“Follow the money trail!” is the all too familiar cry of the financial investigator. In nearly all fraud litigation, whether criminal or civil, the fraudster will usually be adept at concealing the fruits of their fraudulent enterprise – they didn’t obtain it so they could willingly hand it back. Unless they are called upon to explain the source of their assets, it is difficult – often impossible – to identify the extent and whereabouts of the proceeds of their crimes.
As a private prosecutor, the tool to cracking open the door to the fraudster’s assets and recovering those assets can be found within the criminal confiscation legislation. Following the conviction of a fraudster, a confiscation order is usually made shortly thereafter which specifies a sum to be paid, a time by which it must be paid and a default sentence if it is not paid. If the sum stated in the confiscation order is not paid back, the defendant is likely to suffer a substantial term of imprisonment. The pathology of a fraudster is perhaps like no other, and rather than repay the money rightly owed to the victims of their crime, they will all too often elect to serve a (lengthy) custodial sentence.
However, serving a term of imprisonment will not extinguish the debt owed. In many cases, the defendant will have transferred money and assets to third parties or family members or hidden it in corporate structures thinking that will conceal the asset from the prosecutor. The defendant is wrong! In many cases, it becomes apparent from a full and proper financial investigation that the defendant has made substantial money transfers to family members and trusted associates, or companies owned by them. Once that becomes clear, the prosecutor can then start to focus on those individuals in order to recover the money or assets that have been transferred. How that can be achieved and which court to turn to is set out below.
The Criminal Freezing Order
Most people are aware of the powerful weapon of English civil courts to make a worldwide freezing order – the Mareva injunction. Many people may not be aware of the criminal equivalent – a Restraint Order.
Confiscation legislation provides a system to preserve property held by any person with a view to making it available at the end of the proceedings to satisfy a confiscation order. A private prosecutor may apply to the Crown Court (generally) or High Court (for pre-2003 offences and under the older Criminal Justice Act 1988) for a Restraint Order which prohibits dissipation by a person of an asset – preventing them from dealing with property. As a private prosecutor, where an application is made in the High Court, it is fundamental that those instructed are intimately familiar with both criminal and civil procedure.
A Restraint Order can be made so as to act against a person holding the defendant’s realisable property, which includes any person to whom the defendant has directly or indirectly made a gift caught by the legislation. This will often include a spouse, close family relative and/or friend of the defendant and those people will be restrained from dealing with their assets pending the outcome of the case. Where the prosecutor believes that the third party may be holding the defendant’s assets or holds information which may lead to its discovery, the court can require that person to disclose information.
Disclosure: third parties
To make a Restraint Order effective, the High Court or Crown Court has the power to compel the defendant and third parties to make a witness statement disclosing the nature and extent of their assets. Whilst it is an extraordinary step to order a non-party to disclose the whereabouts of the property and assets, the Court is often willing to make such an order where there is a real prospect that the information may lead to the discovery or preservation of the defendant’s assets for the satisfaction of the confiscation order.
Another tool that can be deployed to preserve the defendant’s realisable property, is the repatriation of those assets. The court has recognised that where they have the power to order parties to disclose the whereabouts of realisable property, they must also have the power to order the return of those assets within the jurisdiction. This power is essential to the purpose of the restraint order and to the realisation of assets. This power is also available in conventional civil litigation and a tool often deployed to ensure that assets are best preserved for realisation at the conclusion of proceedings.
There are many powers open to the courts to preserve and realise a defendant’s assets, and it is crucial that those representing victims of fraud know which court to turn to and have the requisite skill and experience to properly prosecute cases, whether that be in the civil or criminal courts.