Prosperity at the National Crime Agency

July 2020  |  SPECIAL REPORT: WHITE-COLLAR CRIME

Financier Worldwide Magazine

July 2020 Issue

Few would argue against criminals and corrupt politicians being deprived of the proceeds of their crimes. The National Crime Agency’s (NCA’s) commendable mission is to “lead the UK’s fight to cut serious and organised crime, protecting the public by disrupting and bringing to justice those serious and organised criminals who pose the highest risk to the UK”. Who could argue with that?

We read on the NCA’s website that it “proactively tackles illicit finance to deny the assets of politically-exposed persons and corrupt elites of various jurisdictions. We are actively looking at opportunities to use new legislative powers from the Criminal Finances Act 2017; Unexplained Wealth Orders (UWOs) allow recovery of criminal assets, and the NCA has made a number of UWO applications since the provisions came into effect. The NCA has also successfully made a number of Account Freezing Orders to freeze millions of pounds in accounts. The NCA proactively tackles illicit finance to deny the assets of politically-exposed persons and corrupt elites of various jurisdictions”.

The information given on suspicious activity reports is worth a careful read by all who work in regulated sectors. It estimates money laundering to cost the UK £24bn annually, but elsewhere asserts a figure of £100bn, and in neither case is a basis of calculation provided. Self-evidently money laundering needs to be policed, but a substantial new policing sector has been quietly growing to meet a threat largely being measured anecdotally. If the NCA reports of 4542 active UK-based organised crime groups and 181,000 UK people involved in serious and organised crime are correct, it is surprising not to have the evidence to send more people to prison.

The NCA’s annual budget already exceeds £500m, but it has called for a further annual £900m to combat serious and organised crime, taking its annual budget to £1.4bn. In these straightened times, where could such monies possibly be found? It is not widely appreciated that the police receive a share of confiscated money and assets to “reinvest into policing, through an incentive scheme”.

For confiscations of assets rather than cash, the Home Office gets half, and the other half is split equally between the police, the Crown Prosecution Service (CPS) and the courts. It emerges that the NCA has a ‘prosperity director’, Mr Donald Toon. The term ‘prosperity director’ suggests an interest in prosperity, arguably at odds with the overriding interests of criminal justice. When the government and police are sharing in sums confiscated, they have a direct commercial interest in maximising them, and it is understood that generous bonuses have been paid to officers whose cases succeed.

When facing such conflicts of interest, the NCA is accountable to the home secretary and, through the home secretary, to parliament, and there are concerns about the adequacy of the safeguards. As a government agency, the NCA is not subject to wider accountability, as are local police forces to their police and crime commissioners; although it commits to having open and transparent working relationships with its key operational partners and partners in the private sector, that does not constitute accountability. With a self-professed ‘law and order’ home secretary in office, confiscation activity mushrooming, and obvious conflicts of interest, the burden of ensuring fairness increasingly falls to courts.

It is not just the NCA that needs to be properly accountable. HM Revenue & Customs (HMRC) has moved its focus to its new powers under the Criminal Finances Act 2017 (CFA), which have not only been adopted more widely, but new police agencies have sprung up to harvest alleged proceeds of crime not previously caught by the Proceeds of Crime Act 2002 (POCA). In parallel, more business and professional activities have been brought within the regulated sector, and the regulators of professions such as the Solicitor Regulation Authority (SRA) for solicitors have been bombarded with stern warnings as to the consequences of default by solicitors, including up to five years in prison for tipping off (telling a client that a compulsory report has been made). The volume of suspicious activity reports (SARs) by such professionals has increased, and many wonder if some reports are made purely as a matter of caution because of the statutory protection that a SAR gives to the professional making it.

Although the NCA encourages increased reporting, this has caused problems for professionals and their clients to which the NCA can turn a blind eye. For example, a bank may notice that an historically low-level customer account has received an atypical sum and file a SAR. The effect is to freeze the account for a minimum of a week, maybe a month. The history may be that the customer’s father paid the money in for a deposit on his son’s first home, in prospect of an imminent exchange of contracts which cannot now be made. The unsophisticated son did not know to tell the bank of the transaction in advance, and when he calls the bank to find out what the problem is, the bank will not tell him. They cannot, as the manager would risk a five-year sentence for tipping off. The son loses the contract race, and forever hates the bank and his solicitor. Eighty-percent of SAR’s are made by banks, numbering 371,522 in 2018, so this is more than a hypothetical problem.

Another sector now regulated is a trade in high value goods. The theory is that if Johnny, a bank robber, goes to the nearest Bentley showroom with a quarter million pounds cash for a shiny new Continental, the dealer will report this to the NCA by a SAR, and police will pounce on the bank robber, seize his cash, trace it to a recent bank robbery from the banknote numbers and justice will be done. No one would object to justice being so done, but such a cameo is not how the real world works.

In another example, a London jeweller had, over time, bought pieces of scrap gold to melt down and make new pieces of jewellery. It was cheaper for her to send the gold abroad to be made into new pieces, than have the work done in England, so she arranged for an export agent to convey it abroad. The gold was fully declared to authorities, but the agent made a small mistake on the declaration form and the gold was seized by HMRC and made the subject of a freezing order, and in due course HMRC applied to a magistrate for its forfeiture. She gave evidence and the magistrate was considerably more impressed by her than the officer making the application, not least because the agent’s mistake was patently innocent and not hers. After the freezing order was discharged, the gold was restored to its lawful owner, but she had nearly gone out of business and has an understandable sense of injustice.

The CFA also introduced the unexplained wealth order (UWO), a legal device to deprive owners of their property after requiring the production of evidence specified by the NCA. The owner has to explain and document the detailed history, absent which the asset may be considered “recoverable property” for the purposes of a civil recovery order and seized. A UWO can be sought without any civil or criminal proceedings, and there is no need for the subject to have been convicted of an offence or to have had even a civil judgement against them. To make a UWO, the High Court must be satisfied that there are reasonable grounds for suspecting that the known sources of the respondent’s lawfully obtained income would have been insufficient to enable the owner to obtain the property.

In a recent flagship UWO appeal by Dr Nazarbayeva and Nurali Aliyev in the High Court, the NCA has been strongly criticised. In a statement after judgement, the respondents said: “The NCA deliberately ignored the relevant information voluntarily provided and pursued a groundless and vicious legal action, including making shocking slurs against me, my family and my country”. Mrs Justice Lang agreed and overturned all the orders, ruling that “the NCA’s assumption” that a prominent relative was the source of the money used to buy three properties was “unreliable”. The judge added there was “cogent evidence” that Dr Nazarbayeva and Nurali Aliyev had founded the companies which owned the homes and provided the money to pay for them.

The English legal profession has applauded the determination of the judiciary to rigorously test such cases but sees no room for future complacency.

James Saunders is a partner at Saunders Law. He can be contacted on +44 (0)20 7632 4337 or by email: james@saunders.co.uk.

© Financier Worldwide

BY

James Saunders

Saunders Law

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