Proceeds of Crime Act (POCA)

Report: 12
Date: 27 March 2008
By: Assistant Commissioner Specialist Crime for the Commissioner

Summary

This report explains how the asset recovery process works and particularly how recovered funds could be returned to London and those communities affected by crime.

A. Recommendation

That Members note the contents of this report.

B. Supporting information

1. The purpose of this report is to provide an explanation of

• how the asset recovery process works;
• how POCA monies finds its way back to boroughs;
• how much of the total amount collected is retained by Government;
• how much is returned to London and in particular could there be a sound case for more allocation to the MPA/MPS and in particular for communities; and
• an examination of and a view on the pros and cons of more allocation to London.

How the asset recovery process works

2. The asset recovery process came into place as a result of the Proceeds of Crime Act (POCA) 2002. This legislation was enacted in February 2003 and gave a large number of powers relating to asset seizure, confiscation and forfeiture. It also created the Asset Recovery Agency and provided powers of civil forfeiture. The main way in which the MPS is using the legislation is to seize cash over £1,000 and to pursue the confiscation of assets after a conviction where certain conditions are met.

3. This is a relatively new activity for police as, prior to the POCA, criminals normally retained the proceeds of their crime, as there was no effective legislation to deprive them of it. The Government believes that the retention by criminals of their proceeds is both wrong and likely to encourage offending. Conversely, depriving criminals of proceeds is likely to deter and disrupt local criminals and help dismantle organised criminal networks.

4. Following a cash seizure, it can either lead to a criminal investigation, or it can be dealt with as a forfeiture hearing at a Magistrates Court. A forfeiture hearing is dealt with on a balance of probabilities basis where it considers whether the cash is proceeds of crime. This is the civil standard of proof and the MPS has won nearly all the cases it has pursued.

5. When a person who is convicted has a criminal lifestyle or is convicted of a criminal lifestyle offence, there will be a confiscation hearing, which can lead to the Judge making a confiscation order. This creates a debt that needs to be settled by the defendant. There are imprisonment penalties that can be imposed in default of payment where, after serving the default sentence, the person will still owe the money.

6. Where a forfeiture order is made, the money is transferred to the Home Office to what is colloquially known as the ‘tin box’. Where a confiscation order is made, as the money is collected or enforced it will go into the ‘tin box’. The time-scale from arrest to ‘tin box’ is from 3 months to 3 years depending on the nature of the case. It is unusual to resolve cases within a year. The tracking and confiscating criminal money is as difficult and time-consuming as arresting and convicting criminals.

7. In order to encourage mainstreaming the use of POCA powers the Home Office set up the Asset Recovery Incentive Scheme (ARIS). This scheme is due to run until 2010 and it has evolved over time. In its current form, 50% of the recovered assets (in the ‘tin box’) from forfeiture and confiscation are retained by the Home Office and in the case of forfeiture, 50% is returned to the MPS. In the case of confiscation, 17% of collected confiscation money is returned to the MPS. The money is conditional on spending it on POCA related work or community projects.

8. In order to mainstream the use of POCA in the MPS a pan MPS programme board was set up chaired by AC SCD (Payback Programme Board, PPB). A Proceeds of Crime Implementation Team (POCIT) was created that works to an implementation board (Payback Implementation Board, PIB). PPB reports quarterly to the MPS Investment Board and MPA Finance Committee. A spending plan has been put in place against the projected income (see Appendix 1). The main purpose of this plan is to build the MPS infrastructure to deliver enhanced performance in asset recovery. This should lead to crime reduction and an increase in ARIS funding year on year whilst the increase in productivity works through the lengthy pipeline. This means that there will not be an immediate increase in return but that it will grow year on year.

How POCA monies finds its way back to boroughs

9. As part of the five-year plan, the PPB has funded posts across the MPS in an effort to build capacity towards a minimum level. Even so, the implementation team estimate that the MPS is only at 62.5% of the minimum level of financial investigation capacity at borough level. Despite this, there has been a significant increase in the capacity to target the criminal assets of acquisitive criminals at a borough level. There have been an additional 85 financial investigator posts created on borough through ARIS funding.

10. There is also funding to reward POCA activity on boroughs against an activity payback index devised by POCIT. This relates to a basket of activities that indicate POCA work on boroughs and other operational OCUs. This translates to a scoring matrix against which the performance reward is paid. This money is to be used for POCA related activity and community projects.

