Orders Need to Suit the Facts

Roger Sahota writes for the Law Society Gazette Opinion Column Reports that 16 of Britain’s most high-profile offenders still owe £126m in unpaid confiscation orders will not surprise anyone with an interest in financial crime. But tabloid calls for new measures to “beef up the authorities’ powers to seize ill-gotten gains” are only part of the solution. The Proceeds of Crime Act isn’t working and the time is ripe for reform. Earlier this year, the MOJ admitted that £780 million in confiscation orders made against convicted criminals remains unpaid and may never be recovered. That figure represents 60% of the global sum (£1.3 billion) that was outstanding in mid 2011-2012.

For the government to effectively concede that it has no strategy in place to recover this money is understandably cause for public outrage. Millions may have to be written off the MOJ’s balance sheet (as the sum owed is accounted for as an asset) at a time that its budget has already been slashed.

Better enforcement to tackle non-payment and prevent criminals from hiding or dissipating their assets is one answer that everyone can agree on. However, this should go hand in hand with a review of the law governing the confiscation of the proceeds of crime from convicted offenders.

One of the principal reasons why this problem arises is because the courts regularly make confiscation orders that will never be realised due to the way in which the POCA legislation must be applied.

POCA became law in 2002. It’s objective was to deprive offenders of the benefit (defined as turnover, not profit) from their criminal conduct. Parliament laid down a mandatory regime which Judges regularly describe as “draconian” in application. They have little or no discretion in applying the rules. Difficulties arise because POCA requires the courts to make far-reaching assumptions about the extent of an offender’s benefit from criminal conduct, to order the confiscation of legitimately acquired assets, as well as tainted property, and to send defaulters to prison.

Invoking the law of unintended consequences, the strict application of these provisions means that our courts regularly end up making unrealistic confiscation orders for sums far in excess of what a defendant can pay.

The knock-on effect includes the cost to the Exchequer of POCA enforcement proceedings, as well as that of keeping defaulters in prison, serving sentences of up to 10 years. Exaggerated confiscation orders far in excess of an offender’s likely assets may also act, in the opinion of the Court of Appeal, “as a disincentive to co-operate.”

The POCA methodology has also been criticised for producing results that are manifestly unjust. An offender’s real benefit may bear little relation to the confiscation order that the court must pass. In the recent landmark case of Waya (2012 UKSC 51), the Supreme Court recognised that the Act can generate confiscation orders that are disproportionate or unfair. It highlighted the case of a pharmacist who had overcharged the NHS by £464 from a total batch of claims in excess of £200,000 but was liable to pay a confiscation order in the total sum. The Supreme Court hinted that a change in the law might be desirable;

“The Crown Court has encountered many difficulties in applying POCA 's strict regime. Many of the complexities and difficulties of confiscation cases, arising from the extremely involved statutory language, would undoubtedly be avoided if a measure of discretion were restored, but whether to restore it, and if so in which form, is a matter for Parliament and not for the courts.”

Under the old law (pre-1995 and pre-POCA), a Judge could make a confiscation order to “pay such sums as the court thinks fit” in certain situations. POCA took that power away. A simple amendment to the Act, as advocated by some commentators, could restore it. Allowing the Judiciary to tailor confiscation orders to suit the facts of a case, taking into account what is actually realisable, would remedy many of the practical problems arising from the way POCA currently operates. More importantly, it would also help restore public confidence in our confiscation system.