Investigative Powers and Cash Seizure: Proceeds of Crime Guidance

Principle
- Defining Investigations
Guidance
Procedure
- The role of the CPS in Part 8 applications

Further Information
- Home Office Summary Table of Powers
- Useful Sources

Principle

The powers of investigation available under Part 8 of the Proceeds of Crime Act 2002 (POCA) for the purpose of a criminal confiscation order include Production Orders, Search and Seizure Warrants, Customer Information Orders Account Monitoring Orders and Disclosure Orders. In addition, financial institutions make suspicious activity reports (SARs) to the Serious Organised Crime Agency (SOCA), who in turn pass these on to financial investigators to make enquires. These provide a fruitful source of intelligence that may ultimately result in a successful prosecution with a confiscation order being made.

POCA expands and replaces the scheme set out in Part II of the Drug Trafficking Act 1994 which provides for the seizure and forfeiture of cash which is being imported into or exported from the United Kingdom, and which represents the proceeds of, or is intended for use in, drug trafficking. The new scheme applies to cash related to all unlawful conduct and also provides for the seizure of such cash inland. A Magistrates' Court may make a forfeiture order in respect of the seized cash.

With the exception of disclosure orders, the CPS will only have a limited role in these applications (see Role of the CPS in Part 8 applications below).

Defining Investigations

Part 8 prescribes three types of investigation in relation to which these orders may be obtained: a confiscation investigation, a money laundering investigation and a civil recovery investigation Section 341 defines these investigations as follows.

Confiscation investigation

A confiscation investigation is an investigation into whether a person has benefited from criminal conduct or the extent or whereabouts of his benefit from criminal conduct: see section 341 (1).

It is important to note that the definition of "confiscation investigation" in section 341 (1) is confined to investigations into whether a person has benefited from criminal conduct or as to the extent or whereabouts of that benefit. It does not extend to investigations into the whereabouts of realisable property to satisfy a confiscation order after it has been made.

If a restraint order is in place, the power of the Court under section 41 (7) to make ancillary orders to ensure the restraint order is effective can be relied on to compel defendants and affected third parties to disclose the whereabouts of realisable property. Similarly, if a management or enforcement receiver is in office, he has power to compel defendants and third parties to disclose the whereabouts of realisable property subject to the orer.

Civil Recovery Investigation

A civil recovery investigation is an investigation into whether property is recoverable or associated property, who holds the property or its extent and whereabouts: see section 341 (2).

BUT an investigation is not a civil recovery investigation if:

Proceeds for a recovery order have been started in respect of the property
An interim receiving order applies to the property
An interim administration order applies to the property, or
The property is detained under section 295:

See section 341 (3)

Money laundering investigation

A money laundering investigation is an investigation into whether a person has committed a money laundering offence: see section 341 (4)

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Guidance

A summary table of Part 8 powers and who may apply for them is set out under the heading of further information below. Prosecutors will need to be familiar with these powers in order to provide appropriate early advice to the police and officers of HMRC and the UKBA.

Production Orders

These allow financial investigators to obtain information about the financial affairs of a person subject to a confiscation, money laundering or civil recovery investigation, most usually in relation to his or her bank accounts. A production order (see section 345) requires the person in possession or control of the material to produce it to an appropriate officer to take away, or give an appropriate officer access to it within the period stated in the order. This is usually seven days unless the judge decides that a longer or shorter period is appropriate.

Power of entry

A production order does not automatically give a right of entry onto premises. If a production order requires a person to give an appropriate officer access to material, section 347 allows the judge, on application by an appropriate officer, to make an order to grant entry. This order requires any person entitled to grant entry to the premises to allow an appropriate officer to enter those premises to obtain access to the material.

A production order cannot require the production of, or grant access to, material that is legally privileged or excluded material. Section 348(2) defines privileged material as being any material, which the person would be entitled to refuse to produce on grounds of legal professional privilege in proceedings in the High Court.

NOTE: Material is not subject to legal professional privilege merely because it is held by a lawyer. In R v Central Criminal Court ex parte Francis and Francis [1988] 3 All ER 775 the House of Lords held that documents were not subject to legal professional privilege if they were held with the intention of furthering a criminal purpose.

