BSQ partner and Fraud expert Daniel Godden and partner Roger Sahota have been instructed in challenging one of the U.K.’s largest confiscation orders.
Extracted below is BSQ Partner Roger Sahota’s article on Account Freezing Orders for the International Bar Association’s Criminal Law Bulletin.
New UK legislation paves the way for increased non-conviction-based asset seizures.
On 17 April 2018, new provisions came into force, which allowed state investigative agencies to apply for an account freezing order (AFO) under paragraph 303Z3(2) of Part 5 of the Proceeds of Crime Act 2002 (POCA 2002). An AFO may be granted in the lower courts, that is, where a magistrates’ court is satisfied that reasonable grounds exist for suspecting that money held with a bank or building society of a value over £1,000 is ‘recoverable property’, or that it is intended to be used in unlawful conduct. ‘Recoverable property’ is defined in POCA 2002 as ‘property obtained through unlawful conduct’. These provisions mirror those for the seizure, forfeiture and detention of cash under Part 5 of POCA 2002.
The threshold test (ie, reasonable suspicion that the property represents the proceeds of criminal conduct) for the granting of an AFO under the first limb is extremely low. In the case of the National Crime Agency (NCA) v AB, an AFO was granted by the magistrates’ court on the basis of two-year-old BBC news reports taken from the internet, which documented the conviction of a close relative of the account holder in another country on corruption charges. There was no suggestion in that case that the account holder was involved in serious crime or corruption.
NCA officials have indicated that a ‘significant’ number of AFO applications are being prepared. AFOs are therefore likely to be widely used in financial investigations as political pressure grows for law enforcement agencies to be seen to be taking steps to tackle financial crime. In particular, it is now relatively straightforward for the authorities to obtain an AFO after a bank or financial institution makes a ‘suspicious activity report’ regarding a credit balance in a bank account.
Against this context, it is no accident that the new AFO regime has been designed to dispense with many of the safeguards or pre-conditions that had to be met before a bank account restraint order could be obtained under the old POCA regime. These included: requirements for a criminal investigation or prosecution to be underway; and proof of a risk of dissipation of assets before an application was made to the Crown Court rather than a court of summary jurisdiction. Moreover, a deliberate decision was taken to invoke the POCA 2002 Part 5 definition of ‘recoverable property’ rather than the Part 7 concept of ‘criminal property’, which applies to money-laundering offending (ie, a person’s benefit from criminal conduct)and is much harder to prove.
The effect of an AFO is that funds held in a bank account can be frozen for an initial period of up to six months, which can then be extended on a six-monthly basis up to a maximum of two years. At the end of the two-year period, there will be a hearing where the court can consider if the monies held should be recovered by the state at a forfeiture hearing. Forfeiture will be ordered where, on the balance of probabilities, the court is satisfied that the money held in the account is derived from criminal conduct.
On a related note, similar provisions are now also in effect allowing for the seizure and forfeiture of listed assets, that is, personal or moveable property, defined in POCA 2002, 303B(1) as precious metals, precious stones, watches, artistic works, face-value vouchers and postage stamps, which are said to be the proceeds of unlawful conduct or intended for use in such conduct.
Freezing orders are highly invasive measures. Given the enormous sums that could conceivably feature in an AFO, it is anticipated that applications for forfeiture under the new regime will provide fertile ground for vigorous legal challenges by way of a judicial review.
Unexplained wealth orders
Practitioners will be familiar with unexplained wealth orders (UWOs), which are deployed in many other jurisdictions. The Criminal Finances Act 2017 (CFA 2017) has introduced these provisions in England and Wales by way of amending POCA 2002. The new legislation requires individuals suspected of involvement or association in serious criminality who hold property valued over £50,000, which appears to be disproportionate to their known income, to explain the origin of their assets to the High Court. If the enforcement authority is not satisfied that the property was acquired through lawful conduct, litigation in the High Court can commence to recover the property further to the civil recovery provisions of Part 5 of POCA 2002. The test for recovery requires showing that the respondent's property represents ‘recoverable property’ and the applicable standard is the ‘balance of probabilities’.
This new Act specifically targets respondents who fall under one of these categories: politically exposed persons; individuals for whom there are reasonable grounds to suspect that they have been involved in serious crime (either in the United Kingdom or elsewhere); or anyone connected to such individuals.
To obtain a UWO, the authorities must show reasonable grounds for suspecting that the known sources of the respondents’ lawfully obtained income would have been insufficient for the purposes of enabling the respondents to obtain the property.
