One of the major objectives of any efficient, empathetic and effective regime or system of criminal justice is to ensure that convicted persons do not make any financial gain from their criminal activity. One method that has been used for thousands of years, which dates back even before the times of Hazrat Musa, A-S, – and it is included in the lax talionis (the Hebrew Scripture) and Islamic law and jurisprudence – in numerous jurisprudences and jurisdictions, is reparation, involving monetary restitution. This aims at replenishment of previously inflicted loss by the criminal to the victim. This could be either in addition to, or in replacement of, other punishment or penalty.
Another method, much more recent than reparation or restitution in criminal law, is the empowering of courts to make ‘confiscation orders’. Under this principle, a court, primarily after an accused has been convicted, can make orders for the confiscation of proceeds of crime. Unlike reparation where the money is paid to the victim, this provision requires the convict’s ill-gotten or other assets to be confiscated and given to the state (the national exchequer). This article is written with the hope of giving Pakistani readers the basic information, so that some lessons can be learned from, or a consideration given to enact up to date and modern legislation based up on, these recent developments.
Under English legal system, confiscation orders are a recent innovation compared to reparation. Under these provisions, a sentencing judge must consider making a confiscation order as part of the sentence after an accused has been found guilty in a court of law. If a court does not make a confiscation order, it has to give reasons for not doing so. The law was consolidated in 2002, under the Powers of Criminal Courts (Sentencing) Act of that year (POCA). This article summarises the law as practised in England, and explains a Court of Appeal’s recent case on one aspect of the interpretation of the Act: Hassan Modjiri (2010).
A lot of thinking and debate had gone into the enactment of the Proceeds of Crime (Sentencing) Act in order to stripping criminals of illegally obtained assets. The enactment contains detailed provisions, in addition to criminal confiscation orders against convicted persons or absconders, dealing with matters such as international co-operation, money laundering, civil recovery of proceeds of crime from unconvicted individual, investigation into suspected proceeds of criminal offences, and taxation of profits made from crime. In view of the recent developments, the legislation has been amended or added to, for example by the Serious Organised Crime and Police Act 2005, and the Serious Crime Act 2007.
This has been supplemented by the Money Laundering Regulations 2007. The Act created the Asset Recovery Agency, which has since become part of the Serious Organised Crime Agency (SOCA). It is now proposed to establish a National Crime Agency; and SOCA will become part of it. Here, we only examine the confiscation orders.
POCA enables criminal courts to order repayment of a sum of money equivalent to the amount adjudged to have been made from crime from all criminal conduct in the past six years. This can be done either in relation to a specific offence, or, if the court considers that the convict has a ‘criminal lifestyle’ (as defined in POCA), from all criminal conduct in the past six years. Thus, POCA becomes the principal tool for recovering the proceeds of crime; and it has increasingly been playing a crucial and critical part in efforts to tackle the criminal economy and provide some deterrence to criminals.
Research shows that the money recovered from persons involved in criminal activities in has been increasing considerably in recent years. However, research also has revealed a substantial attrition rate, in that there is a worrying reduction between the money of criminal benefit initially assessed and the amount eventually recovered (Home Office Research Report No. 17, 2009). The Report took into account the JARD figures [Joint Asset Recovery Database]). As a result, three measures are being taken:
1. Steps are being taken to maximise best means to allocate asset recovery resources.
2. A more systematic and strategic approach is under way to the use of confiscation orders, for example a more methodical and systematic sifting of cases is undertaken to ensure that potential confiscation opportunities are not being lost.
3. Co-ordination between different agencies has been increased in order to ensure that the asset recovery system is working in cooperation with each other and better communication opportunities between agencies are provided.
In order to ensure that assets are not dissipated before confiscation order can be made or enforced, POCA allows the Crown Courts and the High Court to make Restraint Orders, which freeze the assets of a suspect. The important thing to notice here is that these orders are available as soon as an investigation into an offence has begun and at any time thereafter. So, even before a conviction takes place, the suspect’s assets can be frozen, ensuring that the suspects do not hide or squander their assets.
An important aspect in the success of confiscation orders is enforcement. It is no use if a confiscation order is made but the criminal is able to avoid or delay it with impunity. Therefore, stringent rules are provided by POCA. Of course, it is open to defendants to pay their confiscation orders voluntarily. However, the courts are given a wide range of powers to ensure that confiscation orders may be enforced compulsorily, if necessary. Two noteworthy provisions are, firstly, that a confiscation order can be enforced against defendant’s any property, whether it has been obtained illegally or not; and, secondly, the order may also be enforced against any property in the hands of a person who has received a gift from the defendant, up to the value of the gift.
The confiscation orders can be enforced either by the Director of the Assets Recovery Agency or his/her nominee as a receiver, or by the prosecutor applying to the court for the appointment of a receiver. In default of compliance with the confiscation order, a defendant is liable to serve a term of imprisonment in default of payment, and, somewhat interestingly and very clearly, the confiscation order remains enforceable by other means even after such a term has been served.
Enforcement overseas is available under POCA. Domestic authorities are permitted to make applications for restraint and confiscation assistance to jurisdictions outside the UK. These are made via the Home Office (the Ministry of Interior).