Who may apply for a production order?

An application for a production order must be made by an "appropriate officer" Section 378 of POCA (as amended by the Serious Crime Act 2007) defines appropriate officers, in relation to confiscation investigations as being:

A member of SOCA's staff
An accredited financial investigator;
A constable
An officer of HMRC

In relation to money laundering investigations, accredited financial investigators, constables and officers of HMRC are appropriate officers

As to civil recovery investigations, members of SOCA's staff, the Director of Public Prosecutions and the Director of the Serious Fraud Office are appropriate officers (See section 378 (3) and section 352A of POCA).

Search and Seizure Warrants

A search and seizure warrant (see section 352) authorises an appropriate officer to enter and search the specified premises, and to seize and retain any material found which is likely to be of substantial value (whether or not by itself) to the investigation for the purposes for which the warrant is sought.

A search and seizure warrant is only appropriate where:

a production order has not been complied with and there are reasonable grounds for believing that the material is on specified premises;
it would not be appropriate to make a production order because it is not practicable to communicate with any person against whom the production order may be made;
entry to the premises will not be granted unless a warrant is produced; or
the investigation would be seriously prejudiced unless an appropriate person arriving at the premises is able to secure immediate entry.

A search and seizure warrant does not confer the right to seize privileged or excluded material (see section 354).

Customer Information Orders

On the application of a constable, officer of HMRC, member of staff at SOCA or an accredited financial investigator, if they are a senior appropriate officer or are so authorised by one, the Crown Court may make a section 363 customer information order that a financial institution on receipt of a notice in writing provide the customer information requested.

Customer information in relation to a person and a financial institution is information about whether a person holds or has held account(s) at a financial institution solely or jointly with another.

Individual's Accounts

If such accounts are or have been held, the definition of customer information is set out in section 364 (2) and will include the account number or numbers; the person's full name and date of birth; the most recent and any previous address; the date or dates of account opening and/or closing; such evidence of identity obtained by the financial institution for the purpose of the money laundering regulations; the personal details (name, date of birth, addresses) of joint account holders; the account numbers of any other accounts to which the individual is signatory and the details of the other account holders.

Incorporated and Unincorporated Associations

If the specified person is a company, limited liability partnership or similar body incorporated or established outside the UK, then customer information is defined in section 364 (3) and will include the account number or numbers; the person's full name; a description of the business which the person carries on; the country or territory in which it is incorporated and any company number, any VAT number assigned to it; its registered office and previous registered offices; the date or dates of the account opening and/or closing; such evidence of identity obtained by the financial institution for the purpose of the money laundering regulations; and the full name, date of birth, current and previous addresses of account signatories.

Criminal Offences

A financial institution commits an offence contrary to section 366(1) if without reasonable excuse it fails to comply with a requirement imposed on it under a customer information order punishable on summary conviction to a fine not exceeding level 5 on the standard scale.

A financial institution commits an offence contrary to section 366(3) if, in purported compliance with a customer information order, it makes or recklessly makes a statement which it knows to be false or misleading in a material particular punishable on summary conviction to a fine not exceeding the statutory maximum, or on conviction on indictment to a fine.

Account Monitoring Orders

An account monitoring order (see section 370) allows law enforcement agencies to observe/monitor the transactions in an account for up to 90 days at a time. The order is available for both confiscation and money laundering investigations, and will specify the manner and timescale for the information to be given.

As with customer information orders, account monitoring orders may be made on the application of a constable, an officer of HMRC, member of staff of SOCA or an accredited financial investigator.

Disclosure Orders

Section 357 of POCA, as originally enacted, gave the Assets Recovery Agency power to apply to for disclosure orders. The Serious Crime Act 2007, which abolished the Assets Recovery Agency, transferred the powers to obtain disclosure orders to the Director of Public Prosecutions and the Director of the Serious Fraud Office in relation to confiscation investigations and additionally to SOCA in respect of civil recovery investigations.

