Recommended reform to confiscation orders

On 9 November 2022, the Law Commission published new reforms to overhaul the system for recovering the proceeds of criminal activities. The reforms, which are the culmination of a Home Office-commissioned review, would enhance enforcement powers and could lead to the recovery of millions of pounds of additional funds from offenders each year. Written by Richard Fisher KC, Doughty Street Chambers and Dr Anna Bradshaw, partner, Peters & Peters.

What are the current challenges to the effective enforcement of confiscation orders under the Proceeds of Crime Act 2002 (POCA 2002)? 

The current challenges to the effective enforcement of confiscation orders remain those which have dogged the recovery of defendants’ benefit from criminal conduct for many years and stem from, and are highlighted by, the significant amount of confiscation debt, the unpaid sums. Historically, this been caused by a combination of factors, including: unrealistic orders made and a disparate and ineffective enforcement regime. The Commissioners cite a March 2021 figure for the outstanding debt of unpaid and unrecovered confiscation orders as £2.35bn, of which, just £143m was considered by HMCTS to be recoverable.

What are the reforms proposed by the Law Commission? 

In a 642 page report, the Law Commission (LC) make a total of 119 recommendations. As a broad summary the recommendations address: (1) statutory amendments across a number of areas of POCA 2002 including restraint orders, the calculation of benefit, hidden assets and the variation of orders, (2) greater case management and determination in confiscation cases (both at first instance in the Crown Court and on appeal), (3) enhanced judicial training and (4) expediting (current and proposed) enforcement measures in the courts and strengthening law enforcement agencies’ response. A 23 page summary of the report is published separately. We consider further below the recommendations in relation to the calculation of the benefit figure which we regard as significant.

We also note with interest the reform recommended as to the scope of POCA 2002, s 22, which currently provides for the prosecution to be able to apply for an upward variation of the available amount. Whilst a post order application, it is indicative of the LC’s approach to bring greater flexibility, but also, certainty, to the confiscation regime in both terms of a realistic order and the time within which such orders should be made and finality reached so as to increase their enforcement. The POCA 2002, s 22 provision has been regarded by many practitioners as capable of prosecutorial misapplication and potentially producing extreme, and unfair, results, particularly with the unrestricted time for making an application in after acquired assets cases. If the LC’s proposed reform were enacted, the scope of POCA 2002, s 22 would be reduced significantly and limited to assets which were not disclosed at the time of the original confiscation order, or assets that were identified which have realised a greater sum than the original valuation of them. Assets acquired after the event would no longer be a basis for varying the available amount upwards with the result that the confiscation order were increased. This would remove the scope for post order, legitimately obtained, assets being the basis for an application resulting in increase in confiscation. Re Peacock [2012] UKSC 5 is a clear example of a case where an increase in after acquired (legitimate) assets produced an extreme result under the equivalent provisions of the DTA 1994, which the POCA 2002 provisions were based upon, with the same effect. The Supreme Court’s decision has been applied in POCA 2002 cases subsequently but the LC’s proposed reform would bring such applications, on that basis, to an end.

How are these reforms likely to make the enforcement of confiscation orders under POCA 2002 more effective? 

There has been, rightly, criticism of the disparity between sums ordered to be paid and the actual payments made. The size of the confiscation debt at £2.35bn is clear evidence that the regime is not effective. Our view is that the proposed reforms, if followed, do have the capability of improving the effectiveness of the payment and enforcement of confiscation orders. It is not possible to comment upon each of the 119 recommendations here and so what follows is a brief selection.

The principal point to note is the LC’s emphasis that the confiscation regime should make confiscation orders that are realistic as a ‘pivotal objective’. In our view the LC have focussed upon the calculation of the benefit figure as of fundamental importance and we agree that such focus is needed. We will consider solely the LC’s recommendations on particular criminal conduct cases and not those relating to criminal lifestyle cases. Historically, the definition of benefit under POCA 2002, ss 76(4), 84(2)(b) and 84(2)(h)) has produced confiscation orders with benefit figures, driven by a possessory rights approach, notably where property has passed through a defendant’s hands without retaining it. This approach has been criticised for producing unrealistic orders because benefit figures were artificially inflated and the defendant was then required to prove that their available amount was less than that figure with the consequent challenges in successfully achieving that. The LC have identified the benefit figure as critical to the resulting final order and have sought to address the historical approach through their recommendations. We agree with that approach.

Although the courts have developed, through caselaw, a focus on power of control or disposition for assessing benefit, the LC identify the limitations to, and inconsistent results produced by, that approach. The LC recommend an approach where the defendant’s benefit is determined by what they gained, as a result or in connection with the criminal conduct for which they were convicted. The LC propose copying across the definition of ‘gain’ from Fraud Act 2006, s 5(3) as ‘keeping what one has as well as …. getting what one does not have’ (including temporary and permanent gains). In our opinion this can have the advantage of simplifying the concept of benefit from that contained in POCA 2002. It is noteworthy that the LC propose that the reforms should include a requirement that the court must consider the apportionment of gain between the defendant and others. Hitherto POCA 2002 has not provided for apportionment and practitioners relied on caselaw, notably some limited reference in R v Ahmad [2014] UKSC 36 but, in our experience, with minimal success. A statutory footing increases the effectiveness of the regime. Furthermore, the LC propose adding a second stage to the total benefit calculation, containing an interests of justice test, albeit one with a burden placed upon the defendant (or the court is otherwise satisfied), that where it would be unjust to make an order that the defendant’s benefit is equivalent to the gain, where the defendant had intended to have only limited power to dispose of or control the gain. If this test is satisfied, the court may reduce the total benefit figure to an amount which reflects the limited power to dispose of or control the gain. The introduction of that test would provide defendants with a proper statutory footing for contending for an appropriately reduced gain. We think that a simplified approach to the calculation of benefit as has been recommended by the LC can result in realistic orders being made which is a strong starting point for orders actually being paid.

In addition, the LC recommend codifying the existing practice regarding hidden assets (which does not feature by name in any provisions of POCA 2002) and taking that issue together with the recoverable amount to create a stepped approach. This recommended approach (as currently drafted) imposes a burden of proof on the defendant (unless the court is otherwise satisfied) that the available amount is less than the outstanding benefit. Although there is an advantage to placing the issue on a statutory footing, we are concerned that this recommendation may not, in practice, neatly align with the LC’s stated desire for simplicity.

Are there any areas central to the enforcement of confiscation orders that the Law Commission fails to consider in its recommendations for reform? 

Over a four-year period the LC have consulted with all relevant stakeholders with an interest in confiscation. Whilst the LC haven’t recommended a complete fresh start, the 642 page final report is close to a complete root and branch felling of Part 2 of POCA 2002, the associated procedural rules and the practical enforcement of confiscation orders that you could expect to see. We do not consider there to be any obvious areas central to the enforcement of confiscation orders that the 119 recommendations have failed to address. We were attracted to the development of confiscation courts but recognise the issues of time and expense to introduce those as being significant reasons not to recommend them. As to the extent to which the 119 recommendations will be adopted by the legislative and the speed with which any such reform will be brought into practice in statutory and procedural form, we will have to wait and see. One thing is for sure, the time has now come for radical change.