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Corporate Crime analysis by David McCluskey 'How far does the NCA's asset recovery power reach?', Lexis Nexis, 25 October 2013


Corporate Crime analysis: David McCluskey, partner at Peters & Peters LLP specialising in business crime litigation, discusses the National Crime Agency's attempt to enforce asset recovery in the case of Israeli tycoon Israel Perry.


Original news

NCA's powers to freeze worldwide assets tested in High Court

Independent, 25 October 2013: The National Crime Agency's (NCA) powers to freeze criminals' global assets are under scrutiny in the High Court, as it attempts to enforce the seizure of Israeli tycoon Israel Perry's worldwide assets.

What does this case tell us about the NCA's enforcement strategy?

The NCA plainly wishes to pursue asset recovery proceedings against the greatest number of defendants and in respect of the widest property that it can lawfully seize or recover.

The case also indicates that the NCA wishes to make greater use of civil recovery orders. These have the advantage that it is not necessary to convict a person under UK law in order to obtain such an order--it is merely necessary to prove that property is recoverable property under the Proceeds of Crime Act 2002, s 242 (POCA 2002). In this regard, the explanatory notes are inexcusably brief in describing the true effect of the amendments.

While the Crime and Courts Act 2013, s 48 (CCA 2013) does indeed deal with the Perry position(Perry v Serious Organised Crime Agency [2012]All ER (D) 252 (Jul)), CCA 2013, s 49 introduces wholesale changes which provide those pursuing a civil recovery investigation with sweeping powers that are ordinarily only available to those conducting a criminal investigation.

Thus a civil recovery investigation may now found applications for:

·         production orders

·         search warrants

·         disclosure orders

·         customer information orders

·         account monitoring orders, and the like

These involve substantial invasions of the personal rights of individuals, which it is submitted are simply not justified in a non-criminal context.

The Perry amendments themselves closely reflect the structure of some criminal offences which are given extraterritorial effect in respect of those with a 'close connection' to the UK. See for instance the Bribery Act 2010. CCA 2013 goes further, however, and provides for property-related and conduct-related connections which may also confer jurisdiction on the court.

Why has this avenue been pursued after the Serious Organised Crime Agency (SOCA) lost in the Supreme Court?

Plainly, SOCA has made a good case for arguing that at the very least, recovery orders should be made extraterritorial in respect of citizens and residents of the UK, and where there is a property or conduct related connection to the UK.

SOCA has, rightly in my view, made a good case for arguing that there should be some limited extraterritorial application in respect of recovery orders. However the amendments in CCA 2013, s 49 go too far in my view, and risk once again blurring the distinction between a criminal and civil investigation, which I deal with further below.

What are the limits of the NCA's powers in relation to worldwide freezing of assets?

That depends on what kind of order is sought by the NCA. It must be borne in mind that Perry (and the subsequent amendments) only relate to civil recovery orders. The NCA has always had the power to obtain a restraint order against a person's assets worldwide where it is conducting a criminal investigation.

In this regard, it is worth highlighting the difference between the two regimes. Restraint orders may be obtained where a criminal investigation (or proceedings) has begun in England and Wales, and there are reasonable grounds to believe that an offender has benefited from his conduct.

Restraint orders operate in personam, in contrast to civil recovery orders which operate in rem. Thus a person served with a restraint order is under a personal duty to comply with that order--which may include not dealing with his assets wherever situated. A restraint order may even include an obligation to repatriate assets held outside the UK to within the jurisdiction.

In this regard, it is interesting that in the Court of Appeal (which ruled in favour of SOCA) Hooper LJ, in finding that civil recovery orders did have extraterritorial jurisdiction, 'derived support for his conclusions from analogies with the law of bankruptcy and from the practice of issuing worldwide freezing orders'.

Although not explicitly stated by the Supreme Court, it would seem that there is a more appropriate analogy to be drawn between worldwide freezing orders issued by the High Court and restraint orders. Both operate in personam, and the effect of breach by a person served personally with the order may include imprisonment for contempt of court.

What are the challenges facing the NCA in this area?

The two main challenges are identification of property, and the exercise of proper jurisdiction over the relevant property and persons. To that extent the amendments may cause some confusion by their inclusion of clauses conferring jurisdiction by reference to the identity of those holding the property, who acquired it, or who committed the unlawful conduct. In my view those clauses do not change the fundamental nature of a recovery order namely that it operates in rem.

What are the possible wider implications of this case?

