Proceeds of Crime Act - quarterly update

Report: 07
Date: 23 September 2010
By: Assistant Commissioner Specialist Crime on behalf of the Commissioner

Summary

This paper is the quarterly update report of the Payback Programme Board (PPB) for April 2010 to June 2010.

The PPB aims to reduce crime by mainstreaming the use of powers under the Proceeds of Crime Act 2002 (POCA). PPB is funding and supporting operational Payback teams on every BOCU using the Home Office (HO) Asset Recovery Incentive Scheme (ARIS). These funds are currently used to fund POCA dedicated posts within Business Groups and community projects through the Safer London Foundation (SLF).

A. Recommendations

That

1. Members note the update.

B. Supporting information

1. Investment Board in August 2006 requested a review of Payback spending on a quarterly basis. This report is the latest financial review of Payback performance. The purpose of the Payback budget is to reduce crime through mainstreaming the use of powers under the Proceeds of Crime Act 2002. To best illustrate this, the Payback Development Unit produce a six monthly “Payback Index” that equates to the number of cases with a weighting for their value.

Overall Operational Performance summary

2. The asset recovery element of financial investigation is the process of collecting the proceeds of crime using the powers in the Proceeds of Crime Act 2002 (POCA).

There are four main methods of recovering assets:

•  Confiscation - following a criminal conviction.
•  Cash forfeiture - the recovery of seized criminal cash through civil powers.
•  Civil and tax recovery
•  International asset recovery - repatriation of proceeds of crime to the UK, or returning the UK-based proceeds of convicted criminals to overseas jurisdictions.

3. The MPS predominantly concentrates on the first two with SOCA and HMCS dealing with civil and tax recovery.

4. On average the above processes take between one and four years to finalise. This means that delivery against the 20010/11 value target will be partially achieved as a result of the volume of investigations undertaken from 2007/08 onwards. This fact was recognised in the Prime Ministers Delivery Unit report, ‘How to improve the performance and harm reduction impact of recovering the proceeds of crime - Asset Recovery Priority Review,’ as an inhibitor to performance delivery.

5. Receipts from the seizure / sale of criminal assets are paid into the Government Consolidated Fund and parts of these monies are awarded to the contributing agencies via the ARIS. These funds are currently used to fund POCA dedicated posts within Business Groups and community projects through the SLF.

6. Performance around POCA is currently measured by volume and value. Volume can be influenced in year through tasking, but this could impact on other priorities unless it is done in a targeted way. There is a significant problem with the current value measure as it is almost impossible to influence the value target in-year. The current volume measure is helpful as it indicates current POCA activity that will lead to future confiscation and forfeiture orders.

7. In 2008/9 a target of £42 million was set by the MPA for the value of assets identified by the court for seizure (value of all confiscation and forfeiture orders). This target was achieved; this was a 20% increase on 2007/8. The 2009/10 target was £45 million, a 7% increase on 2008/9. At year-end the MPS had achieved £39m, 13% below the £45m target. This £45m target remains for 2010/11.

2009/10 year end position

8. Value Target, £45m (value of all confiscation + forfeiture orders)
Full year 09/10 = £39m (13% below target)
Volume Target, 3169 (No of restraint orders and cash seizures)
Full year 09/10 = 2256 (29% below target)

2010/11 first quarter position

9. Value Target, £45m (value of all confiscation + forfeiture orders) ¼ year target £11.25m
1st quarter 10/11 = £8.9m (21% below target)
Volume Target, 3169 (No of restraint orders and cash seizures) ¼ year target 792
1st quarter 10/11 = 450 (43% below target)

10. The past performance (i.e. final court results, value) of Business Groups in asset recovery is shown below. The sums shown are confiscation and forfeiture court orders imposed (MPA target), not MPS income.

Source: Joint Asset Recovery Database (JARD)

11. In the first three months of 2010/11 the MPS has transferred £6.4m of seized cash to the HO. Under the current ARIS this will result in a first quarter income of £3.2m. This represents 29% of the projected income of £10.9m for 2010/11.

12. There is significant difficulty in predicting the performance outturn at year-end. This is due to the lack of accurate management information within the National Joint Asset Recovery Database (JARD). Currently the required government funding of £2m to enhance and improve JARD is not available.

Impact of Operation Rize on MPS performance

13. This has been a highly successful innovative operation and the positive impacts have been felt in a number of ways, including the confirmed disruption of 28 Organised Crime Networks to date. However there was an inevitability that the deployment of vast numbers of SCD6, TP and SO officers on Rize would impact upon both SCD6 and MPS performance in the following financial year. The operation has seen a higher than expected number of contested hearings followed by appeals. To date DLS has supported 61 separate contested cash seizures. DLS view such volume of appeals as rare.

14. This has caused a significant knock-on effect on the productivity of MPS FIs as officers from eleven boroughs, twelve SCD 6 units and two CO units were allocated a significant numbers of investigations, reducing their capacity to undertake other work and impacting significantly upon MPS performance. Approximately 75 Rize investigations still await completion.

15. In addition to securing ARIS income to the MPS, completed Rize investigations have also resulted in £7.7m being paid over to Her Majesty’s Revenue and Customs (HMRC) with a further £0.26m being paid over to the Department of Work and Pensions (DWP). Although this represents the removal of £7.96m of criminal money it does not represent any income to the MPS as it does not fall within the current ARIS nor is it measurable within the MPA target of £45m. If measurable it would have increased the MPS performance against the MPA target. If accountable it would have represented increased ARIS income of £3.98m.

