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Financial Reporting Orders

(Sections 76 & 79-81 SOCPA 2005)

The Law

Making An Order (Section 76)

1. Following conviction for a listed offence, in addition to sentencing or "otherwise dealing with" the person, a court may also make a Financial Reporting Order (FRO), but only if it is satisfied that the risk of D committing another listed offence is "sufficiently high" to justify the making of an FRO.

Listed offences

Theft Act 1968

  • Obtaining by deception (section 15);
  • Obtaining a money transfer by deception (section 15A);
  • Obtaining a pecuniary advantage by deception (section 16);
  • Procuring the execution of a valuable security by deception (section 20(2)).
  • False Accounting (section 17)

Theft Act 1978

  • Obtaining services by deception (section 1);
  • Evasion of a liability by deception (section 2);

[Theft Act 1968 sections 15, 15A, 16 and 20(2) and Theft Act 1978 sections 1 & 2 repealed by section 14(1) and schedule 1 Fraud Act 2006, but repeal does not affect any proceedings for or in respect of any offence committed or partly committed before 15 January 2007 section 14(2) & schedule 2]

Fraud Act 2006

(in force from 15 January 2007)

  • General offence of fraud (section 1);
  • Obtaining services dishonestly (section 11)

Conspiracy to Defraud at common law

Proceeds of Crime Act 2002

  • Any of the "Life Style" offences in Schedule 2 namely: drug trafficking, money laundering, directing terrorism, people trafficking, arms trafficking, counterfeiting, intellectual property offences, offences in relation to pimping and brothels, blackmail and offences of attempting, conspiring, inciting, aiding abetting, counselling or procuring such an offence
  • Acquisition, use and possession of proceeds (section 329)

Money Laundering

Criminal Justice Act 1988 & Drug Trafficking Act 1994

  • Assisting another to retain benefit (CJA 1988 section 93A & DTA 1994 section 50)
  • Acquisition, possession or use of proceeds (CJA 1988 section 93B & DTA 1994 section 51)
  • Concealing or transferring proceeds (CJA 1988 section 93C 7 DTA 1994 section 49)

Bribery and Corruption

  • Bribery at common law
  • Corruption in office (section 1 Public Bodies Corrupt Practices Act 1889)
  • Bribes given or obtained by agents (section 1 Prevention of Corruption Act 1906)

Terrorism Funding Offences

  • Offences under sections 15-18 Terrorism Act 2000

Revenue Offences

  • Cheating the public revenue
  • Fraudulent evasion of duty (section 170 Customs & Excise Management Act 1979)
  • VAT offences (section 72 VAT Act 1994)
  • Fraudulent evasion of income tax (section 144 Finance Act 2000)
  • Tax credit fraud (section 35 Tax Credits Act 2002)

Conspiracy, attempt, incitement and aiding and abetting any of the above

Duration

2. An order comes into effect when made and will be for a period specified in the order. An order made in the magistrates' court can be for a maximum of 5 years.

3. Orders in other courts can be for a maximum of 15 years, unless the sentence was life imprisonment when it can extend to 20 years.

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Effect Of The Order (Section 79)

4. For the duration of the order the person must "make a report".

Mandatory terms of the order

The order must:

  • State to whom the report must be made;
  • Specify the intervals at which reports must be submitted. First, the period beginning with the date on which the order came into force, and second, subsequent periods of a specified length, each following immediately after the end of the earlier one (these periods will be subject to a maximum specified in rules of court); and
  • the number of days after the end of each period by which the report must be received;
  • Set out the particulars of his financial affairs required;
  • The manner in which they must be reported;
  • Including details of any documents required.

Variation Or Revocation Of The Order (Section 80)

5. Either the person subject of the order or the person to whom the report must be made can apply to the court for variation or revocation of the order.

6. Application is to the court that made the order, unless it was made on appeal in which case the application must be to the original sentencing court. If a magistrates' court, can be any court in the same local justice area.

