Proceeds of Crime Act 2002 POCA
The Proceeds of Crime Act ensures that criminals cannot profit from their actions by granting the authorities the power to confiscate any such ill-gotten gains.
The Proceeds of Crime Act (POCA) 2002 is an important piece of legislation which concerns the confiscation and recovery of proceeds arising from a number of criminal acts. It enables confiscation orders to be made against convicted criminals, obliging them to repay the state for any criminal gains made, as well as allowing the recovery of crime proceeds from unconvicted perpetrators.
This page describes perhaps the most important issues tackled by the Proceeds of Crime Act.
Asset and cash forfeiture
Cash forfeiture is a situation in which the police make a seizure of cash which is reasonably suspected or proved to have been obtained through criminal activities or to be planned for use in future criminal conduct.
The subject does not have to have been convicted of a crime in order to face cash forfeiture. Forfeiture can be imposed upon any sum of money which is suspected to be entangled with criminal activities.
The act of cash forfeiture and the legal rights and obligations of both the police and the subject under it are covered in the Proceeds of Crime Act of 2002 and the Serious Organised Crime and Police Act of 2005.
Limits on cash forfeiture
The POCA states that a police constable or customs official may seize a sum of money if they believe that it is likely to contribute to criminal conduct or that it is ‘recoverable property’. Without making an arrest, they can seize any amount exceeding £1,000.
The cash forfeiture procedure
Seized cash can only be kept for 48 hours unless there is evidence or reasonable suspicion that the money is or was going to be used for criminal purposes or was secured through a crime.
If a magistrate does issue an order to extend the detention period, the money will most likely be forfeited. It is placed into an interest-bearing account until the criminal proceedings have concluded.
The money has to be given back if either the magistrate or customs officer cannot provide adequate justification for its continued confiscation or if the original owner of the money launches a successful appeal.
All cases involving cash forfeiture will involve the civil standard of proof being employed, as they are considered to be civil proceedings. The individual who has had the money confiscated must prove that the money is legitimate in both its origins and its purpose in order to have it returned.
Civil recovery is a process to assist retailers in gaining remuneration for any losses that they have experienced through the criminal activities of shoplifters and dishonest employees. Civil Recovery is not a replacement for criminal prosecution; it is an individual procedure that runs independently alongside the criminal prosecution process.
Retailers can be compensated for the cost of security apparatus like cameras and guards, as well as the monetary value of the goods that were stolen. Even thefts by an errant employee are covered by civil recovery.
Civil recovery is legislated under part 5 of the Proceeds of Crime Act 2002 and amended by the Serious Organised Crime and Police Act 2005. It is generally used when the accused cannot be brought to trial for reasons such as the fact they have recently died, have been acquitted or no witnesses can be brought against them. Civil recovery can be used in this way because it operates on the level of the balance of probabilities rather then the criminal standard of proof.
A Confiscation Order is a proceeding initiated in the Crown Court that is concerned with the ‘benefit’ that a convicted criminal may gain from their illegal conduct. When a person has a confiscation order issued against them it essentially amounts to the benefit they have gained from their criminal acts as well as their available assets being added up. The order is then made to confiscate an amount which is less than the sum of both. This is effectively like a fine, with the person being ordered having to pay the amount within a period of six months, unless the court decides to extend that time frame.
In certain special situations, the court may decide that the defendant’s expenditure and income up to six years before their conviction was obtained through criminality and factor this into their calculation. Property that is confiscated from an individual may be sold by the state to make good on the value that is due.
The benefit that has been derived by the defendant’s criminal activities is defined as the proceeds of the relevant offence. This includes the full value of every asset that was deemed to have been partly or wholly attained with the proceeds of the offence. Benefit, in this sense, may be closer to what some people would call turnover rather then outright profit.
Confiscation Orders are the product of legislation that was originally contained in the Criminal Justice Act of 1988 and later in the Drug Trafficking Act 1994 that was amended in the Proceeds of Crime Act 1995. Some of the specific provisions contained in these earlier statutes are still found to be relevant in some cases. However, the most relevant piece of legislation involving Confiscation Orders in recent times has been the Proceeds of Crime Act 2002 (POCA).
Legal costs of confiscation proceedings
The cost of getting legal help can be a hefty burden, and if a restraint order has been placed upon an individual as well, it can be difficult to stump up the cash they need to defend themselves from accusations of criminal behaviour.
Using money in frozen bank accounts to cover legal costs
Under the provisions of Section 41 of the Proceeds of Crime Act 2002, it is illegal for a person who has had a Restraint Order issued against them to use any assets caught by the order to pay the legal fees of the related proceedings. This is because, in the eyes of the law, any assets that are the subject of a Restraint Order have usually been earmarked for being the subject of a future Confiscation Order, so if any of this money is used for legal fees the amount that could be confiscated would be reduced.
