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The Proceeds of Crime Act 2002 has meant that confiscation proceedings are much more routinely brought these days for all manner of crimes. Now the Crown can assume that everything you have and everything that went through your bank accounts over the last six years can be taken away.
The regulators have been using the powers of the Proceeds of Crime Act 2002 with some abandon. Possibly this is their own method for adding to the sometimes light punishements that are handed out by the courts, or it could be a way for the strapped public sector to raise more cash. Whatever the case, minor criminals or traders committing regulatory breaches can often find themselves on the receiving end of harsh confiscation proceedings. They stand to lose their entire assets in the same way as the more serious offenders.
A very obvious asset for the regulators to target is the family home. This would normally be added on to the alleged benefit derived from the criminal activity. Thus, somebody who has flaunted health and safety rules on a couple or so occasions, or evaded a few thousand pounds of tax, may be threatened with the loss of their main asset worth many more times the scale of the crime.
The regulators will allege a level of benefit within their Statutory Statement of Information that they must produce under Section 16 of the Proceeds of Crime Act so that a court can consider how much they have obtained from their life of crime. When an independent forensic accountant is faced with this statement there is often a gasp of horror. The reason for this is that there is no constancy in the treatment by the various Crown investigators who are looking at all the ways to include assets within the benefit. Property is usually a feature, and it can be included in any number of ways.
It could be the family home that was bought twenty years ago. Here we see that the acquisition of the property should not be included in the benefit calculations. It was bought well before the Relevant Date. The Relevant Date is six years before proceedings were commenced against the convicted person and defines the period in which the regulators can look for the proceeds of crime.
If the house increased in value since the Relevant Date, this may represent additional equity that can be considered as benefit. However, this is only in respect of any increase that can be matched to mortgage payments and then only if the source of those mortgage payments can be deemed to represent criminal benefit.
The vast majority of confiscation cases in the courts at the present time are proceedings that were begun a year or so ago. Therefore the Relevant Date is going to be around 2003 - 2006 in most cases. Given that there has been a severe property crash in 2008, not many properties are currently showing equity growth in this period - a lot of properties acquired with mortgages having little or no equity!
These are all very important considerations and after the initial shock of seeing a claim for the full market value of a property included within every confiscation order sought, it is often possible to present an argument for a more realistic sum.
Crooks ought to lose all of their ill gotten gains. But the areas for acceptable assumption within the 2002 Act provisions leads to frequent unreasonable estimates of benefit being alleged and so there is a very strong argument for the utilisation of forensic accountants to make sense of the claim. This adds to the cost of managing the criminal confiscation system of course but ensures a fair system continues. But it does turn out for the best in that substantial sums are obtained from the crooks ensuring that a warning is sent out to would be offenders who might think that saving a little income tax, VAT or corporation tax, or flouting a few regulations might be harmless enough.
Mark Jenner specialises in the POCA 2002 and fraud cases. He is a Fellow of the Institute of Chartered Accountants, a Member of the Expert Witness Institute, a Certified Fraud Examiner and has a Masters Degree in Fraud Management. His work includes assessing fraud and confiscation proceeding cases.