7. The Act sets down no criteria which might support an application by either party nor what should be considered by the court in deciding whether or not to grant an application. In the context of restraining orders under the Protection from Harassment Act 1977, which has a similarly phrased variation provision (section 5(4)), the court in Shaw v the Director of Public Prosecutions [2005] EWHC 1215 (Admin) has made it clear that there had to be a good reason in the form of some change of circumstances to justify the variation of an order. The same principle must apply to orders under this Act.

Disclosure Of Information (Section 81)

8. The person to whom the report must be made may disclose information to anyone he reasonably believes may be able to help check the accuracy of the report or discover the true position.

9. Anyone else can disclose information to the person specified in the order to receive the reports, or to anyone to whom the specified person has disclosed the report for the same reasons.

10.The person to whom the report is made may also disclose a report for the purpose of preventing, detecting, investigating or prosecuting criminal offences either in UK or abroad. Disclosure can also be made for preventing, detecting, investigating conduct which is subject to non-criminal penalties under UK law or the laws of any other country. (E.g. this will presumably allow for disclosure for civil confiscation and the like).

11. By section 85(5) Proceeds of Crime Act 2002, proceedings are deemed to continue following conviction until any confiscation order is satisfied or discharged, or, the order is quashed and there is no further possibility of an appeal against the decision to quash the order. It appears therefore, that information may be disclosed for the purpose of assisting in the enforcement of any confiscation order as that can be said to be part of the prosecution proceedings.

12. Neither person will breach any obligation of confidentiality or other restriction on disclosure of information if they are acting under these provisions, but this exemption does not allow the disclosure, in contravention of the Data Protection Act 1998, of personal data which is not exempt under that act.

Offences [Section 79(10)]

13. The Act creates the following offences:

  • Without reasonable excuse including false or misleading information in a report, or
  • Otherwise failing without reasonable excuse to comply with any requirement

Both are summary offences - imprisonment 51 weeks or level 5 fine or both.

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Practice And Procedure

Commencement of the FRO

14. The White paper (One Step Ahead: A 21st Century Strategy to Defeat Organised Crime (Cm 6167, Mar 2004)) originally suggested that a Financial Reporting Order would take effect after release from prison, but under the Act it takes effect upon sentence. It is possible that the initial period, following which the first report must be made, could be a lengthier period than the subsequent ones in recognition of the potential difficulties that a defendant may encounter in preparing and obtaining the necessary information while still in custody. That said, one concern, particularly regarding serious, professional criminals, is their ability to continue conducting their criminal enterprises while still in prison.

Requirements of the FRO

15. The White paper also suggested that an order might include for example, requirements to submit a report every six months setting out details of income, assets and expenditure. It could include requirements to submit copies of all bank statements, credit card accounts or other documentation detailing financial transactions, including tax returns and business accounts.

16. It was acknowledged that these requirements could be a considerable burden upon a released prisoner, but were nonetheless stated to be "fully compatible with the normal goal of probation" namely, to encourage offenders to stop offending. Article 8 of the European Convention on Human Rights is likely to be engaged by such requirements (privacy of private life and correspondence) and orders will therefore have to be proportionate with regard to the person and the offending, both past and said to be likely in the future.

Applying for the order

17. It will be for the prosecuting advocate to suggest to the sentencing judge that he should consider making such an order in an appropriate case.

18. Section 76(1) refers to "sentencing or otherwise dealing with a person convicted" so it will be open to the court to make an order either at the time of sentence or for example when dealing subsequently with confiscation.

19. It is further suggested that it will be good practice to prepare a draft order setting out suggestions as to whom the report should be made, the periods and requirements. This should be drafted in consultation with the senior investigating officer and/or the financial investigator, if there is one.

The person to whom the reports should be made

20. The choice of the person to whom the reports are to be made ('specified person ) should be agreed in consultation with the SIO and/or FIO. It should be a post-holder rather than a named individual.