Legal aid in confiscation proceedings
The availability of legal aid in confiscation proceedings is depending on whether they are civil proceedings, known as Civil Recovery, or criminal proceedings, where a person can be subject to a Confiscation Order.
If the individual is the subject of a civil procedure in the Magistrate’s Court then Legal Aid is granted on the basis of means testing. If the individual is the subject of criminal proceedings that are taking part in the Crown Court or the High Court, the provision of legal aid is not allocated on the basis of means testing. Individuals who are the subject of Confiscation proceedings or Restraint Orders can apply for legal aid (public funding) to cover their legal costs.
Fraud is defined as intentional dishonesty or a planned or conceived deception that is committed with the goal of damaging another individual or personal gain. The legal definition of fraud is related to the specific legal jurisdiction that the accused finds them in, so fraud is sometimes a civil law offence and sometimes it is a crime. Most cases of fraud that result in people losing money or property to fraudsters are considered to be a crime, but humorous hoaxes that involve deception or fraudulent scientific discoveries are not usually considered as serious (although each case is judged on its own merits). It is estimated by the UK government that fraud in the UK costs the country an estimated £14 billion each year.
The process of investigating a possible case of fraud can be long and complicated, and often takes several years to conclude. The investigative process can involve the police, HMRC, the Financial Services Authority and the Serious Fraud Office. For particularly far-reaching fraud, overseas authorities may also become involved.
Insurance fraud is defined as any use of dishonest methods to gain a payment from an insurer. Fraudulent claims account for a large percentage of the claims received by insurance firms each year. Cases of insurance fraud can range from the trivial, i.e. partially exaggerating an insurance claim, to the severe, i.e. deliberately causing accidents or damage to claim on one's insurance.
Insurance fraud is an extremely serious offence under UK law, and is punishable by up to 10 years in prison.
Carousel fraud, also known as Missing Trader Intra-Community Fraud (MTIC Fraud), is the theft of VAT (Value Added Tax) from the government. It is done by exploiting a loophole in the way that VAT is administered within multi-jurisdictional trade which means that the movement of services and goods between these different jurisdictions is VAT-free. This permits the fraudulent individual to charge VAT on the goods that they trade and then simply disappear instead of paying this tax to the government. This is why it is called ‘missing trader’ fraud, because the trader disappears along with the tax they owe.
Carousel fraud is an extension of this that involves a more complex web of fraudulent behaviour. Whereas MTIC Fraud can theoretically be committed by a lone individual, carousel fraud is where goods are passed between a whole raft of different companies operating in different jurisdictions. The goods go around this system continually, like a carousel, while the collected VAT is fraudulently skimmed off the top.
Carousel fraud investigations
Fraud in the UK is investigated by HM Revenue and Customs and prosecuted by the Crown Office and Procurator Fiscal Service. Because of the web of companies and intra-company trading agreements between the EU and the UK that allow MTIC and carousel fraud to happen, investigations into alleged cases can be extremely time-consuming.
Cases of MTIC Fraud conviction frequently end up with the individual or group receiving a considerable prison sentences and are also usually accompanied by confiscation orders under the provisions of the Proceeds of Crime Act.
Benefit fraud occurs when an individual does not provide accurate or truthful information about themselves when applying for state benefits, resulting in their receiving state benefits that they do not qualify for and thus defrauding the state. The main ways that a person can commit benefit fraud are:
- not providing information about other benefits that they are receiving
- not providing details of their partner living with them or starting employment
- claiming benefits for people who no longer live with them, such as children
- not providing information or give inaccurate information about the amount of savings that they have
- not reporting that they are moving home, going abroad or are living abroad
- not reporting that they have inherited some money.
Benefit fraud punishments
If an individual is found to have committed benefit fraud, the punishment depends on the severity of the fraud committed. The accused can either be handed down a fine or a sentence of imprisonment, and will also have to pay back all the money they made. They will also receive a criminal record and could have a confiscation order made against them.
Administrative Penalty fine
The fine for benefit fraud, called an Administrative Penalty, amounts to around 30% of the total amount owed. This fine is imposed on the accused with no negotiation, on top of the full amount they owe. The accused does not have to admit their guilt to be given the option of a fine; this usually happens if the Department of Work and Pensions believes there is sufficient evidence for the matter to proceed to court.
Prison sentences for benefit fraud
If a prosecution is handed down, it will typically be under the Theft Act 1978, the Social Security Administration Act 1992 or the Fraud Act 2006. A prison sentence is only brought for fraud which was especially profitable, particularly brazen or lasted for a great length of time, or for cases where the accused was in a position of trust.
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