Confiscation of the proceeds of crime is recognised as being an effective way of fighting crime. It acts as a deterrent. Confiscation also prevents criminally derived wealth from being used to finance other unlawful activities.
The United Kingdom has a clear and effective set of asset recovery laws. The Proceeds of Crime Act 2002 contains measures to allow for: the confiscation of the proceeds of crime following conviction; the recovery by the state of property which has been obtained through unlawful conduct, pursued through the civil courts without the need for a prior conviction; taxation of the proceeds of crime; and the prosecution of money laundering.
However, national laws are not enough in themselves. Serious organised crime takes place at an international level, and exploits the difficulties which are faced by law enforcement authorities in undertaking cross-border investigations. It also exploits the very real difficulties which exist when those authorities seek trace and confiscate or recover the proceeds of crime.
Only a small percentage of the proceeds of serious organised crime groups is confiscated from them. For example, according to figures released by the European Union, in the United Kingdom organised crime made an estimated €18 billion in 2006, of which only €150 million was recovered.
European law seeks to assist the many law enforcement authorities across Europe work more closely and effectively together, but the European Union recognises that these measures need to be strengthened.
The EU has common rules on confiscating assets derived from illegal activities, but research undertaken on behalf of the European Commission has found these rules to be inadequate. Difficulties include that member states do not apply the rules consistently, and when it comes to the confiscation of the proceeds of crime, the domestic legal systems of member states vary considerably.
Particular difficulties arise in relation to non-conviction based confiscation, which in the United Kingdom is called “civil recovery”. When it comes to the recovery of unlawfully obtained assets by the state through the civil courts, those efforts can be frustrated if an asset is traced to a jurisdiction whose own domestic laws do not contain provisions allowing such measures to be taken.
The Commission has proposed simpler and more effective rules to close the loopholes that criminals exploit to avoid proceeds of crime laws. The aim is that new laws ensure that courts are able to enforce confiscation orders across the EU and fully recover illegal assets.
The Commission has proposed a Directive which includes:
- making it easier to confiscate assets that are clearly linked to a convicted person's criminal activities
- simplifying procedures for recovering assets passed on to other people who should have been aware they were criminally obtained
- allowing assets to be confiscated when a criminal conviction is not possible because the suspect is dead, permanently ill or on the run (non-conviction based confiscation, or “civil recovery”)
- ensuring that prosecutors and other authorities can temporarily freeze assets before they disappear
- requiring EU countries to manage frozen or confiscated assets so as to preserve their value.
The European Council has recently issued an overview on replies to its consultation on non-conviction based confiscation. Member states have differing views on whether a pan-European approach is appropriate, and the circumstances in which this measure should be available. Some member states have concerns about a wider power of “civil recovery” because of concerns about the measures being proportionate, and complying with Human Rights laws.
Pan-European “civil recovery” may therefore be restricted to circumstances in which, if a suspected or accused person had been able to stand trial, those proceedings could have led to a criminal conviction but where (a) the death or permanent illness of the suspected or accused person prevents any further prosecution, or (b) the illness or flight from prosecution or sentencing of the suspected or accused person prevents effective prosecution within a reasonable time, and poses the serious risk that it could be barred by statutory limitations.
In the United Kingdom, the Proceeds of Crime Act 2002, is a robust piece of legislation which provides law enforcement authorities which a potentially very effective weapon against serious organised crime. However, how useful that weapon is can depend to a very significant degree on whether it can be wielded internationally. Unless rules of international co-operation are strengthened, a lot of that power is lost.
It is clear from the Council’s overview that it will not be straightforward to align the different approaches and attitudes of member states, just as it is clear that if civil recovery is to be an effective tool against serious organised crime, European measures for co-operation will need to be improved.