monies paid under confiscation orders. The Law Commission's task ahead is to propose a system of reforms that delivers a confiscation regime fit for purpose; namely to deprive criminals of their ill-gotten gains.

Early this year, the Home Office commissioned the Law Commission to analyse the functions of, and benefits and problems arising from, the reporting regime in POCA. The Law Commission acknowledges that the regime disproportionately affects businesses and is not optimal in preventing, detecting, and prosecuting money laundering. The expedited project, anticipated to be 9 months, will include consideration of the consent regime and will seek to optimise the detection of money laundering through effective reporting.

The outcome of the Law Commission's work is eagerly awaited. The sooner the confiscation and money laundering provisions established by POCA are reformed, the better.

A version of this article appears in the Lloyd's Law Reports: Financial Crime of which Jonathan Fisher QC is the General Editor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions