Criminal Law Reform Now

Proposals & Critique

J J Child, R A Duff, J J Child, R A Duff

• Publisher: Hart Publishing
• Year: 2018
• ISBN:
  9781509916795
• Edition: 1
• Topic: Jura
• Subtopic: Strafrecht

If you could change one part of the criminal law, what would it be? The editors put this question to nine leading academics and practitioners. The first nine chapters of the collection present their responses in the form of legal reform proposals, with topics ranging across criminal law, criminal justice and evidence – including confiscation, control orders, criminal attempts, homicide, assisted dying, the special status of children, time restrictions on prosecution, the right to silence, and special measures in court. Each chapter is followed by a comment from a different author, providing an additional expert view on each reform proposal. Finally, the last two chapters broaden the debate to discuss criminal law reform in general, examining various reform bodies and mechanisms across England, Wales and Scotland. Criminal Law Reform Now highlights and explores the current reform debates that matter most to legal experts, with each chapter making a case for positive change.

1

Reflections on Proceeds of Crime: A New Code for Confiscation?

MICHAEL LEVI^*

The reform of law is a political process, and the elements of underlying political pressures – as well as the difficulties thrown up by cases brought or wanted to be brought – have a strong influence on prioritisation of issues in the scarce space available in Parliamentary timetables. This chapter will review the cultural and political background behind measures to combat proceeds of crime, the history of legislation and implementation, and the contemporary case for change.

The proceeds of crime confiscation are socially and politically attractive for a range of reasons. Confiscation and forfeiture are socially restorative in a visible way that takes away something criminals have acquired and feel that they have ownership of, even if they know it is not legal; they offer a prospective general deterrence or at least crime reduction, through the common sense assumption (not proven empirically) that criminals will not offend at all or will offend less if they become aware that they will not be able to keep the funds that they have ‘acquired’; and they offer some compensation to identifiable victims, to society and (via a sometimes controversial incentives scheme) to cover police, prosecutors and the courts for enforcement costs in the use of financial investigation, asset freezing and other mechanisms to pursue assets.¹ Confiscation and asset recovery also offer something for diverse political and even ideological constituencies. For NGOs and development aid agencies in the Global North and South, there are prospects of deprivation of the proceeds of Grand Corruption (which usually involves offences committed in other jurisdictions, in which the UK or other major financial centres are trusted locations for assets and may also be where the bribe-paying companies – if not their actual bribe-paying intermediaries – are located).² Sanctions and asset freezing supplement banking and corporate due diligence by placing some funds ‘beyond use’, thereby reducing terrorism capacity for legally designated individuals, networks and Rogue States³ – an impact also claimed for freezing and confiscation on transnational organised criminals. For the public, stripping undeserving criminals – from local dealers to transnational traffickers and from full time criminals to otherwise respectable fraudsters – of the fruits of their crimes offers the hope that this will reduce the extent to which they serve as negative role models for young people in their communities and offers some symbolic satisfaction. In societies which crave public signals to offenders to deter them from vice and to show the virtuous that crime does not pay, proceeds of crime freezing and recovery is important.

Consequently, the public failure to achieve those objectives counts as humiliation for the State and civil society. Levels of proceeds confiscation have failed to meet official hopes for major financial impact. The public, like the media and indeed governments, may not ‘connect up’ the large (if empirically contested by scholars) ‘estimates’ of money laundering and the ‘costs of organised crime’ with the relatively puny criminal assets confiscated or even frozen: however it is not intellectually tenable to argue that confiscation is successful at the same time as asserting that criminals are making sums in the trillions while confiscation globally barely struggles into the billions of dollars, euros or pounds.⁴ It appears that criminals are cocking a snook at the State’s efforts to inhibit their lifestyle. Added to the dramatic demonology of crime itself, this somehow makes the grievance of lack of redress and ‘just deserts’ worse. If it turns out that offenders’ vehicles and other apparent ‘assets’ are hired or borrowed and are beyond the reach of confiscation or forfeiture, and that suspects and convicted persons cannot be stopped from making use of these ‘undeserved’ facilities, it may evoke the same resentments (or sometimes envy) at lack of entitlement as the stereotype of social security fraud, and even worse if the public can see (or imagine) them continuing to do visible harm in their neighbourhoods. It may contribute to de-legitimate the State’s claims about its capacity and motivation to control ‘serious crime’. Hence the long-term efforts of the police to monitor and act against the Adams ‘gangster’ family in London, which have occupied the courts in relation to Serious Crime Prevention Orders and confiscation.⁵

Despite the narrow framework of recent National Audit Office and Parliamentary reports (reasonably in the case of the NAO progress updates)⁶ – excluding HMRC civil fraud recovery and police cash forfeitures – it is important to appreciate that the problems of pursuing offender assets are neither new nor are they restricted to the British and formerly British Isles (including the Irish Republic). A reader of the above reports would be unaware of the EU network of MS Asset Recovery Offices, the Europol-based Camden Asset Recovery Inter-Agency Network,⁷ and the wealth of British, Dutch and Italian – indeed pan-EU and Council of Europe – empirical as well as legal research on this subject.⁸ Whether pre- or post-Brexit, the UK must deal with its crime problems on a national basis as well as by cooperation or pressure in international cases, which has improved in recent years. In reviewing existing approaches, the UK should consider practices in non-Anglophone countries and also what might be possible in international applications. Though modest regular recoveries from lower level criminals may have more crime reduction effect, more critical detailed attention is needed to the sorts of cases that generate larger and unsuccessful recoveries internationally, to examine whether success and failure are associated with case mix rather than particularities of confiscation regimes, and also whether more can be done to recover criminal assets held overseas that were neglected when POCA was drafted.⁹ The Public Accounts Committee noted with resignation:

