Policy paper

Criminal Justice Bill: Proceeds of crime

Updated 23 February 2024

What are we going to do?

Criminals should never benefit from the proceeds of their crimes. This bill will strengthen the ability of the Criminal Justice system to pursue those who have benefited from criminal activity and enable the government to work in partnership with financial institutions to use suspected criminal funds to combat economic crime.

Measures in the Criminal Justice Bill will:

• reform the confiscation regime – the statutory framework used to strip criminals of their proceeds of crime – to improve the process by which confiscation orders are made and enforced

• facilitate the transfer of funds representing the amounts of balances of suspected criminal accounts currently held by the financial sector to further invest in combatting economic crime

How are we going to do it?

The Criminal Justice Bill substantially overhauls the confiscation regime, contained in Part 2 of the Proceeds of Crime Act 2002 (POCA). The reforms will bolster the current system, by giving courts more powers to make realistic and proportionate confiscation orders, improve the enforcement of orders, and speed up confiscation proceedings. Reform will improve the recovery rate of assets, which will lead to more funds being successfully returned to victims; and more funds for public services to deal with crime.

The bill also provides for the creation of the Suspended Accounts Scheme to enable the voluntary transfer of funds to the government held by financial institutions in accounts suspended on suspicion of criminal activity, whilst protecting the rights of legitimate customers. Such monies will then be used to fund projects to tackle economic crime.

Background

Confiscation of proceeds of crime

Part 2 of POCA contains the legislative scheme for the recovery of assets acquired through criminal means, in England and Wales.^{[footnote 1]} A confiscation order is an order imposed by the court against a convicted defendant, ordering them to pay the amount they benefited from their criminal activity. For example, a person who commits fraud and benefits by £100,000 would be ordered to pay back the £100,000. The subject of a confiscation order will have a set amount of time to satisfy their confiscation order, after which the order will start to accrue interest.

In November 2018, the Home Office commissioned the Law Commission to undertake a review of the current confiscation regime and make recommendations for legislative reform. In November 2022, the Law Commission published its final report; containing 119 recommendations. The government published its response to the Law Commission in October 2023.^{[footnote 2]}

To inform the response and proposed reforms, the government consulted widely across government, law enforcement, civil society, legal practitioners, and academia.

Key reforms include:

1. Introducing a statutory objective for the confiscation regime to guide the exercise of the powers: “to deprive a defendant of his or her benefit from crime”.

2. Multiple measures to better prioritise compensation for victims and legitimate third-party interests.

3. Early resolution of confiscation: have a procedure after the sentencing but before the making of a confiscation order to narrow the issues in dispute and fast-track agreed orders.

4. Make it easier to restrain assets and preserve their value during an investigation: clarify the requirements for making a restraint order.

5. Introducing flexibility into the test for the calculation of a defendant’s benefit from crime, to ensure orders are accurate and enforceable.

6. Codifying the concept of hidden assets: to clarify the approach the court should take when a defendant hides their assets from law enforcement agencies, to ensure the value of those assets is still re-paid.

7. Enable cases to be heard in the appropriate forum: allow both the magistrates’ and Crown Court to enforce confiscation orders; and enable some appeals to be heard in the Crown Court rather than the High Court.

8. Optimising the enforcement of confiscation by introducing:

   • “Confiscation enforcement plans”, to be imposed by the court when a confiscation order is made, to detail the orders the enforcing court can make in the event the defendant defaults on the payment of their confiscation order.

   • Extending the enforcement powers of the magistrates’ court to the Crown Court. The courts will have powers to transfer proceedings between them based on the facts of each case. This will address the drift that frequently occurs in payment of orders and will streamline the enforcement process.

   • Confiscation assistance orders: to enable orders to be enforced promptly, standardise the best practice of appointing an appropriately qualified person to assist a defendant with satisfying their confiscation order.

9. Provisional discharge of confiscation orders: to allow outstanding confiscation orders to be placed in abeyance where there is no realistic prospect of recovery in the immediate term, and all enforcement steps have been exhausted. This would not bluntly write off the debt. The discharge would be provisional so that money could still be recovered in time if an order was revoked.

