Seizure of Assets In London

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Significant experience advising clients who are the subject of HMRC investigations and criminal prosecutions for tax-related offences, fraud and money laundering and other offences including:

  • Serious and Organised Crime
  • Bribery & Corruption
  • Insider Dealing
  • Corporate Manslaughter and Health & Safety Law
  • Fraud and Financial Crime
  • Corporate Crime
  • Tax Investigations
  • Cash Seizures, restraint Orders and Confiscation Proceedings

Former international judge who presided in many complex serious and organised crime cases including complex financial crimes, tax evasion, money laundering, fraud and asset confiscation cases.

If you are looking for a proactive approach with clear, strategic advice for the successful conclusion of your case, contact us for a free consultation.

Confiscation is an essential tool in the prosecutor’s toolkit to deprive offenders of the proceeds of their criminal conduct; to deter the commission of further offences; and to reduce the profits available to fund further criminal enterprises.

Restraint Order

A restraint application may be made at any time following the commencement of the criminal investigation and at any stage of the criminal proceedings.

A restraint order must make provision for the defendant’s reasonable living expenses from their restrained assets (unless sufficient available assets remain unrestrained) and in practice this is likely to make the application for a restraint order inappropriate where a defendant’s available assets will be quickly eroded by way of a living expense entitlement. A restraint order should be considered if there are identified assets that may be required to satisfy a compensation order in circumstances when the compensation order is likely to be paid out of the monies enforced in respect of the confiscation order.

Restraint Order - Legal Principles

A restraint order may be granted under s.41 and may have the effect of freezing property anywhere in the world with the aim of preserving that property so it is available to settle any confiscation order that may be made. It may be made both against a defendant or a person under investigation together with any other person holding realisable property.

An application for a restraint order may be made by the prosecutor

Costs generally follow the event in restraint proceedings and prosecutors should only proceed with the application if they are satisfied that they have been made aware of all relevant information and that the statement in support of the application properly reflects all of the available evidence and unused material both for and against the prosecution case.

The judge may only grant a restraint order pursuant to s.41 if any of the five conditions set out in s.40 are satisfied.

The Five Conditions

The first condition (s.40(2))

The first condition is satisfied if a criminal investigation has been started in England and Wales with regard to an offence and there are reasonable grounds to suspect that the alleged offender has benefited from his criminal conduct (for a fuller summary of ‘benefit’ and ‘criminal conduct’ please see Chapter 3 below).

S.88(2) defines a criminal investigation as being an investigation, which police officers or other persons have a duty to conduct with a view to it being ascertained whether a person should be charged with an offence.

Criminal conduct is conduct that either constitutes an offence in England and Wales or would constitute such an offence if it occurred in England and Wales. An alleged offender will be taken to have benefited from his criminal conduct if he obtains property as a result of or in connection with the conduct.

It is important to note that if a restraint order is granted on the basis that the first condition is satisfied the order ‘must’ contain a requirement that the applicant report to the court on the progress of the investigation ‘at such times and in such manner as the order may specify’ (s.41(7B)).

If the first condition was satisfied the restraint order ‘must’ be discharged if proceedings for an offence are not brought within a reasonable time. What amounts to “a reasonable time” will depend on the circumstances of individual cases, but it is particularly important that criminal investigations proceed with all due expedition when a restraint order is in force (s.42(7)).

The second condition s.40(3)

The second condition is satisfied if proceedings for an offence have been started in England and Wales and not concluded, and there is reasonable cause to believe that the defendant has benefited from his/her criminal conduct.

Proceedings are started once a warrant or summons in respect of the offence is issued by a justice of the peace under s.1 of the Magistrates’ Court Act 1980, when a relevant prosecutor issues a written charge and requisition or when a person is charged with the offence after being taken into custody without a warrant, or when a bill of indictment is preferred in accordance with section 2(b) of the Administration of Justice (Miscellaneous Provisions) Act 1933.

Proceedings are not concluded for the purposes of POCA until such time as any confiscation order made against the defendant has been paid in full (including accrued interest)discharged or quashed (and there is no further possibility of  appealing the decision to quash the order) (s.85(5)). (Note, the duty to discharge the pre-existing restraint order upon the conclusion of proceedings does not apply where the conviction was quashed by the Court of Appeal and a retrial was ordered or the prosecutor has applied for such an order – refer to s.42(6A)-(6B) for the detailed provisions.)

By virtue of s.40(7) the second condition will not be satisfied if the court believes that either there has been undue delay in continuing the proceedings or if the prosecutor does not intend to proceed.

