Law firms should not be the law enforcers

A new pilot scheme on seizing the proceeds of crime has the potential to jeopardise the fairness of already draconian legislation, argues Samira Noor Khan

In August, the Guardian reported that the City of London Police is to hire law firms under a pilot scheme to help seize the proceeds of cybercrime and fraud. While civil proceedings to recover the proceeds of unlawful conduct are not new, hiring law firms to conduct this process is.

The criminal justice system
is sorely underfunded and there
is no clarity about where the funding for this civil procedure will come from should the pilot be extended. Added to this are concerns around the lower burden of proof required to instigate the process and issues around accountability should private firms start to take over the role of the state.

The prosecution already has powers under civil forfeiture proceedings to seize and forfeit criminal property. This new system seems to increase the scope of this power, but for whose benefit?

Existing procedure

Some background first. Part 5 of the Proceeds of Crime Act 2002 (POCA) allows enforcement agencies to forfeit property and assets that derive from or are associated with unlawful conduct. These take place before the High Court under civil proceedings and aim to strip the suspected criminal of the proceeds of their criminal offending. The proceedings are a form of non-conviction-based asset forfeiture.

The Asset Recovery Agency was created in 2003 to perform this task, but was subsequently abolished for costing more than
it recovered, and was replaced by the Serious Organised Crime Agency in 2006. This was in turn replaced by the National Crime Agency (NCA) in 2013, again
due to the agencies spending more than they recovered.
Other agencies such as the Serious Fraud Office and HMRC can also initiate civil recovery proceedings, although the NCA remains the lead agency.

The new pilot scheme proposes the move to private law firms, which would investigate and bring civil proceedings on behalf of the police. The firms would bear the costs of the proceedings and in return receive a share of the money seized. The move privatises the process and gives a profit incentive to the firms instructed to pursue claims.

Existing civil recovery orders (CROs) under part 5 of POCA 2002 are draconian proceedings, decided on a civil standard of proof. The procedure for a CRO can be lengthy, complex, and costly, involving the use of financial investigators and forensic accountants. The
impact of these proceedings on individuals can be severe, long lasting, and extremely disruptive.

Under the current legislation, property belonging to a suspect and any associated property can be subject to property freezing orders (PFOs) preventing the suspect from accessing their bank accounts or disposing of any of their named assets.

Underhand techniques

It is quite possible that firms enlisted to help the police in
the pilot scheme could use underhand techniques to achieve early settlements
from suspects. These include prolonging proceedings, knowing the suspect will not
be able to pay the accumulating costs, and obtaining reports from financial investigators, which again the suspect cannot respond to due to lack of funds.

Indeed, given the financial incentives connected to the potential returns, it would be in the interest of firms to apply for as wide-reaching a PFO as possible.

The pilot has the potential to jeopardise the fairness of what is already draconian legislation. Its punitive measures can severely disrupt an individual but also have the potential to impact on that person's family and associates, who may find themselves without a home,
an office, transport, or a job as
a result of assets being seized under the order.

However, the major concern is that this action can be taken before someone has gone through the criminal justice system and been proven guilty. There are serious ramifications for both the individual and the firm concerned should this action be taken, property seized, and the individual subsequently found to be not guilty of the crime.

Overall, the costs incurred by private firms would exceed those incurred by the state, so, again, who will bear the cost of this?

This pilot seems to have
too many holes in its potential application, with costs likely
to outweigh the benefits to the state. A better course of action would be to put additional funding into the criminal justice system to ensure swift justice rather than paying costly firms to become quasi-law enforcers. The result could be just as effective.

Samira Noor Khan is a partner at Hodge Jones & Allen @hodgejonesallen www.hja.net