11. Currently there is a total of £600,000 in reward payments made to boroughs each year and £3.5 million per year is invested in borough infrastructure around financial investigation.

12. As an example of this reward process, in the first half-year, April to September 2007 the following amounts were disbursed to boroughs against the payback index reward process:

Table 1: Amounts disbursed to boroughs against the payback index reward process April to September 2007

13. There is a year on year disbursement in two lots of £300,000 each in reward money. In addition to this, the Specialist OCUs infrastructure has been increased and a similar reward structure is in place. The figures for the specialist OCUs are far higher than the boroughs as they deal with serious and organised crime where the value of assets recovered is much higher. This is clearly shown in the table below.

Table 2: Year on year disbursements 2004/05 to 2007/08

Source: JARD
Specific windfalls have been excluded. These are RART orders in 2004/5 for £14.1m and 2005/6 for £10.3m and one TP order for £1.8m in 2004/5. These are one off results that are unlikely to be repeated and distort underlying performance.
*Unallocated – JARD does not show team allocation. Slight variations will occur on rounding up.

14. The remaining money not allocated as reward or for infrastructure building, is to increase the CHIS reward payments for asset recovery, to pay for the POCIT, to pay for a small confiscation enforcement team, to pay ARA training costs to keep Financial Investigators accredited and to provide funding for community projects through the Safer London Foundation (SLF).

Retention of monies by Government

15. As described at paragraph 7, the Government retains 50% of the forfeiture and collected confiscation money. From this 50% they fund the Regional Asset Recovery Teams and the Joint Asset Recovery Database. It is not clear how the remainder is used as it is subsumed into the Home Office budget.

16. The remaining 50% of forfeiture money is returned to the MPS quarterly.

17. The remaining 50% of collected confiscation money is shared with other agencies at just under 17% each. The Crown Prosecution Service (CPS) prosecute offenders and restrain assets, Her Majesties Court Service (HMCS) enforce the debts imposed by confiscation orders. The Home Office estimates suggest that the cost ratio between: police: CPS: HMCS; is 56: 28: 16, whereas the ARIS confiscation income is equally shared.

18. A recent Home Office review proposes a change in the scheme increasing the police share to 20%, but imposes an initial top-slice for Serious and Organised Crime Agency (SOCA) of £3 million in 2008/9, £5 million in 2009/10 and £7 million in 2010/11. This means a marginal increase in share for police nationally of about £1m. At this time, it approximately equates to an extra £250,000 yearly for the MPS. The MPS and ACPO have opposed this change, as it is not an accurate reflection of costs and the payment to SOCA is thought to be inappropriate, as this is part of SOCA core business. The Home Secretary is currently considering this review and the views of ACPO and the MPS.

Funds returned to London and a sound case for more allocation to the MPA/MPS and in particular for communities

19. In 2006/7, the MPS generated £14.6m, of which the Home Office retained £7.3m, the CPS and HMCS shared £3.4m and the MPS received £4m.

20. The prediction of income from ARIS is very difficult and imprecise. The return of the money to the MPS is dependant on the court process and on confiscation orders being enforced. The current figure of £28.7 million in confiscation/forfeiture orders for 2007/8 cannot be accurately translated into potential income in-year. This is further complicated as the Home Office target for asset recovery is based on the ‘tin box’ receipts whereas the MPS target is on forfeiture and confiscation orders where the amount may not have been collected.

21. The current national target of £250m by 2009/10 is the ‘tin box’ target. This excludes compensation to victims, money retrieved from UK criminals overseas and a large number of low value orders obtained by the police under Misuse of Drugs Act powers. These are important methods to achieve public reassurance and crime reduction and should be included in the target. The idea of raising revenue diverts people from the central crime reduction purpose. This is not in harmony with a victim-based approach as it could cause activity to be skewed away from victims. This is because any compensation for victims comes from confiscation orders before the money reaches the ’tin box’, which reduces the income from ARIS and does not count towards the national target. The aim should be to take money from criminals not put money in the ‘tin box’.

22. The community project aspect of this is important and to start this process funding has been allocated to the Safer London Foundation (SLF). The disbursement of funds by the SLF is decided by the SLF Grants Committee, chaired by Lord Toby Harris and composed of members of the Trustees of the SLF. Trustees are expected to declare an interest in any applications for funds and the Chief Executive has been able to cite a recent example of when this had occurred.