The third condition (s.40(4))

The third condition is satisfied if the prosecutor has applied (or is likely to apply) to the Crown Court under:

  • 19 (to reconsider making a confiscation order when no such order was made)
  • 20 (to reconsider making a confiscation when no such order was made and there is new evidence that the defendant benefited from his or her criminal conduct);
  • 27 (to make a confiscation order where a defendant absconds after conviction or committal); or
  • 28 (to make a confiscation order where a defendant absconded more than three months previously but was neither acquitted nor convicted in commenced criminal proceedings); and
  • there is reasonable cause to believe that the defendant has benefited from his criminal conduct.

The fourth condition (s.40(5))

The fourth condition is satisfied if the prosecutor has applied (or is likely to apply) to the Crown Court under s.21 to reconsider the benefit figure in a confiscation order and there is reasonable cause to believe that the Court will decide that the amount found under the new benefit calculation of the defendant’s benefit exceeds the relevant amount (as defined in s.21(13)).

The fifth condition s.40(6))

The fifth condition is satisfied is the Prosecutor has applied (or is likely to apply) under s.22 to reconsider the amount available to satisfy a confiscation order and there is reasonable cause to believe that the court will decide that the amount found under the new calculation of the available amount exceeds the relevant amount (as defined in s.22(8).

It should be noted that the third, fourth and fifth conditions will not be satisfied if the court believes that either there has been undue delay in continuing the application, or the prosecutor does not intend to proceed (see s.40(8)).

The term “reasonable cause to believe” is not defined in the legislation or relevant case law. It clearly connotes something more than suspicion and the belief must be rational and based on adequate supporting material. It does not require the prosecutor to adduce as much evidence as would be required for a jury to convict.

The second condiIs there a ‘real risk’ that assets may be dissipated?tion s.40(3)

In all cases, regardless of which s.40 condition is being relied on, the prosecutor must be able to show there is a real, rather than fanciful, risk that assets may be dissipated if a restraint order is not made.

In many cases, particularly those involving charges of dishonesty, the risk of dissipation will speak for itself and will not prove problematic: see Jennings v CPS [2005] 4 All ER 391.  However, prosecutors must be alive to the necessity to establish that such a risk exists. This is especially so in cases where there has been a delay in applying for the restraint order and there is no evidence to show the defendant has dissipated assets in the meantime.

As the Court of Appeal held in Re B [2008] EWCA 1374 in such a case it is incumbent both on the prosecutor and the judge to explain how it can be said there is a real risk of dissipation in the future when the defendant has not dissipated assets in the past despite having every opportunity to have done so.

The extent of a restraint order

The amount of realisable property that can be restrained will depend upon the amount in which the confiscation order is likely to be made. The court will permit the prosecutor a degree of latitude in the assessment of the amount of benefit where enquiries into its extent have not yet been completed.

A defendant will be restrained from dealing with all of his assets (“an all-assets restraint order”) if the prosecutor is going to ask the court to conclude that the defendant has a criminal lifestyle and has benefited from general criminal conduct.

If the prosecutor is not alleging that the defendant has a criminal lifestyle and the court is going to be asked to decide whether the defendant has benefited from his particular criminal conduct, a defendant will be restrained from dealing with specific assets which, when taken together,  have an equivalent value than the amount of his benefit from particular criminal conduct (“a specific restraint order”).

Where the amount the defendant has benefited from particular criminal conduct exceeds the value of all his assets or the lifestyle provisions are triggered, it will often be appropriate to restrain the defendant from dealing with all of his assets.

Any person who holds assets jointly with the defendant may be specifically restrained from dealing with those jointly held assets. The recipient of a tainted gift may be restrained from dealing with any realisable property they hold up to the current value of the gift.

Companies

Companies enjoy their own legal personality separate and distinct from the defendant.  In normal circumstances, therefore, assets of a company do not constitute realisable property of the defendant. However, a long line of authorities have established that where a defendant is the controlling mind of the company and it is a sham and/or has been used to facilitate the criminal conduct complained of, the court may ‘pierce the corporate veil’ of the company and treat it as the realisable property of the defendant: see the full consideration of the issues in R v Boyle Transport (Northern Ireland) Ltd [2016] EWCA Crim 19.

The Court will not, however, permit the restraint order to operate at the pre-conviction stage is such a way as to preclude the company engaging in legitimate trading activity. The restraint order will need to make provision for company assets to be released to facilitate such activity. In cases of particular complexity, an application for the appointment of a management receiver may be necessary (see Chapter 5 below).

Tainted gifts

A gift is made if the defendant transfers property to another person for a consideration whose value is significantly less than the value of the property at the time of the transfer.

