On Tuesday last week the CPS released details of 143 criminals who have failed to pay monies owed under Confiscation Orders, orders aimed at depriving a convicted person of the spoils of their crime. The headline on the front page of the Evening Standard read: “Exposed: Crooks who owe Britain £600 million” and the article went on to detail the names of the top 10 “Mr Bigs” together with photos of their glamorous homes and luxury cars.
The CPS and HMRC had been reluctant to publish details of their enforcement but the Director of Public Prosecutions, Keir Starmer QC, agreed they should be released. He went on to defend their enforcement record by explaining that orders over £1 million were challenging to enforce because assets are often hidden. Mr Starmer fails to mention that the enforcement record looked significantly worse just a few days before as it included two of the largest confiscation orders in history. In fact, the timing of the release may well have been orchestrated to follow the appeals of two convicted fraudsters [R v Ahmad and another  EWCA Crim 391] which saw their confiscation orders of over £92 million, quashed and replaced with Orders of £16 million each.
Messers Ahmed and Ahmad were convicted of involvement in a carousel or MTIC fraud in which HMRC paid out £12.6 million as a result of bogus VAT reclaims. Mr Justice Flaux, who made the confiscation orders against them, determined that the full amount of the monies cycled through their company’s bank account were ‘obtained in connection with the commission of an offence’ and that section 71(4) of Proceeds of Crime Act 2002 (POCA) allowed for no discretion in a finding that that very large amount of money was their “benefit” from their criminal conduct. Ahmed and Ahmad claimed that they were penniless but Judge Flaux found them to be “complete liars” and made orders in the figure of £72 million each (uplifted to £93 million after accounting for inflation) and ten years imprisonment in default.
The point on which their appeal succeeded was the meaning of the phrase ‘obtained in connection with the commission of an offence’. The Court of Appeal held that the money flowing through the company’s account was not obtained in connection with the offence, it was expended on the offence. Therefore they quashed the original order and replaced it with the sum of the VAT fraudulently obtained, £12.6 million before uplift for inflation.
While the original decision may have seemed startlingly unfair because nobody could sensibly contend that either defendant could ever pay £72 million, practitioners will not be surprised that POCA was interpreted in such a way as to produce an inequitable result. The language of the statute has led to some confiscation orders which defy common sense. In this case, the confiscation order would have been higher and possibly as much as the original £72 million if the case had triggered the “criminal lifestyle” provisions of POCA. It did not do so but, in another case, if there were convictions for two fraud or money laundering offences, the judge would still be forced by the legislation to consider making an order for an impossibly high amount which the defendants would never be able to pay.
To use a further example, one given in the judgement in Ahmad, ‘pecuniary advantage’, avoidance of a debt, will be included in the calculation of the Confiscation Order. In the case of a person convicted of smuggling cigarettes into the UK, selling those cigarettes on the black market and thereby evading duty and VAT, the benefit figure will be made up of the value of the duty and VAT on the cigarettes (the pecuniary advantage) and the sale proceeds. So far this may appear to be sensible. However, if the cigarettes were confiscated prior to their sale, the benefit figure will still include the duty and VAT payable on those cigarettes, even though they have been seized.
The plight of a convicted criminal is not a sympathetic cause and although there is no political will to amend this legislation in the near future, the appellate Courts have started to curb the more extreme effects of what is probably the most draconian proceeds of crime legislation anywhere in the world.
Corker Binning is a law firm specialising in fraud, business crime and general criminal work of all types. For more information about our expertise call us on 0207 353 6000.
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