10. Consolidate existing appeal rights for confiscation into POCA  to ensure that the law is clear, transparent, and easily accessible.

These reforms support key Economic Crime Plan 2 and Fraud Strategy objectives to: reduce money laundering and recover more criminal assets year-on-year; and cut fraud and restore faith in the public sector response.

Suspended Accounts Scheme

Action 41 of the Economic Crime Plan 2 (2023-26) committed the government to exploring a mechanism to enable suspected criminal funds held in suspense accounts to be used in tackling economic crime.

It is estimated that the financial sector currently holds a minimum of £220 million of suspected criminal funds in suspended accounts. A further £30 million could be suspended annually in future.^{[footnote 3]}

The source of these monies, and their owners, is often unknown for a variety of reasons, including techniques used by criminals to obscure their origin. This means that securing a criminal justice outcome for every suspended account is often not possible. Implementing a process to enable the transfer of these funds will provide additional revenue to combat economic crime, delivering the government’s ambition to cut fraud and reduce money laundering.

The scheme will not affect the rights of the account holders and victims.

Monies will be received by the scheme, at the earliest in 2025/26, and will be allocated in three ways:

• the significant proportion of the funds will be directed by government to new and additional projects which combat economic crime

• participating scheme members will be compensated by the scheme for the balances repaid to legitimate customers, subject to a cap that will be detailed within the scheme rules

• the scheme administrator will be able to defray its costs for running the scheme

Key facts

Confiscation of the proceeds of crime

£339.1 million of assets were recovered using asset recovery powers provided for in POCA in the financial year 2022 to 2023. Receipts have risen by 75 per cent compared to £193.8 million in 2017 to 2018 and are 49 per cent higher than the six-year median of £227.8 million.

Suspended Accounts Scheme

Surveyed financial institutions hold a known minimum of £220m in releasable suspended accounts, and estimate a minimum of £30m per year could be suspended in future. Surveyed institutions represent only a small portion of the Anti-Money Laundering Regulated sector and the true figure is likely to be higher.

The large majority of suspended accounts are held by banks and building societies. To a lesser extent, suspended accounts are accumulating in other parts of the financial sector, and wider Anti-Money Laundering Regulated Sector.

A Targeted Engagement on the proposed Suspended Accounts Scheme ran between 24 July and 15 September 2023. Selected firms and industry bodies from across the Anti-Money Laundering sector were invited to respond.

Frequently asked questions

Why are these reforms needed?

The legal framework for the recovery of criminals’ assets is complicated and confusing. Wholesale reform is required to ensure criminals do not benefit financially or materially; to compensate victims; and stop criminal assets being used to fund further criminality.

The reforms address criticisms from the Law Commission of England and Wales, the National Audit Office, the Public Accounts Committee, and the Home Affairs Select Committee, which expressed concerns regarding the complexity and enforcement of the confiscation regime.

Does the government intend to accept all of the Law Commission’s 119 recommendations?

The government has carefully considered all of the Law Commission’s recommendations and is taking forward those which will deliver its ambitions to recover more criminal assets year-on-year and restore faith in the public sector response to fraud.

In determining which of the recommendations to progress the government consulted widely with subject experts.

How much more will be recovered as a result of these reforms?

Reforms to the confiscation regime are expected to increase the amount of criminal assets recovered by government by between £25.2 million and £126.1 million, with a central estimate £75.7 million over ten years.

The measures will also improve the efficiency and speed with which confiscation order cases progress and conclude.

What will this mean for the confiscated assets?

Confiscated funds are returned to victims or retained by the state and reinvested into tackling economic crime.

Under the Asset Recovery Incentivisation Scheme (ARIS), recovered proceeds of crime are split between operational partners, based broadly on their relative contribution to the recovery of the assets, and central government.

Since 2006/07, £1.3 billion of the assets recovered under the Proceeds of Crime Act (POCA) 2002 has been returned to law enforcement agencies, prosecutors and the courts to fund further asset recovery capability or work that protects the public from harm.