The UWO regime has international reach – it can apply to individuals and companies that are not resident in the UK and that hold property outside the jurisdiction. Pursuant to section 362J of POCA 2002, if a UWO is granted, the property can be frozen and the respondent must provide information and documents specified by the court within a set period. Moreover, section 362E of POCA 2002 stipulates that providing a statement that is false or misleading in a material way, either knowingly or recklessly, is an offence.
At the time of writing, despite the fanfare, only two applications for a UWO have been reported and both have been brought by the NCA. The UK government has estimated, in an impact assessment appended to the legislation, that they anticipate 20 UWO applications on an annual basis. Experience suggests that the limited usage and complexities inherent in making applications under the POCA 2002 Part 5 civil recovery regime means that a far lower number of UWOs may transpire in reality. In the meantime, lawyers advising high net-worth individuals and companies holding property in the UK who may have cause for concern about these new provisions should keep a close eye on developments in the field.
 Proceeds of Crime Act (POCA) 2002, s 304.
 The term ‘suspicion’ denotes ‘a degree of satisfaction, not amounting to belief, but at least extending beyond speculation’. UK’s Joint Money Laundering Steering Group Guidance Notes 2006.
 Unreported, Westminster Magistrates Court, May 2018. The author acts for AB.
 Ibid, statement made in the course of submissions in open court by counsel for the NCA.
 POCA 2002, s 340(3).
 POCA 2002, ss 241 and 241A.
 Section 1 of the Criminal Finances Act 2017 inserts new provisions to the Proceeds of Crime Act 2002 at sections 362A to 362I.
 POCA 2002, s 362B(2)(a)-(b).
 POCA 2002, s 362B(3).
 POCA 2002, s 362C(4).
 The orders relate to two properties, one in London and one in the southeast of England and both are thought to be owned by a PEP. Director for Economic Crime at the National Crime Agency Donald Toon commented that: ‘Unexplained wealth orders have the potential to significantly reduce the appeal of the UK as a destination for illicit income. They enable the UK to more effectively target the problem of money laundering through prime real estate in London and elsewhere. We are determined to use all of the powers available to us to combat the flow of illicit monies into, or through, the UK.’ See www.nationalcrimeagency.gov.uk/news/1297-nca-secures-first-unexplained-wealth-orders.
 Former Director of the UK Serious Fraud Office David Green told Reuters that UWOs were an ‘extremely useful tool’ but the SFO would not use them until it had the right case. See www.reuters.com/article/uk-britain-fraud/uk-fraud-prosecutor-combs-through-cases-for-signs-of-unexplained-wealth-idUKKBN1FK2QI.
On the 17th April 2018 the police were given new powers which are now being used to freeze the bank accounts of wealthy London based foreign nationals.
Since then, we have represented a number of HNW’s who have had their bank accounts frozen on the application of the National Crime Agency, who can take up to 2 years to complete their enquiries. These new laws are in our opinion draconian and subvert the normal rules of due process because the orders can be obtained even where the person concerned is not accused of, let alone convicted, of any criminal offence.
And more are to come. Last week we were told by NCA lawyers that they were adopting an aggressive policy to apply for these orders which is “gaining significant momentum.”
Freezing someone’s bank account freezing order is an invasive and onerous measure. With no access to funds for everyday expenses these orders can make life very difficult for those concerned.
And there is no guarantee that the authorities will ultimately be successful in persuading an English Court that any money seized should be forfeited. Judges in this jurisdiction have traditionally been reluctant to order the forfeiture of property save where there is clear evidence that indicates a link with criminal conduct.
Time will tell how successful these measures will be and whether their use as with UWO's will be widespread or restricted to cases where for good reason a criminal investigation is not appropriate.
Read Roger Sahota's guide for the Law Society Gazette on the Criminal Finances Act 2017.
If you require advice in relation to an Account Freezing Order or Unexplained Wealth Order investigation please call our London Office.
BSQ’s Fraud defence team has been appointed to represent Dr Gerald Smith in enforcement proceedings concerning one of the highest confiscation orders ever made – now standing in excess of £64m including interest - ever made in the UK.
Mr Smith features in proceedings brought by the SFO in one of the largest cases under the CJA 1988 to be ever heard, presided over by Mr Justice Popplewell before the Commercial Court. The complex litigation involves more than 12 different parties and concerns assets worth in excess of £200 million.
The BSQ partners instructed are Daniel Godden and Roger Sahota.
The case has been widely reported in the media including the Evening Standard.
BSQ Partner has written for the Law Society Gazette on the recent landmark Supreme Court decision in Ivey v Genting. You can read the article here or below.
Phil Ivey, the professional gambler who failed in his attempt to compel a Mayfair casino to pay out £7.7m in winnings and was branded a cheat by the Supreme Court is likely to become a familiar name to future generations of criminal lawyers.