21. Where SOCA are the investigators, it has been decided that the specified person will be The Financial Reporting Officer , PO Box 8000, London, SE11 5EN.

22. ACPO are in the process of consulting individual forces on which posts should be designated as specified persons. It may well vary from force to force.

23. Pending confirmation of national ACPO policy either the Chief Constable or Head of the Financial Investigation or Economic Crime Unit for the force, is likely to be the most appropriate person (rather than a named individual to avoid the need for subsequent variations in response to officer transfers etc.).

24.Upon conviction, the court and the defence should be given notice that the prosecution will be submitting that an order is appropriate and a copy of the draft should be served on them.

What amounts to 'sufficiently high risk?

25. In making the suggestion to the judge, the advocate may also be required to give reasons why it is contended that the "risk of the person s committing another offence ... is sufficiently high to justify making" such an order.

26. The Act provides no guidance as to what will amount to a sufficiently high risk. It is to be noted that the section does not refer to "a high risk" but to a "sufficiently" high risk with nothing to measure it against, leaving it entirely to the judge s discretion. In the context of bail a distinction has been drawn between "substantial grounds" to believe D will commit a further offence justifying refusal of bail and, "a real and not a fanciful risk of an offence being committed" justifying conditions being imposed. (R v Mansfield jj ex parte Sharkey (1985) 1 All ER 193 @201).

27. It is suggested that the test should be that the risk should be real and not fanciful, but is unlikely to be as high as "substantial grounds to believe" or a risk that it is more likely than not that the defendant will re-offend.

28. Also in another context, the Contempt of Court Act 1981 section 2(2), a "substantial risk" (of serious prejudice) has been held to mean "not insubstantial" or "not minimal" (Att Gen. v. News Group Newspapers Ltd [1987] QB 1 CA), a comparatively low threshold, particularly when it is considered that it could lead to penalties for contempt.

29. Under sections 225-229 of the Criminal Justice Act 2003 the court has to assess whether there is a "significant risk" that a defendant will commit further specified offences to qualify for a life sentence or a sentence for public protection. The court said, "The risk identified must be significant. This is a higher threshold than mere possibility of occurrence and in our view can be taken to mean (as in the Oxford Dictionary) "noteworthy, of considerable amount or importance." (R v Lang & others [2005] EWCA Crim 2864)

30. The nature of the offending before the court, e.g. conduct consistent with a professional organised criminal, and the defendant's previous record of offending, including particularly for offences contained within section 76(3), could both be used to support the contention that re-offending is a real risk because it can be suggested for example, that the defendant lives by crime.

31. R v Lang & Ors (above) also offers guidance on the matters the sentencer should take into account:

"the nature and circumstances of the current offence; the offender's history of offending including not just the kind of offence but its circumstances and the sentence passed, details of which the prosecution must have available, and, whether the offending demonstrates any pattern; social and economic factors in relation to the offender including accommodation, employability, education, associates, relationships and drug or alcohol abuse; and the offender's thinking, attitude towards offending and supervision and emotional state.

Information in relation to these matters will most readily, though not exclusively, come from antecedents and pre-sentence probation and medical reports.

The Guide for sentence for public protection issued in June 2005 for the National Probation Service affords valuable guidance for probation officers. The guidance in relation to assessment of dangerousness in paragraph 5 is compatible with the terms of this judgment.

The sentencer will be guided, but not bound by, the assessment of risk in such reports. A sentencer who contemplates differing from the assessment in such a report should give both counsel the opportunity of addressing the point".

Commencement of the provisions and questions of retroactivity

32. The sections relating to the making of Financial Reporting Orders were brought into force on 1 April 2006 by The Serious Organised Crime and Police Act 2005 (Commencement No. 5 and Transitional and Transitory Provisions and Savings) Order 2006 (S.I. 2006 No.378).