The Home Office’s share of ARIS receipts supports investment in priority front line activity, including supporting and safeguarding victims, delivering the policy response to Economic Crime and the National Cyber Strategy and delivering statutory obligations.

Will the reforms contribute to the recovery of the uncollected confiscation debt?

Yes. Multiple measures in the bill are designed to optimise enforcement. These will be used to full effect to recover both sums payable under new and historical confiscation orders.

When there is no realistic prospect of recovering the remainder of an order, despite the reasonable efforts of law enforcement authorities, the bill will provide for those orders to be provisionally discharged.

No enforcement action could be taken to recover provisionally discharged confiscation orders, but this would not bluntly write off the debt. The discharge would be provisional so that money could still be recovered in time if an order was revoked.

Unlimited enforcement is not viable because it is not without costs ultimately borne by the taxpayer. This principle is already recognised by sections 24 and 25 of POCA, which provide for orders to be written off in narrow circumstances.

Does the provisional discharge of a confiscation order mean crime will pay?

No. Orders may only be discharged on a provisional basis. Should any offender come into funds, the order for provisional discharge would be removed immediately to provide for enforcement action. This will ensure crime does not pay.

What is the money received from the Suspended Accounts Scheme going to be spent on?

Funds received through the scheme will be invested in new and uplifted projects to combat economic crime, delivering the government’s ambition to cut fraud, reduce money laundering, recover more criminal assets; and combat kleptocracy and sanctions evasion.

Why does the scheme require the government’s involvement?

There is currently no clear and sustainable option for these funds to be released from suspended accounts by financial sector entities themselves for this purpose. As a result, there is a need for the development of a clear new model for the release and use of these funds, which requires the input of both the government and private sector.

Why can’t suspended accounts be recovered through the Dormant Assets Scheme?

As proceeds from crime are not dormant, as defined by the Dormant Bank and Building Society Accounts Act 2008 and the Dormant Assets Act 2020, they are not eligible for inclusion in the Dormant Assets Scheme.

How are you going to make sure innocent customers are not being denied access to their money?

Customers will maintain their legal rights to claim against participating organisations for any funds which they believe have been suspended in error. Existing avenues for recourse will remain.

Why is the scheme voluntary and not mandatory?

As these monies have been suspended by financial sector organisations for different reasons and in different ways, a voluntary scheme is preferable to avoid the burdens of a mandatory scheme including significant government oversight, alongside large-scale changes to regulations and processes.

Will money from the scheme go towards reimbursing victims of fraud?

Scheme members will need to have made reasonable efforts to return monies to victims prior to any of the accounts being eligible to transfer to the scheme. Whilst the scheme will not be a vehicle to reimburse victims of fraud, money received through the scheme will go towards combatting economic crime, which includes supporting victims of fraud.

Why would financial sector organisations volunteer for the scheme?

The use of these funds across the economic crime landscape to reduce fraud and money laundering will bring benefits across the Anti-Money Laundering Regulated Sector, including to those firms within the financial sector who currently hold significant stocks of these funds that they are otherwise unable to use. These benefits include potential decreases in the volume of criminality abusing their businesses, lower costs of compliance, the ability to input into the spending allocation process for the scheme, and demonstrating their commitment to their corporate social responsibility objectives.

How do suspended accounts differ from accounts frozen by Account Freezing Orders (AFOs)?

An AFO is an order granted by a magistrates’ court to freeze a UK bank or building society account with a balance of £1,000 or more. In contrast, suspended accounts have been suspended by private sector entities on a private law basis and for the purposes of protecting their customers and preventing criminality. In order to prioritise the recovery of criminal assets by law enforcement, accounts frozen under an AFO will not be eligible for the scheme.

1. There are separate confiscation regimes for each of England & Wales, Scotland, and Northern Ireland. These are contained in Parts 2, 3 and 4 of POCA respectively. Each of those Parts extends only to the respective jurisdiction. ↩

2. Government response to the Law Commission’s review of confiscation - GOV.UK (www.gov.uk) ↩

3. Based on an industry survey commissioned by the Home Office and issued by UK Finance in August 2022. ↩