23. Applications for funds are invited through the SLF website at
www.saferlondonfoundation.org.uk  and other publicity. The applications are received direct to the SLF and the process of evaluation is delegated to the Chief Executive and his Operations Managers to ensure they fit the published criteria for funding. In the case of successful bids, this team also monitor expenditure and evaluate the results. SLF support is given to projects through a legally binding contract. The system of bidding, acceptance and evaluation is transparent and the accounts are independently audited.

24. The fact that one of the sources of funding comes from proceeds of crime monies is advertised in SLF literature. POCA monies have been used to ‘fund community based projects addressing the issue of guns, gangs and weapons crime in London’. This is in the process of being amended to; ‘fund community based projects aimed at reducing acquisitive crime and violence and sending the message across London that crime does not pay’.

25. This disbursement to the SLF has been endorsed at MPA Finance Committee in January 2008. The progress of the POCA plan and expenditure was last reported to the December 2007 Finance Committee meeting.

26. The MPS does not cover its costs in using the POCA legislation. Some smaller cash seizures do not cover the costs of the process. It is important to remember that the primary purpose of the legislation is to remove the money from criminals, not to raise revenue from the process. This is a legislative imperative as well as being a valuable policing tool and there should not be the expectation that all POCA activity should be funded. ARIS is a form of pump priming that could cease at any point post 2010.

An examination of more allocation to London

27. In part, this point has been covered in other answers above. Additional funding could increase the infrastructure to provide minimum standard Financial Investigator coverage across all London boroughs. At this time, the coverage is still patchy. An increase to full coverage is likely to increase the return from ARIS as well as having local impact on crime.

28. There is a real opportunity through this work to have a positive impact on London communities. The initial investment in the SLF is starting projects that will potentially make a difference. Year-on-year funding will help continuity and enable longer term plans to be funded.

29. There is a lack of transparency as to how the other agencies and Home Office spend the money from the ‘tin box’. A disbursement of a larger allocation to London would enable more local investment in communities and potential reparation. There is a difficulty with the community funding, as it needs transparency and clear audit trails of spend. This needs infrastructure and accountability and is not a role for the MPS. This is the reason that the SLF was chosen for funding as it has these audit and bidding controls.

C. Race and equality impact

1. The implementation team have researched the use of cash seizure powers and found no inherent disproportionality. All POCA investigations are an output of criminal investigation powers.

2. It is believed that there will be a positive benefit from the funding of the SLF, because, among the stated ‘objectives and activities’ of the SLF, is the phrase ‘to provide facilities for … people who are by reason of their age or mental or physical disability in need of care or support and/ or by reason of the place where they live or work, their ethnic origin or other social and economic factors particularly likely to be victims of criminal activity’.

D. Financial implications

1. A financial spreadsheet is attached at Appendix 1 – Revised cash flow based receipts and actual expenditure on Payback Teams.

2. An important point is that to increase the impact on crime of the legislation and the resultant ARIS funding it is essential that we build our POCA infrastructure. There is significant scope for us to increase our impact on acquisitive criminals.

3. Improving the income stream from asset recovery depends on:

• Ensuring that the Payback budget is spent on asset recovery.
• The development of dedicated ring-fenced teams across Business Groups.
• The effective enforcement of confiscation orders, currently through a dedicated Emerald team.
• Minimising abstractions from this budget that do not directly improve asset recovery performance.

4. The disbursement of funding to the SLF will be the subject of three-monthly review by Investment Board and twice yearly scrutiny by MPA Finance Committee.

5. The income from incentivisation will be monitored by the Programme Board and, if it falls below projection, remedial action can and will be taken to reduce the expenditure. If this proves to be necessary, there is capacity in the MPS staff turnover to redeploy staff affected. A reduction plan is being prepared starting with the least productive OCUs as assessed by the Payback Index. The SLF funding will be considered as part of this descaling.

6. The Home Office funding under ARIS is agreed until 2010. The proposed expenditure will still keep the accounts in credit with an end of programme surplus. This has been helped by the Home Office decision to fund the London RART until 2010, which has removed the projected three-year expenditure of £1,572,000 per year from April 2008.

7. It should be noted that receipts from the Home Office are falling below the projection. This is being carefully monitored and a significant piece of work has been commissioned to understand the pipeline. This will help to project future income.

E. Background papers

None

F. Contact details

Report author:  A/Commander Nigel Mawer., MPS

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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