Effective Asset Recovery and Confiscation of the Proceeds of Crime in the EU: Challenges

11 th -12 th June 2018 Valletta, Malta Effective Asset Recovery and Confiscation of the Proceeds of Crime in the EU: Challenges HH Judge Michael Hopmeier 23 Essex Street, London WC2R 3AA Tel : 020 7413 0353 1 1

The UNODC estimates that the sum of money laundered globally amounts to between 2 and 5% of the global GDP or between EUR 615 Billion and EUR 1.54 Trillion each year

Michael Hopmeier 8

Pre amble to Directive 2014/42/EU Whereas: (1) The main motive for cross-border organised crime, including mafia-type criminal organisation, is financial gain. As a consequence, competent authorities should be given the means to trace, freeze, manage and confiscate the proceeds of crime. However, the effective prevention of and fight against organised crime should be achieved by neutralising the proceeds of crime and should be extended, in certain cases, to any property deriving from activities of a criminal nature. (2) Organised criminal groups operate without borders and increasingly acquire assets in Member States other than those in which they are based and in third countries. There is an increasing need for effective international cooperation on 9 asset recovery and mutual legal assistance.

(3) Among the most effective means of combating organised crime is providing for severe legal consequences for committing such crime, as well as effective detection and the freezing and confiscation of the instrumentalities and proceeds of crime. 10

Methods of Recovering Proceeds of Crime in UK Confiscation Orders following criminal conviction. Civil Recovery Proceedings non-conviction based Forfeiture of Cash- non-conviction based Private Civil Proceedings brought by Claimant State (including obtaining freezing ordersinjunctions)- not dependent on MLA or govt cooperation 11

THE NATURE AND PURPOSE OF RESTRAINT AND CONFISCATION ORDERS The purpose of a confiscation order is to deprive criminals of the benefit they have gained from their criminal conduct. The confiscation regime under The Proceeds of Crime Act 2002 ( POCA ) is designed to give effect to the principle that criminals should not profit from their crimes. It is not intended to be an additional punishment or fine. In CPS v N [2009] EWCA Crim 1573 the Lord Chief Justice made clear that the court was under a duty to give effect to that purpose. The purpose of a restraint order is to ensure that assets are preserved which may subsequently be required to satisfy a confiscation order. 15

Confiscation is not limited to serious fraud or financial crime. Where a Defendant has benefited from his crime, whatever the nature of the crime, then confiscation proceedings can be appropriate. Confiscation Orders are made in personam (against the defendant personally) rather than in rem (against specific assets). Confiscation Orders may be satisfied from any assets, whether those assets are found to be the proceeds of crime or legitimately acquired. Accordingly, when a Crown Court makes such an order it is not directing that particular assets must be realised. 16

Benefit A person benefits if he obtains property as a result of or in connection with the conduct [s.76(4)] pecuniary advantage he is to be taken to obtain as a result of or in connection with the conduct [is].a sum of money equal to the value of the pecuniary advantage. [s.76(5)] 17

R V Muddassar [2017]EWCA Crim 382 conspiracy to supply Class A drugs -benefit assessed in drugs case where 14 drugs deals to undercover police officers, 20449 calls calculation on averages and inferences upheld R V Stephen Reynolds [2017] EWCA Crim 1455 where a company had been established for the sole purpose of supplying goods to a local authority at inflated prices a judge had erred in valuing the benefit to the offenders by reference to profit rather than turnover. R V Lee Alan Reid [2018] EWCA Crim 628 calculation of benefit arising from fraudulently obtained remortgage transactions where the property had originally been acquired legitimately using untainted funds and the offender had either repaid or had undertaken to repay the sum due under the remortgage. R V Giedrius Gricevicius [2018] EWCA Crim 1061- calculation of benefit from large scale drugs conspiracy and available assets. Proportionality.

Recoverable amount s.7 Benefit s.7(1) Available amount s.7(2)(a) Nominal order s.7(2)(b) just amount s.7(3) OR OR OR 20

Beneficial Interest Cases -Third Party Claims s10a POCA (inserted by Section 1 of SCA 2015)

Schedule 4 Para 19 SCA 2015

Other orders (for default sentences see now S. 10 SCA 2015) Compensation- see R V Jawad [2013]EWCA Crim 644, R V Beaumont [2014] EWCA Crim 621, R V Lehair 2015 EWCA Crim 1324, R V Parkinson [2015] EWCA Crim 1448, R V Davenport [2015] EWCA Crim 1731 Appoint enforcement authority ss.34-36 Time to pay s.11 (S 5 SCA 2015) Default period of imprisonment ss.35,36 23

AMOUNT MAXIMIMUM TERM 10,000.00 or less 6 months 10,001 to 500,000.00 5 years 500,001 to 1 million 7 years More than 1 million 14 years ( R on application of Gene Gibson V Sec State for Justice 2015 EWCA Civ 1148 - enforcement of default sentence-credit for sums paid-interest)