Applications for disclosure orders may not be made in relation to money laundering investigations: see section 357 (2).

What is a Disclosure Order?

Section 357 (4) of POCA (as amended by para 108 of Schedule 8 to the Serious Crime Act 2007 defines a disclosure order as an order authorising the relevant authority to give any person notice in writing requiring him to do any of the following in relation to any matter relevant to the investigation in which the order was made:

answer questions, either at the time specified in the notice or at once, at a place so specified;
provide information specified in the notice, by a time and in a manner so specified;
produce documents, or documents of a description specified in the notice, either at or by a time so specified or at once, and in a manner so specified.

The relevant authority may only apply for a disclosure order pursuant to a confiscation investigation it receives a request to do so from an appropriate officer: see section 357 (2A) of POCA.

Once a disclosure order has been made, there is no limit to the number of notices the prosecutor may issue or the persons to whom they may be issued.

The requirements that must be satisfied before an order can be made are set out in section 358 and are identical to those in relation to customer information orders and account monitoring orders.

A person commits an offence under section 359 if he fails to comply with a disclosure order or knowingly or recklessly makes a false or misleading statement in response to such an order.

Disclosure orders are particularly intrusive in nature and may must not be sought without prior reference to the Head of the Proceeds of Crime Unit.

Restriction on the use of information provided in response to orders

By section 360 (1) a statement made by a person in compliance with a requirement made under a disclosure order may not be used in evidence against him in criminal proceedings.

This prohibition does not extend to confiscation proceedings after conviction, to prosecutions for perjury or to a prosecution for some other offence where, in giving evidence, the person makes a statement inconsistent with a statement made pursuant to a disclosure order: see section 360 (2).

Procedure

Applications for orders in relation to confiscation or money laundering investigations, judges empowered to exercise the jurisdiction of the Crown Court may make orders under Part 8 of POCA: see section 343 (2) (a).

In relation to civil recovery investigations, only a judge of the High Court has jurisdiction to make orders under Part 8: see section 343 (3).

The procedure for making applications to the Crown Court is set out in Part 6 of the Criminal Procedure Rules 2010.

Code of Practice

Section 377 of POCA imposed an obligation on the Secretary of State to prepare a code of practice as to the use of these powers by the Director General of SOCA and his staff, accredited financial investigators, police officers and officers of HMRC. This code was brought into force by virtue of SI 2003.334 on 24th March 2003.

Section 377A imoses a similar obligation on the Attorney General to prepare a code of practice as to the exercise of the section 357 powers by the Director of Public Prosecutions and the Director of the Serious Fraud Office. This document is available on the Attorney General's website - http://www.ago.gov.uk

By section 377 (6) a failure to comply with the Code does not of itself constitute a criminal offence but, by section 377 (7), the code will be admissible in evidence and the court is entitled to take into account any failure to comply with its provisions in determining any issue in the proccedings. Strict compliance with the requirements of the Codes is therefore of critical importance.

Cash Seizure

Since 30 December 2002, a customs officer or a constable may seize cash at the borders or inland if he has reasonable grounds for suspecting that the cash is recoverable property or intended for use in unlawful conduct and if the sum seized is in excess of a minimum amount (section 294 POCA). This exercise of this power is subject to a Code of Conduct. The minimum amount was originally set at £10,000, but was subsequently reduced to £5,000 on 16 March 2004. On 31July 2006, the minimum amount was further reduced to £1,000.

Seized cash may not be detained for more than 48 hours (excluding weekends, Christmas Day, Good Friday and official bank holidays) except by order of a magistrate. A magistrate may make such an order if satisfied that there are reasonable grounds for the officer's suspicion and that the continued detention is justified for the purposes of investigating its origin or intended use. The magistrate may also make an order for continued detention if consideration is being given to the bringing of criminal proceedings, or if such proceedings have been commenced and not concluded. Monies detained would in most cases be paid into an interest bearing account pending the outcome of proceedings.

The magistrates' court may release the cash in response to an application by the person from whom the cash was seized on the grounds that it is not recoverable property and is not intended for use in unlawful conduct. Secondly, a customs officer or a constable may release cash or any part of it after notifying the justice or magistrates' court if satisfied that the detention can no longer be justified.