There are a number of ways that a gift will be tainted (see s.77):

  1. If the court has not made a decision as to whether the defendant has a criminal lifestyle or has determined that the defendant does have a criminal lifestyle a gift will be tainted if it was made after the first day of the period of six years ending with the day the proceedings were commenced against the defendant (or, if there are two or more offences and proceedings for them were started on different days, the earliest of those days); or
  2. If the court has determined that the defendant does not have a criminal lifestyle a gift will be tainted if it was made after the date on which the offence was committed (or the earliest date if the particular criminal conduct consists of more than once offence); or
  3. If the gift was made at any time and was of property which was obtained by the defendant as a result of, or in connection with, his general criminal conduct or which represented in the defendant’s hands property obtained by him as a result of or in connection with his general criminal conduct.

Although a court can apply the wider definition of tainted gifts at the restraint stage (i.e. at point 1 above), if it is clear at that time that the defendant does not have a criminal lifestyle and that therefore the narrower definition will apply at the confiscation hearing, the court will have to take this into account when making the restraint order.

Ancillary Orders

S.41(7) gives the Crown Court jurisdiction to make any such ancillary order as it believes appropriate for the purpose of ensuring the restraint order is effective.

The two orders most commonly made under s.41(7) are provision of information orders and repatriation orders.

Provision of Information orders

A provision of information order requires the defendant to provide information to the prosecutor in a witness statement, verified by a statement of truth, about the nature, extent and location of all his realisable property. Such an order may be appropriate if the value of the defendant’s known assets do not correlate with the value of the property known to have been obtained by him or her.

A provision of information order may be made against a third party holding the defendant’s realisable property: see Re D (Restraint Order: Non Party) The Times, 26 January, 1995.

In order to protect the defendant’s privilege against self-incrimination, provision of information orders are made subject to a strict condition that the statements may not be relied on in the criminal proceedings. It is of vital importance that this rule is adhered to at all times.

Once a defendant has been convicted, the provision of information statement may be relied on in the confiscation proceedings. Indeed, good practice dictates that such statements should normally be exhibited to the Prosecutor’s Statement of Information made under s.16.

Repatriation orders

Repatriation orders are orders requiring a defendant to repatriate to England and Wales assets held overseas. They are most commonly used in relation to funds held in overseas bank accounts which are vulnerable to dissipation before a letter of request can be issued and actioned to secure them.

A repatriation order should only be sought where the realisation of assets held overseas will be necessary to satisfy a confiscation order in the amount of the defendant’s benefit. If there are sufficient UK based assets available, a repatriation order should not be sought. For more details on the Court’s power to make a repatriation order, see DPP v Scarlett [2000] 1 WLR 515.

Detention and Seizure of Property

The restraint order can make provision for the continued detention of property seized or produced to the police pursuant to a relevant seizure power, namely:

  • 47C POCA; or
  • 352 OCA; or
  • Part 2 or 3 of the Police and Criminal Evidence Act 1984.

The detention provision must relate to specified property, property of a specified description or to all property covered by the restraint order. It can also relate to property that may be seized or produced in the future.

Variation or Discharge of a Restraint Order

By virtue of s.42(3) the person who applied for the restraint order, or any person affected by it, may apply to vary or discharge it.

In relation to an application to discharge a restraint order the court will take into consideration different factors depending on which condition in s.40 was satisfied when the order was granted.

If the first condition was satisfied the restraint order ‘must’ be discharged if proceedings for an offence are not brought within a reasonable time. What amounts to “a reasonable time” will depend on the circumstances of individual cases, but it is particularly important that criminal investigations proceed with all due expedition when a restraint order is in force (s.42(7)).

If the second condition was satisfied or the third, fourth or fifth condition was satisfied because an application had been made, the court ‘must’ discharge the restraint order when the proceedings or the application (whichever is relevant) is concluded (s.42(6)).

If the third, fourth or fifth condition was satisfied because an application was likely to be made the court must discharge the restraint order if within a reasonable time the application is not made (or on the conclusion of the application) (s.42(8)).

The proceedings are concluded when:

  1. A defendant is acquitted on all counts (s.85(3)); or
  2. The defendant’s conviction is quashed on appeal (s.85(4) subject to ss.42(6A) and (6B) ); or
  3. The defendant’s confiscation order is satisfied (that is to say no monies are due under it (s.87(1)), discharged or the order is quashed and there is no further possibility of an appeal against the decision to quash the order (s.85(5)); or
  4. One of the scenarios relating to an appeal arise as detailed in s.85(6)

An application is concluded when one of the scenarios in s.86(1) or (2) arise.

Prosecutors should not agree to the discharge of a restraint order until such time as the confiscation order has been satisfied. Accordingly, it is absolutely imperative that the restraint order is not discharged at the point a confiscation order is made. At that point the proceedings are not yet concluded and any variation to the restraint order which is required to facilitate the sale of the defendant’s assets will be managed by the CPS POC prosecutor.

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