Restraint orders S.40-47 Criminal investigation started Reasonable cause to suspect that an alleged offender has benefited ( S 11 SCA 2015 + monitor by reporting requirement S 12 continuation after quashed conviction) Note breach may amount to perverting the course of justice (R V Kenny 2013 EWCA Crim 1,R V Norman 2013 EWCA Crim 1397) Ashford V Southampton County Council 2014 EWCA Crim 1244 Ready Rentals Ltd V Ahmed [2016] EWHC 1996 Delay. Investigation 2009 Order July 2016 25

7. Orders for securing compliance with confiscation order After section 13 of the Proceeds of Crime Act 2002 insert 13A Orders for securing compliance with confiscation order (1) This section applies where the court makes a confiscation order. (2) The court may make such order as it believes is appropriate for the purpose of ensuring that the confiscation order is effective (a compliance order ). (3) The court must consider whether to make a compliance order (a) on the making of the confiscation order, and (b) if it does not make a compliance order then, at any later time (while the confiscation order is still in effect) on the application of the prosecutor. (4) In considering whether to make a compliance order, the court must, in particular, consider whether any restriction or prohibition on the defendant s travel outside the United Kingdom ought to be imposed for the purpose mentioned in subsection (2). (5) The court may discharge or vary a compliance order on an application made by (a) the prosecutor; (b) any person affected by the order. R V Pritchard [2017]EWCA Crim 1267 must be justified. Length/terms

CIVIL RECOVERY It is not always possible to commence criminal proceedings where, for example, the criminal offender has kept himself distant from the crime he is controlling or is outside the UK. Also, there are occasions where a criminal dies leaving recoverable assets or simply transfers them to a third party. In such situations, where the Crown Prosecution Service has decided it is not in the public interest to prosecute, the use of civil recovery to recover the proceeds of unlawful conduct will be considered. The powers under Part 5 of POCA 2002 can be exercised against any recoverable property, whether or not criminal proceedings have been brought

CIVIL RECOVERY Non-conviction based. Proprietary action on the part of the state to acquire property in the hands of a criminal or anyone else (not a bona fide purchaser for value) and trace it into property that represents the unlawfully acquired property- no need for conviction, civil standard of proof applies. 30

SCHEDULE 17 Section 45 DEFERRED PROSECUTION AGREEMENTS PART 1 GENERAL Characteristics of a deferred prosecution agreement 1 (1) A deferred prosecution agreement (a DPA ) is an agreement between a designated prosecutor and a person ( P ) whom the prosecutor is considering prosecuting for an offence specified in Part 2 (the alleged offence ). (2) Under a DPA (a) P agrees to comply with the requirements imposed on P by the agreement; (b) the prosecutor agrees that, upon approval of the DPA by the court (see paragraph 8), paragraph 2 is to apply in relation to the prosecution of P for the alleged offence. 32

Effect of DPA on court proceedings 2 (1) Proceedings in respect of the alleged offence are to be instituted by the prosecutor in the Crown Court by preferring a bill of indictment charging P with the alleged offence (see section 2(2)(ba) of the Administration of Justice (Miscellaneous Provisions) Act 1933 (bill of indictment preferred with consent of Crown Court judge following DPA approval)). (2) As soon as proceedings are instituted under sub-paragraph (1) they are automatically suspended. (3) The suspension may only be lifted on an application to the Crown Court by the prosecutor; and no such application may be made at any time when the DPA is in force. (4) At a time when proceedings are suspended under subparagraph (2), no other person may prosecute P for the alleged offence. 33

www.newlawjournal.co.uk 13 September 2013 Economic crime legal update Time to agree terms? Polly Dyer & HHJ Michael Hopmeier assess the role & impact of DPAs at home & abroad 34

UK-4 Main routes for overseas authorities to obtain documents and to freeze assets in criminal investigations Crime (International Co-Operation) Act 2003 Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005. Criminal Justice and Data Protection (Protocol No 36) Regulations 2014. The European Investigation Order (Directive 2014/41/EU.

(Acts adopted under Title VI of the Treaty on European Union) COUNCIL FRAMEWORK DECISION 2006/783/JHA of 6 October 2006 on the application of the principle of mutual recognition to confiscation orders (c) confiscation order shall mean a final penalty or measure imposed by a court following proceedings in relation to a criminal offence or offences, resulting in the definitive deprivation of property; Article 1 Objective 1. The purpose of this Framework Decision is to establish the rules under which a Member State shall recognise and execute in its territory a confiscation order issued by a court competent in criminal matters of another Member State.

(1) A (2) A v DIRECTOR OF PUBLIC PROSECUTIONS [2016] EWCA Crim 96 PROCEEDS OF CRIME ACT 2002 (EXTERNAL REQUESTS AND ORDERS) ORDER 2005 art.7, art.2, art.7(2)(a), art.55(1), art.9(7), art.7(2)(c), art.55, art.7(2), art.9, art.7(2)(b), art.8 A restraint order had been properly made under the Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 in relation to UK bank accounts held by two Kuwaiti nationals. There was no evidence of bad faith on the part of either the Crown or the Kuwaiti authorities in seeking the order and there was a real risk of dissipation of assets. A V DPP [2016] EWCA Crim 1393 on Criminal Justice Data Protection (Protocol No.36) Regulations 2014- refusal to cancel registration.

Thank you for your Attention diolch i chi am eich sylw HHJ. Michael Hopmeier 55