Criminals Face Confiscation Double Blow

A recent ruling of the House of Lords will come as a big blow to criminal conspirators hoping to protect their assets from confiscation under the Proceeds of Crime Act and related legislation. The judgment means that, where co-defendants have jointly benefited from criminal activity, each could receive a confiscation order representing the entire value of the benefit, as if they had acted alone, and subject only to their having sufficient assets.

The case concerned a VAT fraud involving a loss to public funds of some £11 million. The defendant, Raymond George May, pleaded guilty to the charge against him in Sept 2001 and was sentenced to five years’ imprisonment, later reduced to four years on appeal.

Four companies were set up solely to perpetrate a so-called ‘carousel fraud’. The companies imported high-value microprocessors, sold them on in the UK and then re-exported them, retaining VAT reclaimed on the deals. The companies were closed down before any of the VAT retained could be recovered. This type of fraud is thought to be prevalent, causing huge losses to the public purse.

When a confiscation order of £3.2 million was made against him under the 1988 Criminal Justice Act, May appealed the decision. He failed to win the backing of the Appeal Court and so took his case to the House of Lords.

The House of Lords, however, upheld the original judgment. In its view the wording of the relevant legislation was clear enough and intended to deprive drug dealers, money launderers and other criminals of the benefit of their ill-gotten gains. The Lords ruled that the courts should not take into account any costs incurred by criminals, such as paying confederates.

There are only three questions that need to be answered in such cases. Firstly, has the defendant benefited from the crime? Secondly, what is the value of any benefit so gained and, finally, how much is recoverable?

Another case also dealt a blow to acquisitive criminals. In it, the court ruled that, when assessing the value of something for the purposes of making a confiscation order, for the purposes of the Proceeds of Crime Act 2002, the value attributable to an asset is the amount it would have cost to acquire it legitimately, not the amount for which the criminal could have sold it.

This is important because it means that the value of assets to be confiscated from a criminal (say in a case of stolen valuables) is not the value for which they could be ‘fenced’ but the amount it would have cost to buy them in the first place.