33. The order is silent as is the act as to whether a Financial Reporting Order can be made in respect of an offence and/or a conviction occurring before 1 April 2006. Therefore the courts will have to interpret the Act to decide the question.

34. However, the provisions have a retroactive effect as the order is essentially a preventative measure rather than punitive, aimed at dissuading an individual from re-offending. The aspects pointing towards a penalty (criminal court, trigger conviction, liability to penalty for breach) do not outweigh the preventative nature.

35. Having regard to the public interest in preventing crime and the safeguard that an order may only be made if the risk of re-offending is sufficiently high to justify an order, it is submitted that an FRO is not a penalty - it is not a punishment.

36. As such, it does not breach Article 7 of the European Convention which forbids retroactive penalties.

37. See R v Terrance Adams [2008] EWCA Crim 914 at para 25

"We have no hesitation in saying that a financial reporting order is not a penalty for the purposes of that Article; it is a preventative measure intended to enable the courts to keep control over those in respect of whom there is the risk that they may indulge in criminal activity. Accordingly, there is no question of a bar on retrospective application of the provisions of section 76(1)."

When can an FRO be made?

38. Section 76(1) states that a "court sentencing, or otherwise dealing, with a person may also make a financial reporting order."

39.Section 76(1) clearly defines an FRO as being in addition to a sentence and the phrase "otherwise dealing with" envisages a hearing, other than a sentencing hearing, where an FRO could be imposed.

40. Therefore, so long as a court is dealing with the defendant it may make an FRO.

41.In the case of Adams (paragraph 39 above) the court made an FRO after both sentence and confiscation when the only remaining matter before the court was the quantification of a defence costs order. The order was challenged on the basis the court at that stage no longer had jurisdiction to make the order to which the court's response at paragraph 26 was:

"Returning to the order that was in fact made, we take the view that the judge was entitled to make the order. When the matter came back before him, it matters not in what guise, he was dealing with the offender within the meaning of section 76. That gave him the jurisdiction and the power to make the order."

Appeal

42.There is no statutory provision which expressly provides (as has been the case in a number of other statutory provisions) that FROs shall be considered to be sentences of the court for the purposes of the right of appeal under the Criminal Appeal Act 1968. The court in Adams (para 39 above) also considered this point and at paragraph 24 concluded:

"The solution, it seems to us, is that, for the purposes of the 1968 [Criminal Appeal] Act, the financial reporting order is indeed a sentence. It is an order made on conviction. That is, it is an order that can only have been made after conviction. This Court, considering a different form of ancillary order in the case of R v Hayden 60 Cr App R 304, held that an order which fell into that category was to be treated as a sentence for the purpose of the 1968 Act, and accordingly there would be a right of appeal."

Enforcement

43. Following the making of a financial reporting order against a defendant it will be for the person specified in the order to whom the report must be submitted (i.e. the police, HMRC or SOCA) to monitor compliance.

[Paragraph 44 redacted]

45.Different considerations will apply where it is alleged that a report has been submitted but it contains false or misleading particulars.

46.In such a case, further investigation and, in all probability, an interview with the convicted person would be expected. It will be necessary to prove that the person had no reasonable excuse for submitting the false information, which in practice will effectively mean proving that he knew or was reckless as to the accuracy of the information or that he unreasonably relied upon another to supply the necessary information.

47.In cases of total failure to submit a report, [text redacted] a file simply proving the making of the order and exhibiting a copy together with a statement proving that no report or explanation had been received would normally be sufficient to make a charging decision.

48.In both cases the report submitted regarding the failure to comply should be sent to the original prosecutor for review.

49. Areas should make contact with their local forces to establish a suitable system.

Forms

50. The Courts Service has issued prescribed forms in connection with Financial Reporting Orders in both the Crown Court and the Magistrates Court :

The form for a Financial Reporting Order in the Crown Court

The form for a Financial Reporting Order in the Magistrates Court

The form for a Variation of an FRO in the Crown Court

The form for a Variation of an FRO in the Magistrates Court

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