Now we discuss the 2010 Court of Appeal (Criminal) case: Modjiri. The appeal raised a point of significant practical importance under POCA. It dealt with the valuation of partial ownership or beneficial interest held by a defendant in property, where that beneficial interest or ownership cannot be realised separately from the property. As we have seen above, the defendant lived in a home of which he was 25% owner. The amount of confiscation could only be obtained by the sale of the property but the other two co-owners refused to allow the sale of their abode of residence, as they were entitled to do under the trust deed, because they would become homeless. Although the courts have the power to force innocent co-owners to sell the property in such circumstances, it can cause unjust harm to the co-owners who had not committed any offence. The other easier solution was to value the property and order the defendant to pay his share, in this case 25%, of the property under the confiscation order.
The prosecution wanted the 25% of the valuation amount. They relied on some cases decided under the legislation before POCA. For example, a Court of Appeal case under previous legislation (Ahmed and Qureshi, 2004), that was decided under the 1988 legislation, in which the defendant’s half shares in the family homes were taken into consideration in determining their realisable assets, despite the fact that their homes would have to be sold in order to meet the confiscation orders. The prosecution in Todjiri, therefore, contended that the value to be attributed to the defendant’s interest was that proportion of the market value of the property that his ownership bears to the whole of the property.
In the trial court, the lawyers on behalf of the defendant, who was sentenced to 6 years’ imprisonment for possession of cocaine with intent to supply, maintained that the defendant’s interest in the property where, as a 25% owner, he lived with his relatives, had no value, because the house could not be sold as the other owners refused (as they were entitled to do under the trust deed for their home), and thus only a nominal amount should be awarded under the confiscation order, and that the Ahmed and Qureshi precedent did not apply to POCA. The trial judge had accepted these arguments on behalf of the defendant. These arguments were repeated in the appeal court.
The Court of Appeal court decided, in accepting the prosecution’s arguments and reversing the trial judge, that POCA was a consolidating legislation and Parliament did not intend to change the previous decided cases, including Ahmed and Qureshi. The Court also took into account a recent case Nottingham Crown Prosecution Service v Rose (2008), where it was decided that POCA does not make any change in the existing property valuation principles.
On the point that the defendant did not have any realisable value in the property, for the purposes of POCA, which he partly owned and shared with his relatives, the Court of Appeal decided that the trial judge was not only wrong but also was illogical in his conclusions. The Court, although showing its surprise at and disapproval of the trial judge’s reasoning, admitted that it would be difficult to sell a part ownership of a flat or house or even borrow money on its security. However, the appeal court added that if the defendant’s contention was accepted a criminal could retain the jointly-owned property without it being taken into account for the realisable assets and sell it later without any recourse. Parliament could not have intended such a consequence. The proper interpretation of POCA is that a confiscation order can be made, in cases like the present one, on the basis that the realisable amount includes 25 per cent of the value of the property – the defendant’s share being 25% in the property.
Otherwise, a criminal who uses his proceeds of crime to acquire a part ownership in property must be assessed as having free property of nil value. In the Court’s opinion, Parliament could not have intended such a result. And its own opinion was that such a consequence is untenable.
The Court explained that the relevant sections of POCA are not concerned with the realisation of property as well as its valuation. POCA does not require the court to assume that a partial ownership has to be sold separately as such. The court must proceed on the basis that the defendant can obtain a court order for the sale of the property as a whole, and that he/she will on a sale receive his/her due proportion of the proceeds of sale. In the Court’s judgment, the possibility that the defendant will not obtain an order for the sale of the property as a whole does not affect or diminish its market value (although the costs of obtaining the order may be relevant). A house does not have a market value of nil because {an owner] may not readily be able to obtain an order for its sale in order to realise its value. The same applies to the market value of [an ownership] in the house. The suggestion that the market value of the beneficial interest is nil confuses market value (for the purposes of a valuation under POCA) with an individual’s personal difficulty in putting the house on the market or otherwise realizing his interest in it.
To make matters clear, the appeal court confirmed that, in cases where the circumstances so demand, an order to sell the property can be made, even though the innocent co-owners refuse to sell the property, which a receiver would have to comply with. However, this course has to be followed with caution.
In conclusion, it can be seen that criminal confiscation orders, an extension of the reparation system and well established in the Islamic jurisprudence as well, are an excellent innovation. These orders are a very useful tool as part of the deterrence included in the penalty or punishment for crimes (Panesar 2008). The system is designed to discourage those who consider embarking upon criminal conduct and to deprive a person of profits received from criminal activity. According to the courts, its aim is to impoverish defendants to the tune of their criminally obtained gains and not necessarily to enrich the state (Glatt 2006; Rose 2008). A defendant cannot hide behind co-ownership or trust to avoid confiscation orders. Otherwise, clever criminals before embarking on a crime would be able to protect their assets by placing them in a trust or buying property as co-owners leaving the state without any recourse under the confiscation legislation and making the legal system a laughing stock (May 2009).
References (in addition to the court cases cited in the article):
J. Allen, Textbook of criminal law, 2007.
E. Finch & S. Fafinski, Criminal law, 2008.
J. Herring, Great debates in criminal law, (2009).
R. King & E. Wincup, Doing research on crime (2007).
T. Millington, The proceeds of crime: law and practice of restraint, confiscation and forfeiture (2007).
D. Omerod, on Smith and Hogan, Criminal law (2009).
E. Rees, Blackstone’s guide to proceeds of Crime Act (2008).
D. Roe, Criminal law (2008).
R. Sandberg, Criminal law (2009).