Forensic Accounting for Proceeds of Crime Cases

Expert Accounting Appraisal of Confiscation Cases

Confiscation of criminal wealth ought to be straight forward, but has become another part of the expensive adversarial criminal justice process. It is not simply a matter of recovering wealth that has been stolen, but a process where the Crown will “have a go” at recovering as much as it can regardless of the source of the wealth.

This is because the Proceeds of Crime Act 2002 clarified the concept of a criminal lifestyle, and introduced the assumptions the prosecutors can make when confiscating assets after a guilty verdict. The intention was to deal with the criminal bosses, the ringleaders who hid behind ranks of junior criminals, never seeming to get their hand dirty. Now if they cannot explain their wealth, it can be confiscated, or failing that taxed and penalties added.

If you cannot explain your wealth, it can be taken away. This seems to be a sensible approach. Many crooks are well known to the police, but hide behind crooked lawyers, accountants and offshore jurisdictions. Their criminal activities appear unconnected to the dirty street crimes, drug importation or frauds that are being committed under their direction.

However, the confiscation regime applies to a wide spectrum of criminal activity that only needs to fit some quite narrow criteria. It is so narrow that only a few £ thousand needs to have been stolen, perhaps over just a few months. Thus it is quite feasible for a relatively minor offence to result in confiscation proceedings. The trouble is, once such proceedings commence there appears to be no constraints on the assumptions that the Crown (or other prosecutors) attempt to make when looking at the assets they would like to confiscate.

For example, in a current case that I am currently looking at the Defendant has been convicted of qualifying offences, that only amount to stealing £250, and yet the Crown’s estimate of benefit is several £100,000s.

When assuming a criminal lifestyle, the regulators are entitled to also assume that all income, expenditure or assets, where the source of the funding cannot be properly explained, has been derived from criminal activity. As you would expect this leads to some overblown assumptions being made, and estimates of criminal benefit that bear no relation to the level of actual criminal wrongdoing that has been proven.

How to Deal With an Inflated Estimate of Criminal Benefit

The Crown is entitled to make its assumptions when looking at a criminal lifestyle, and I fully endorse the confiscation of criminal wealth from convicted criminals.The amount of wealth that can be confiscated is ordered by the judge during a confiscation hearing, and could be based upon the criminal benefit being assessed within a S16 Statement of Information presented by an accredited investigator on behalf of the prosecutors.

However, the amount of benefit that must be paid back should be proportional to the crime that was committed. As a forensic accountant specializing in fraud and money laundering, I often examine the S16 Statements and find that an “all inclusive” approach has been adopted. In my view this is because the regulators are ready for the defence to appoint an expert accountant to pick holes in their calculations. It is like a system of barter, where the opening bid is much higher than the bidder expects the deal to end up as.

This approach clearly increases the amount of work being carried out by both sides, and in turn the overall costs are higher – which are normally publicly funded for both the prosecution and the defendants. I see benefit calculations where the assumptions do not have a reasonable basis and where the whole benefit needs re-calculation from scratch. I just wonder if the provision of some form of independent vetting procedure would moderate the sometimes ridiculous benefit estimates being presented for some relatively modest crimes? Such independent business and accounting expertise is applied (it forms a big part of the work that I do), but only after the confiscation demands have been presented and at substantial cost to the public purse.

Tax Evasion – an Area That Could Be Exploited by the Regulators More?

Many cases that I see as an independent forensic accountant who has been asked to prepare an expert account’s report responding to a S16 Statement, will have an element of tax evasion within the defendant’s financial history. The tax evasion has not been proved, to do so would require additional investigation and the expert calculation of any outstanding tax owing. This work is never carried out by the prosecutors (unless we are looking at a case being brought by HMRC) but might provide a useful strand of benefit to be confiscated that is proportional to the criminal lifestyle being assumed. Just a thought!

Mark Jenner & Co Limited is a specialist firm of Chartered Accountants providing forensic accounting and expert witness services in cases of fraud, money laundering and tax evasion. We are regularly instructed by lawyers on behalf of defendant’s who are facing confiscation proceedings and we have a track record of providing defence expert reports that can be used to negotiate a more balanced and normally acceptable confiscation order. This normally means reducing the benefit figure to exclude transactions that ought not be included – sometimes substantially or even to levels that exclude any lifestyle benefit at all!

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