The facts of Ivey v Genting Casinos (UK) Ltd t/a Crockfords  UKSC 67 concern an ingenious effort by Ivey to find ’a legal way to beat the house’ whilst playing Punto Banco, a variant of Baccarat, using a technique known as ‘edge-sorting’ which relied on him spotting tiny differences in the cards. Crockfords casino refused to pay out his winnings because they believed that by using ’edge-sorting’ and hoodwinking the croupier on the table he had cheated.
At first instance, Mitting J sitting in the High Court rejected Ivey’s civil claim that Crockford’s should be ordered to pay him what he had won. The Court held that the gaming contract Ivey had entered into with Crockfords was subject to an implied term that he would not cheat. Mitting J found that the evidence suggested he had, noting that Ivey had duped the croupier into rotating the cards differentially to give him an advantage. The casino and the croupier would not have agreed to this if they had known what he was up to.
The Court of Appeal (Sharp LJ dissenting) later affirmed this decision but on different grounds. The case then came before the Supreme Court. In reaching a unanimous decision the Supreme Court Justices (Lord Neuberger, Lady Hale, Lord Kerr, Lord Thomas, Lord Hughes) dismissed Ivey’s appeal. In doing so the Court also delivered a landmark judgment revising the law on dishonesty in criminal proceedings.
A wide range of theft and fraud offences require a finding of dishonesty. And, more often than not, the main issue at trial is whether a defendant has acted dishonestly. Proving dishonesty is therefore a key requirement for the Crown. Previously the test for dishonesty was that set out in R v Ghosh  EWCA Crim 2 which stated that a conviction could only result where a jury was satisfied that;
- the conduct complained of was dishonest by the lay objective standards of ordinary reasonable and honest people; and, if yes
- the defendant must have realised that ordinary honest people would so regard his behaviour.
Following Ivey it is clear that the Ghosh test is no longer good law (para.74). What replaces it is a test similar to the first limb of Ghosh and identical to the civil definition of dishonesty as per Barlow Clowes International Ltd v Eurotrust International Ltd  UKPC 37. The second limb of Ghosh, known as the subjective test, is discarded. The new post Ivey definition of dishonesty retains a subjective element - a jury must firstly decide what a defendant’s subjective mental state and belief as to their knowledge of the facts are. Having done so the jury must then apply an objective test to the defendant’s state of mind – deciding whether by the ’standards of ordinary decent people’ (para.74) his intent was dishonest. This objective test is ’not a matter of law but a jury question of fact and standards’ (para.48) that did not require any further elaboration from the Court as ’Dishonesty is something which laymen can easily recognise when they see it’ (para.64).
This sea change in the law greatly simplifies the directions juries must be given by Judges in criminal trials on the meaning of dishonesty. It also addresses the Supreme Court’s main concern about the Ghosh test, namely that it did not require a defendant to show that their genuinely held belief refuting dishonesty was also a reasonably held one. Relying on the second limb of the Ghosh test, the Supreme Court justices noted that defendants were entitled to plead as a defence ’I did not know that anybody would regard what I was doing was dishonest’ and to cite a myriad of cultural or other creative explanations in support of their mistake. The Court felt this had ’the unintended effect that the more warped the defendant’s standards of honesty are, the less likely it is that he will be convicted of dishonest behaviour’ [para. 58].
By removing the second limb of the Ghosh test the decision in Ivey has raised the bar for anyone who denies acting dishonestly. In complex fraud and business crime cases in particular the effect will be dramatic. No longer will individuals be able to rely on Ghosh to say in their defence that they mistakenly but genuinely believed that their decision-making and conduct was consistent with industry norms and would not be seen by their contemporaries as dishonest. Closing this window of opportunity was an important objective for the Court, which commented that ’there is no reason why the law should excuse those who make a mistake about what contemporary standards of honesty are, whether in the context of insurance claims, high finance, market manipulation or tax evasion’ [para. 59].
Ivey will therefore be a welcome development for prosecution lawyers involved in fraud cases where establishing dishonesty is an essential ingredient. Anecdotal evidence suggests that proving dishonest intent to the Ghosh standard has often been seen by prosecutors as an obstacle to conviction – the recent acquittal of six accused in the second inter dealer/broker LIBOR criminal trial being one possible example. All six accused relied on the second limb of Ghosh in their defence, claiming that they did not regard their conduct as dishonest in the context of widespread market malpractice in the setting of LIBOR prevalent at the time.