Section 300 enables the magistrates' court to order the forfeiture of cash or any part of it if satisfied that it is recoverable property or is intended for use in unlawful conduct. Cash forfeiture proceedings are civil proceedings and the civil standard of proof will apply.

Seized cash that is detained under section 295(2), or that has been forfeited under section 298(2) POCA is excluded from the definition of free property (section 82 POCA). The effect of this is that the cash cannot be covered by a restraint order and cannot form a part of the confiscation order, although whilst held under section 295(2) it will be taken into account in calculating the person's benefit from criminal conduct.

The situation is further complicated by the fact that once cash has been taken into account in deciding the amount of a person's benefit from criminal conduct for the purpose of making a confiscation order, it is no longer recoverable property (section 308(9) POCA) and so cannot be forfeited under section 298(2) POCA.

In the event that cash proceedings are linked to a criminal prosecution and the cash forfeiture is to be contested, then an application for forfeiture should be made under section 298 POCA and the hearing of the application should be adjourned to await the outcome of the criminal proceedings (R v Payton [2006] EWCA Crim 1226). It is submitted that cash detained under section 298(4) is free property and so may then be taken into account in respect of both the benefit figure and the amount of confiscation order in confiscation proceedings.

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Procedure

The role of the CPS in Part 8 applications

Applications for Production Orders, Search and Seizure Warrants, Customer Information Orders and Account Monitoring Orders are proceedings, which are linked to the investigation of crime. CPS lawyers may provide advice but must not make the application since POCA gives them no standing to do so. If there is a subsequent challenge to any order that is made the CPS may provide advice, including advice to the police on drafting instructions to counsel, but it is for the police to instruct counsel in relation to applications which occur before the commencement of proceedings.

In providing advice, CPS lawyers are reminded of the following:

The need comply fully with the requirements of Part 6 of the Criminal Procedure Rules 2010
The need for accuracy in drafting orders and statements in support. If proforma statements are used care must be taken to ensure that any provisions that are inapplicable are clearly deleted: see Redknapp v Commissioner of City of London Police [2008] EWHC 1177 (Admin)
The need to comply with the Code of Practice at all stages of the investigation; and
That any failure by investigators to comply fully with the requirements of the Act, Rules of Court or the Code of Practice may lead to the order being quashed.

Cash seizure proceedings are normally conducted by in house solicitors employed by individual police forces, HMRC and UKBA. Section 302A of POCA (inserted by section 84 of the Serious Crime Act 2007) permits prosecutors to conduct cash recovery proceedings. Thus far, the power has not been exercised and it has costs implications for the CPS. The Head of POCU should be consulted before a decision is taken to conduct cash recovery proceedings under this provision.

If the CPS advises that a prosecution should proceed, then it is likely that money seized will either form an exhibit in the case, or will be held with a view to the court making a confiscation order following conviction. In those circumstances, the CPS would provide advice to the police on the basis that the issue arises from a criminal offence and is ancillary to contemplated or ongoing criminal proceedings.

Conversely, if the CPS advises against prosecution, then either the cash will be returned, or purely civil forfeiture proceedings will continue without CPS involvement.

Prosecutors should note that the cash seizure provisions became operative on 30 December 2002 and that the exercise of the power is subject to a Code of Conduct and that amendments were made to the Magistrates' Court Rules to govern these applications.

For further information as to the role of the CPS in respect of these applications, please refer to the Service Level Agreement with ACPO.

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Further Information

Home Office Summary Table of Powers

(a) Purpose of power

(b) Who can apply for it

(b1) confiscation/investigation?

(b2) money laundering investigation?

(b3) civil recovery investigation?

Production order

(a) Obtain material already in existence relating to a known account in control of a know person e. g. bank statements and correspondence

(b1)
(1) A member of SOCA's staff
(2) Any constable
(3) Any customs officer
(4) AFI with relevant accreditation

(b2)
(1) Any constable
(2) Any customs officer
(3) AFI with relevant accreditation