National performance

16. Attached at Appendix 1 is the POCA National Performance data. This highlights that the previous year on year increases in performance have now declined to only a 4% increase between 08/09 and 09/10 (source SOCA). This downturn in performance is mirrored within Appendix 2, which shows the balance of cash detained within MPS accounts declining from £40m to £38m from Apr 10 to June 10.

The Asset Recovery Incentivisation Scheme (ARIS) funding

17. In 2009/10 MPS cash seizure activity resulted in payments to the Home Office of £15.2m. This generated ARIS income to the MPS of £7.6m. (ARIS formula 50% of all submitted monies returned to MPS)

18. In 2009/10 MPS confiscation activity resulted in the collection of £9.6m by HMCS. This generated an income of £1.8m to the MPS. (ARIS formula 18.75% of all collected funds by HMCS returned to MPS)

19. In 2009/10 the MPS recorded an order value of £39m against the MPA target of £45 million. This £39m is largely composed of orders to pay that have not yet been enforced by the HM Courts Service. The amount obtained and remitted to the Home Office in 2009/10 is a lower sum, about £25m. Half of this (£12.5m) is retained by the Home Office and the remainder is shared with the CPS and HM Courts Service. The MPS share under the ARIS is paid quarterly in arrears and is estimated at £9.4m in 2009/10. The quarterly ARIS income in 2009/10 is shown below.

20. (Quarter 4 is a conservative estimated, this income should have been received by mid July 10 but has been delayed as it awaits ministerial sign off, HO have indicated this should be concluded in Aug 2010)

21. In addition to the ARIS income all Payback generated monies generated through Section 27 Misuse of Drugs act are paid centrally to the POCA account. In 2009/10, activity under this legislation generated a further £0.5m giving a total POCA income of £9.9m.

22. The MPS income via the ARIS is difficult to predict as the pipeline runs from 3 months to 4 years. There is a difference between confiscation and forfeiture. In forfeiture cases the money actually exists and when an order is made the money is transferred to the ‘tin box’. In confiscation cases the order creates a debt that needs to be settled and the money only exists when and if the debt is paid. It is not possible to predict with any accuracy the value of a potential confiscation order, when it is likely to be made or when the money will be paid. The recession has also seen a downturn in property valued in previous years, therefore reducing the anticipated collectable amount.

Disbursement of funds

23. The rate of spend over recent years has exceeded the flow of income from ARIS disbursements to the MPS. The gap has been funded from historical POCA reserves and there was an expectation that revenue would grow in consequence of the investment in building financial investigative capacity. Revenue has increased in recent years, but not at the projected rate. POCA reserves, which stood at about £8m in FY 2006/7, will be exhausted at some point in 2012 based on current projections.

2010/11 budget

24. Projected income is £10.9m with expenditure predicted at £10.7m. Income will be supplemented by a one off Operation Rize effect.

2011/12 budget

25. Projected income is £9.6m with current expenditure predicted at £10.8m. This shortfall has been addressed by the Management Board decision of 7th April 2010 to reduce the number of funded posts by 22 therefore reducing annual costs by £1.25m. Income and Expenditure Statement attached as Appendix 3.

C. Other organisational & community implications

Equality and Diversity Impact

There are no direct equality and diversity implications associated with this report. The Proceeds of Crime Act is a legislative requirement imposed by a Court of Law in any case where the defendant is found guilty and the Court believes that they have gained financially from their crime. The Court then instigate POCA proceedings to recover these monies irrespective of gender, ethnic origin or background. There is no requirement for the MPS to have a monitoring mechanism in place in relation to the application of this Act.'

Financial Implications

1. The present ARIS runs until the end of March 2011. Options are being considered by the Asset Recovery Board (ARB) for submission to the HO. It is not known what impact the change of government will have on the renewal / redesign of this funding stream. Feedback is awaited from the HO re the continuance or change to ARIS.

2. The current annual donation to the SLF of £0.5m is met from ARIS funding, and is currently built into the POCA budget assumptions. The MPA has the lead on dealing with the SLF Grant governance and the donation is, therefore, subject to MPA approval.

3. ARIS income is apportioned according to the money received at the Home Office, not against the amount ordered by the court. Therefore there is no correlation between the £8.8m identified by the court for seizure in the first ¼ of 2010/11 and likely income in-year. In other words uncollected confiscation orders (MPA target) do not count towards ARIS income.

4. Current MPS enforcement of outstanding confiscation orders is dealt with by 5 funded officers working together with the HMCS. HMCS inability to deal with warrants issued against defendants for non-payment of confiscation orders requires the MPS to use £0.3m of ARIS funding p/a to support HMCS in one of their core roles. These Officers contribute towards ARIS income derived from all collected confiscation orders.

5. Payback Implementation Board has already taken action to address the potential shortfall in fund. It is now considering how the MPS will respond to the planned review of ARIS in 2011. Proposals will be presented in due course.

Met forward

The MPS will continue its programme to mainstream the use of POCA powers to reduce crime. It aims to support Met forward in that criminals will be made to pay back the benefit of their crime for reinvestment back into the criminal justice system and Safer London Foundation community projects.

Legal Implications

This report raises no legal implications.

Environmental Implications

This report raises no environmental issues.

Risk Implications

Removal of the annual £0.5m SLF donation could lead to adverse publicity for the MPS. Any further reduction in the POCA infrastructure would impact on our ability to recover Criminal Proceeds of Crime, which in turn could have a detrimental impact on public confidence.

D. Background papers

None

E. Contact details

Report author(s): Commander Allan Gibson, MPS

For more information contact:

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

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