Interestingly, were the same six accused tried today applying this new interpretation of the law they may have been prohibited, as a matter of law, from even raising this type of explanation as a defence addressing the objective test set out in Ivey. In the first LIBOR case - R v Tom Hayes  EWCA Crim 1944 - the Court ruled (Cooke J, upheld by the Court of Appeal) that evidence of a similar nature of ’market ethos’ raised by Hayes was ’iirrelevant to the determination of the objective standards of honesty’ (para. 33) and had the effect of ’diluting the standard’ that a reasonable person would otherwise apply. In the second LIBOR trial Hamblen J treated himself as bound by this decision. Consequently, the six accused in that trial could not rely on the first limb of Ghosh in their defence. Their options post Ivey, with the second limb of Ghosh also removed, would be far more limited.
The latest decision in Ivey may therefore encourage the Crown and other prosecuting agencies to continue pursuing such complex cases. Whether it results in more convictions however remains to be seen.
Phil Ivey, an American gambler who failed in his attempt to compel a Mayfair casino to pay out £7m in winnings and was branded a cheat by the Supreme Court yesterday is likely to become a familiar name to future generations of criminal lawyers.
Ivey (Appellant) v Genting Casinos (UK) Ltd t/a Crockfords (Respondent)  UKSC 67 is an important case for lawyers and finance professionals because it revises the law on dishonesty. Defendants in all fraud, theft and business crime prosecutions will have to adapt to the new Supreme Court ruling.
One of the most common defences raised in business fraud prosecutions is that a defendant has not acted dishonestly. Proving dishonesty is therefore a key requirement for the Crown in fraud and theft prosecutions. Previously the test for a conviction was that set out in R v Ghosh  EWCA Crim 2 which states that a conviction could only result where a jury was satisfied that;
1. the conduct complained of was dishonest by the lay objective standards of ordinary reasonable and honest people; and, if yes
2. the defendant must have realised that ordinary honest people would so regard his behaviour;
It is the second limb of that test that the Supreme Court in a unanimous decision primarily focused their ire on. Their main concern was that the Ghosh test did not require a defendant to show that their genuinely held belief refuting dishonesty was also reasonable. Accordingly, this created “the unintended effect that the more warped the defendant’s standards of honesty are, the less likely it is that he will be convicted of dishonest behaviour” [Para 58].
In business crime cases the Court felt that a defendants conduct should be judged against “contemporary standards of honesty” - “there is no reason why the law should excuse those who make a mistake about what contemporary standards of honesty are, whether in the context of insurance claims, high finance, market manipulation or tax evasion” [Para 59].
Commenting on the decision BSQ fraud partner Roger Sahota said that ‘most fraud cases revolve around one central issue – did the defendant act dishonestly. The ramifications of the Supreme Court’s decision are not clear yet but it may have raised the bar for anyone who denies acting dishonesty. In complex fraud cases Accused persons may be required to show that their conduct and decision making was consistent with industry norms and would not be seen by their contemporaries as dishonest.”
The full decision is available here.
If you require advice in a fraud prosecution or investigation please contact our London office.
BSQ Fraud specialists Daniel Godden and Roger Sahota recently advised a company director accused of misappropriating company assets.
Our client was alerted by a red flag alert from the company’s auditor concerning accounting irregularities.
Fearing that an internal investigation would lead to a criminal and civil complaint from his employers we were instructed to approach his employers.
Following extensive negotiations, the parties agreed to a civil settlement and non-disclosure agreement.
If you require advice and assistance in a financial crime investigation please contact our London offices.
Daniel Godden acted as solicitor for Lord Hanningfield in his recent high profile acquittal. Lord Hanningfield was accused of dishonestly claiming parliamentary expenses. The case was resolved in Lord Hanningfield’s favour after a dismissal application on the basis that the concept of ‘parliamentary work’ was subject to parliamentary privilege.
Read Daniels article - ‘The Separation of Powers and the Exclusive Cognisance of Parliament’ written in conjunction with Rupert Bowers QC and published by the Solicitors Journal Vol 160, no.33, 6th September 2016 here - http://www.solicitorsjournal.com/comment/separation-powers-and-exclusive-cognisance-parliament).
Daniel Godden specialises in civil and criminal fraud. If you wish to speak to Daniel concerning a financial crime investigation please contact our offices.
Daniel Godden acted as solicitor for Lord Hanningfield in his recent high profile acquittal. Lord Hanningfield was accused of dishonestly claiming parliamentary expenses. The case was resolved in Lord Hanningfield’s favour after a dismissal application on the basis that the concept of ‘parliamentary work’ was subject to parliamentary privilege. Read more about the case in the Daily Mirror and the Guardian.