While the amount confiscated has increased from £133 million in 2012–13 to £175 million in 2015–16, the number of confiscation orders imposed has fallen and debt has soared to £1.9 billion. Furthermore, weaknesses previously identified, such as unclear objectives and ineffective incentives for the many bodies involved in the system and poor performance information, still remain.¹⁰

The figures above are simply gross and net confiscation order values. However, the choice between metrics of asset recovery performance – per capita population, per recorded crime (or sub-set of crimes), per amount reasonably estimated to be proceeds of crime domestically and imported, per amount frozen or only actually confiscated or recovered – have not received serious analysis in formal papers by the Financial Action Task Force (hereafter, FATF), International Financial Institutions (IMF, World Bank), governments or the National Audit Office internationally. Although we should be much warier than the evangelists of change usually are about whether there is a universal ‘what works’ package to be found in this realm, these experiences may and should teach us that there are broader issues we need to consider even if we are focused solely on restraint and confiscation cases in the UK or England and Wales. Indeed the ‘in’ here should be carefully considered: the assets of offenders convicted (or investigated) in the UK may be overseas, while assets may be held in the UK by offenders (including but not restricted to kleptocrats) who reside overseas. The Law Commission cannot itself determine extra-territorial restraint and confiscation (though Worldwide Freezing Orders – formerly known as Mareva injunctions – were developed by the English civil courts to deal with financial claims, including misconduct such as Grand Corruption¹¹).

Implicit in many reports is the assumption that criminals are Protestant ethic capitalists bent principally on accumulation and on integration of their illicitly acquired proceeds into the respectable economy. It is true that empirical studies of offender lifestyles are thin on the ground, but Freakonomics insights such as its chapter ‘WHY DO DRUG DEALERS STILL LIVE WITH THEIR MOMS?’, as well as more formal academic studies, yield some grounds for scepticism about the centrality of accumulation in criminal motivation.¹² One quantitative study of serious fraud cases in Australia and New Zealand found that more than half of fraudsters simply spent the proceeds of their crimes on luxurious goods and services, with gambling and living expenses accounting for most of the other proceeds. Only 5 per cent of losses were recovered from offenders.¹³ And offender expenditure of significant sums on restaurants, clubs, gambling, holidays as well as on personal drugs consumption is unavailable for recovery. (Doubtless, betting firms and casinos would put more effort into customer due diligence if the money lost by criminals from criminality was repayable by them!) Unless confiscation can be made to occur much earlier in the criminal life cycle, this high lifestyle expenditure (by an unknown percentage of serious offenders as well as by most petty offenders) undermines some of the deterrence argument for proceeds confiscation, which relies on a significant proportion of the proceeds being saved rather than spent as offenders go along.

Thus, the elapsed time between the offence or obtaining proceeds and access to funds being stopped by post-conviction orders or pre-conviction asset restraint becomes the critical period both for deterrence and for asset recovery prospects. Some criminals are apprehended by the police or HMRC in possession of cash, which can be seized immediately with, one might expect, stronger cognitive effects. However, to understand deterrence and deterrability better, we need to avoid the tendency to lump different ‘types of criminal’ together so that it becomes hard to distinguish motivation and to identify how to discourage. We might therefore look at the difference between criminals who fit the definition of criminal lifestyle and those who do not. As defined by POCA 2002, ‘criminal lifestyle’ is not about how the money is spent but about how (and how repeatedly) it is obtained. However, we might consider also how money is spent or saved.¹⁴ To the extent that offenders have saved their proceeds, those funds or assets purchased with them will still be available in theory: but whatever moral position POCA 2002 and politicians may adopt in relation to their recuperability, it is unrealistic to think that would ever happen, and the high proportion of outstanding debts accumulating interest among the uncollected totals¹⁵ suggests that writing off those hypothetical obligations would be a sensible policy. Then free of this unnecessary hostage to the public discrediting of system efficiency, we can start again.

I.A Short History

There is a centuries-old tradition of legal rulings and academic disputes about the nature of post-felony confiscation which has influenced common law internationally, but which is not germane here and can be found elsewhere.¹⁶ However, it might be instructive 23 years on to revisit the executive summary of the first British empirical research study,¹⁷ and to see how ‘the system’ has fared: despite the substantial percentage rise in confiscation, massive expansion of the anti-money laundering regime in the private sector and legislation globally, and the attention given to the proceeds of crime issues at regular cross-government committees, many weaknesses identified then remain. This suggests that more substantive changes, rather than mere consolidation changes, may be needed in any Code for Confiscation to generate change.

No one who reviewed the current state of confiscation of the proceeds of crime in England and Wales in any detail would be likely to judge it a success. To summarise, the main difficulties are as follows:

(1)Relatively few ‘Mr Bigs’ have been convicted in the courts and consequently, few are available to have their assets confiscated. Indeed, few have been charged, and therefore have not even had their assets frozen.

(2)The confiscation order cannot ‘reclaim’ the past ‘entertainment’ expenditures of proceeds of crime by people … who have no apparent assets. Our interviews and what criminological evidence there is on persistent offenders’ lifestyles suggests that – except for cash ‘floats’ and other assets found directly on them, plus sometimes ostentatiously decorated homes – most medium and low-level offenders ‘spend as they go’ and have low savings ratios …. In fraud and other property crimes where the offender is not caught very soon after the offence, there are unlikely to be sufficient funds remaining even to compensate victims, let alone to yield any surplus to the Treasury.

(3)It is only the recent provisions of the Criminal Justice Act 1993 (CJA 1993) which make it easier to come back to the court if assets are discovered subsequent to the making of a confiscation order, and thus may generate greater sums confiscated in the futu...