The case has served to further clarify and underline the distinction between asset recovery in a criminal context (the POCA 2002, Pts 2 and 7) and that in a non-criminal context (POCA 2002, Pt 5). In this regard it is important to note that the recent amendments have not sought to disturb the primary finding of the court in Perry, which is that civil recovery orders operate in rem whereas orders under POCA 2002, Part 2 operate in personam. This distinction becomes clearer when comparing the respective definitions of criminal/unlawful property and benefit in:

·         Part 7--(s 340(5): A person benefits from conduct if he obtains property as a result of or in connection with the conduct, and

·         Part 2--(s 242(1): A person obtains property through unlawful conduct (whether his own conduct or another's) if he obtains property by or in return for the conduct

The requirement for a greater nexus ('by or in return' versus 'as a result of or in connection with') between conduct and acquisition can be contrasted with the fact that POCA 2002, Pt 5 proceedings do not require proof of specific criminal conduct. This is part of the balancing exercise that must be undertaken between the need to confiscate criminal property and the need to respect property rights. By contrast, where a criminal offence of money laundering is charged under Pt 7, there is a looser connection between conduct and property, which need only be acquired 'in connection with' the conduct, albeit that this must be proved to a much higher standard.

What should lawyers do next?

There is likely to be much room for debate on the precise application of the criteria for what constitutes a 'connection' between the case and the 'relevant part' of the UK. In this regard it is worth noting that England and Wales on the one hand and Scotland on the other are treated no differently to other foreign jurisdictions in requiring there to be a connection between the case and the 'relevant part' ie where the order was made, whether it be England and Wales or Scotland.

There is also provision for jurisdiction according to whether property was within the jurisdiction, or whether it was recoverable property, even if for a limited period of time.

Close attention must be paid to the use of invasive powers such as search warrants, account monitoring orders, and the like. Appropriate cases may well see a challenge to the validity of such provisions, on the basis that they represent a disproportionate interference with personal and property rights in the circumstances of a non-criminal investigation.

Interviewed by Dave Thorley. The Views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

This is reproduced with the kind permission of Lexis Nexis. 

Is UK Legislation on the Internet Sale of DVDs Fair or Even Fit for Purpose? by Maria Cronin

To read Maria's article which was originally published in Issue 6 of the Entertainment Law Review 2013, please click on the attachment below. Maria Cronin is an Associate in the Business Crime Department and can be contacted at mcronin@petersandpeters.com


Enforcing White Collar Crime in the UK by Neil Swift, Financier Worldwide, September 2013

Responsibility for the investigation and prosecution of white-collar crime in England and Wales is shared between three specialist agencies: the Serious Fraud Office (SFO), the Financial Conduct Authority (FCA) and the Office of Fair Trading (OFT).

In addition, serious frauds investigated by the police and tax frauds investigated by Her Majesty’s Revenue & Customs are prosecuted by the Crown Prosecution Service Central Fraud Division.

This article looks at the remit of the three specialist agencies, examines their recent history and discerns what each aspires to.

'Anti-Competitive Camouflage: Pay-for-Delay Agreements' by Jonathan Tickner and Emma Ruane, the 6th edition of The International Comparative Legal Guide to Competition Litigation 2014

To read the article in full please click on the attachment below.

Who's Afraid of the Bribery Act

Monty Raphael asks the question

"Conducting Internal Investigations”, Financier Worldwide, August 2013

Running an internal corporate investigation is fraught with risk. Even a single-site, small to medium sized company will face a number of difficulties in carrying out an internal investigation. The risks multiply many times when the company concerned operates in a number of different countries.

To read the full article, please click on the link below. Financier worldwide is subscription only.

Keith Oliver and Maria Cronin have their Case Study on Fraud published in 'Droits De la Personne', May 2013

To purchase this publication, or to find out more information please click on the link below.

Article by Helen McDowell and Emily Wilson, 'Challenging extradition on human rights grounds', Lexis Nexis, 12 July 2013

Corporate Crime analysis: Are the courts showing signs of relaxing the stringent threshold to be met when resisting extradition? Helen McDowell, business crime managing partner, and Emily Wilson of Peters & Peters, advise that it’s worth considering new human rights angles in extradition cases. To read the article in full please click on the attachment below.

'Privilege Against Self-Incrimination In Civil Cases' by Jason Woodland, YFLA Newsletter Vol 2, Issue 2, 2013

This article focuses on what happens at trial. What steps can a party to civil proceedings take at that stage to avoid providing evidence which might incriminate them? To read the article please click on the attachment below.

Update Crime: criminal cartel offence, the Victims' Right to Review, tax evasion and new caution guidance, Miranda Ching, The Solicitor's Journal, 21 June 2013

Miranda Ching examines changes to the criminal cartel offence, the Victim's Right to Review, HMRC's exposal of tax evasion and new guidance on the issuing of cautions. To read the article please click on the attachment below. It is reproduced with the kind permission of the Solicitor's Journal.