Rupert Bowers QC was instructed as Counsel.
Following a lengthy investigation by Birmingham Trading Standards Roger Sahota has been instructed in a multi defendant fraud and regulatory prosecution to act for the lead defendants, a small private company. Charges are brought following coverage that featured in BBC1’s One show. The case is expected to conclude in 2017.
Counsel instructed is Richard Furlong of Carmelite Chambers.
Confiscation law is one of the most complicated areas of criminal law. Roger Sahota is one of the leading criminal solicitors in this narrow field. We have prepared this guide for clients who are concerned at what will happen if they are involved in confiscation proceedings after their conviction.
This guide has been prepared in response to many frequently asked questions from of our confiscation clients we have prepared an overview of the confiscation process under POCA 2002.Itr predates the Serious Crime bill 2015. It is a general gude to the law and procedure - for specific advice on your individual case please contact a lawyer.
Below we set out the procedure for defendants who are asked to provide a financial statement after their conviction.
POCA Confiscation Procedure
The Confiscation procedure begins in the Crown Court after an Defendant has been sentenced.
Who Brings the Confiscation Proceedings?
The confiscation process begins as soon as a prosecutor requests it or the court believes it to be appropriate. If the Prosecution requests it the Court must proceed.
The process begins in a case where the Prosecution brings proceedings when the Crown serves a notice on the Court under s 16 of POCA. This notice confirms their intention to apply for confiscation.
What is the Standard of Proof?
Unlike ordinary criminal cases, the standard of proof in any POCA case, for all parties is the balance of probabilities, a lower threshold than beyond reasonable doubt.
Ordinary rules of criminal evidence also do not apply so, for example, hearsay evidence is admissible.
What Information Must the Defendants Provide?
The Defendant will receive a statement from the Court issued under Section 18 (3) of the Proceeds of Crime Act.
The notice requires an Defendant to provide a statement detailing all of their assets and liabilities by a certain deadline. The Defendant must set out details of all assets including
• bank and building society accounts,
• savings, investments, premium bonds,
• stocks and shares,
• cash deposits,
• traveller cheques, postal orders and other financial instruments
In lifestyle cases, the defendant must provide details of any gifts of transfers received of property from the relevant date i.e. six years before the present case began.
Supporting documentation must also be provided including receipts, invoices, statements and proof of purchase and ownership.
The Court will provide a timetable for the Prosecution to reply to the statement from the Defence and the date for a final hearing.
What are the Prosecutor’s Powers?
A Section 16 POCA Notice, known as a Statement of Information will be prepared by the Crown’s Financial Investigator early in the proceedings and normally once the Defence statement has been received.
The statement contains all the matters that the Prosecutor believes are relevant for the court to consider when deciding the case.
The statement will indicate if the Crown claim that the Defendant has a criminal lifestyle.
During this process the Prosecution can use their investigative powers under POCA to make further enquiries to determine what assets a Defendant has.
The s 16 statement will set out the
• relevant facts of the underlying conviction
• summarise the defendant’s financial circumstances
• what is believed to be is the defendants benefit, the recoverable and available amount
• the amount of the confiscation order requested
• It will clearly state if the Prosecution believes that the defendant has hidden assets or has made tainted gifts.
What are the Court’s Powers?
The Court has various investigative powers it can exercise at the request of the Financial Investigator and the Crown. Generally the Court also has a wide power to order an Defendant to provide further information to help it carry out its functions. If the Defendant does not co-operate, the court can draw an inference.
What Must the Defence Show?
If the Defence disagree with any of the facts that the Prosecution rely on or the conclusions arrived at they must say why. Failing to object could be seen as acceptance of the Crown’s submissions.
The Defence must serve a formal reply to the prosecutors notice setting out the information requested supported by a statement of truth from the defendant.
Documents should be provided by the Defence to prove any of the points they rely on. The court will not accept or vague or generalised assertions made by the Defence.
In some cases it may be possible for the Defence and Prosecution to agree on the amount owed and the quantum of the confiscation order. However, the Court is not bound by any agreement made by the parties.
What Happens At The Final Hearing?
Both parties are entitled to file replies and counter replies to the statements of information they rely on. After the parties have filed the documents, evidence and additional skeleton arguments they rely on a final date will be set for the confiscation hearing.
At this hearing witnesses and experts can be called to give evidence. The Defence have every opportunity to challenge evidence against them and to call witnesses. Both parties will present their closing arguments before a decision on the Confiscation Order is made.
BSB Fraud Partner Roger Sahota has been instructed in one of the country's largest mortgage fraud investigations. The police claim more than 70 victims were defrauded by a rogue mortgage broker.