Criminals choosing jail rather than pay confiscation orders
21 March 2014
The Public Accounts Committee publishes its report on confiscation orders which finds that criminals are choosing jail instead of paying up to £490 million in confiscation orders.
The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, said:
"Crime should not pay, but we found too many criminals who are subject to an order to confiscate the proceeds of crime choosing to spend extra time in prison rather than paying up.
£490 million is owed by criminals who have served or are serving more time in prison for non-payment. This suggests these sentences provide little deterrence and that the sanctions are not working and need toughening up.
The idea behind confiscation orders is to hit criminals where it hurts – in their pockets – so that serious and organised criminals do not profit from the misery of others. However, poor implementation has meant not enough confiscation orders are being made and not enough is being done to enforce them once they have been made.
We found that:
- In 2012-13 the authorities, through confiscation orders, collected only 26 pence in every £100 of criminal proceeds generated in that year;
- Very few confiscation orders are sought and made. In 2012-13, nearly 680,000 offenders were convicted of a crime, many of which had a financial element, yet only 6,392 confiscation orders were set; and
- Departments spent £100 million administering confiscation orders, yet confiscated a meagre £133 million.
Assets held by the big time criminals were frozen too late. This allowed criminals to salt away valuable assets, putting them in the hands of spouses, using complex financial instruments, buying houses and expensive cars and hiding them overseas.
Too often the small time criminal is pursued whilst the big time criminals get away. Ninety per cent of orders of less than £1,000 are enforced whereas only 18% of orders for over £1 million are enforced.
All this shows what a shambles exists and how poor the performance of all the agencies involved is. It is unclear who is responsible and accountable for what.
There is no sense of urgency and little understanding of what works. Information is not shared across agencies, and out-of-date systems make it difficult to communicate across Government.
We are talking about big sums here, with the National Fraud Authority estimating that £52 billion was lost to society through fraud in 2012-13.
The departments need to get a grip urgently and step up their performance so that criminals stop benefitting unchallenged from the proceeds of their crimes."
Margaret Hodge was speaking as the Committee published its 49th Report of this Session which, on the basis of evidence from the Home Office, National Crime Agency, Director of Public Prosecutions and HM Courts & Tribunals Service, examined their performance in investigating, imposing and enforcing confiscation orders.
Confiscation orders are the main way through which the Government carries out its policy to deprive criminals of the proceeds of their crimes. The intention is to deny criminals the use of their assets and to disrupt and deter further criminality, as well as recovering criminals’ proceeds. The Home Office leads on confiscation policy, but many other bodies are involved including the police, the Crown Prosecution Service and HM Courts and Tribunal Service. The overall system for confiscation orders is governed by the multi-agency Criminal Finances Board. The annual cost of administering confiscation orders is some £100 million. In 2012-13 the amount confiscated was £133 million.
Poor implementation of the confiscation order scheme has severely hampered its effectiveness. Confiscation orders can be a powerful mechanism for recovering criminal proceeds and combating and deterring criminal activity. The Proceeds of Crime Act 2002 provided powers for enforcement agencies to use confiscation orders, but over 10 years later the Government only collects 26 pence out of every £100 generated by criminal activity. Many bodies are involved with confiscation and there is a lack of clarity over who is responsible, with no clear direction, failure to act promptly, weak accountability and no understanding of what makes good performance and delivers value for money. For example, there is limited understanding of the extent to which confiscation orders have disrupted crime. The Criminal Finances Board has failed to address these issues since its creation in 2011, but we welcome the fact that it is now chaired by a Minister and is drawing up a new improvement plan.
Recommendations
Recommendation: The Criminal Finances Board should develop and implement its improvement plan urgently. This plan should include well-defined objectives and success measures so that practitioners can prioritise criminal cases and orders and be able to understand and measure success beyond amounts collected. The plan should also include project milestones that the Board can use to assess progress.
Not enough confiscation orders are imposed. Law enforcement and prosecution agencies are missing opportunities to impose confiscation orders with only 6,392 imposed in 2012-13 when 673,000 offenders were convicted of a crime, many of which had a financial element. Each agency uses different criteria to determine when to use confiscation orders and there is a widespread lack of awareness among staff within these agencies of the relevant legislation, and seeking orders is too often given a low profile. To increase the numbers of confiscation orders and provide better guidance, the Crown Prosecution Service is developing common criteria to assess whether pursuing a confiscation order is appropriate and cost-effective.
Recommendation: Law enforcement and prosecution agencies need to agree and apply a common set of criteria to ensure that they consider consistently and properly all crimes with a financial gain for confiscation orders.
Not enough is being done to enforce confiscation orders once they have been made, especially in higher value cases. Enforcement bodies are much more successful in collecting proceeds from low-value orders than high-value ones, with an enforcement rate of nearly 90% for orders under £1,000 compared to 18% for orders over £1 million. In high-value cases, the specialist financial investigators required are often brought in too late; bodies do not collaborate or share information effectively and quick action to ‘restrain’ (freeze) assets is often not undertaken. Only 1,368 restraint orders to freeze assets were imposed in 2012-13, down 27% from 2010-11. Only recently have the National Crime Agency, Crown Prosecution Service, Serious Fraud Office and HM Courts & Tribunals Service jointly identified 124 high priority cases for additional enforcement activity.
Recommendation: Law enforcement agencies should work together to ensure that financial investigators are brought in early in high value cases and use restraint orders quickly to prevent criminals hiding their illegal assets. The Crown Prosecution Service and National Crime Agency should also report to the Criminal Finances Board on the enforcement progress of its priority cases.
The incentive scheme to encourage the many bodies involved to confiscate proceeds of crime is opaque and ineffective. The existing scheme simply rewards bodies for the amount of money they collect, ignoring the other key policy objectives of asset denial and crime disruption. The scheme also fails to reflect the relative contribution and effort each body makes, with the Home Office receiving 50% of confiscated assets despite its having no operational role. It is not clear how monies received under the incentive scheme are used with only 62% of the organisations involved producing returns in 2012-13. We therefore welcome the Home Office’s decision to review the scheme.
Recommendation: The current incentive scheme for bodies involved in confiscation orders should be revised to ensure it is aligned with the success measures and objectives set out in the new Criminal Finances improvement plan and to link effort and reward. The Home Office should also ensure that there is proper reporting on the use made of scheme funds.
The bodies involved with confiscation orders do not have the information they need to manage the system effectively. The focus of the management information available to enforcement and collection agencies on confiscation orders is on how much has been imposed and how much has been collected. They lack detailed information on how much different enforcement activities cost, how successful different activities are and how much is realistically collectable in different cases. Without such information enforcement agencies cannot tell which orders they should prioritise for most impact on criminal activity and which approach to enforcing them will be most successful or cost-effective. Enforcement teams also have to rely on dated ICT systems that are not interoperable, leading to errors and time wasted re-keying information between systems. For example, an estimated 45 hours a week is wasted on HM Courts and Tribunals Service’s Confiscation Order Tracking System (COTS) alone. Data quality is further compromised as financial investigators and Crown Court staff provide incomplete and inaccurate data to enforcement units.
Recommendation: All the bodies involved in confiscation need to develop a better range of cost and performance information to enable them to prioritise effort and resources to best effect. They also need to improve their existing ICT systems and their interoperability, as well as cleanse the data they hold.
The sanctions imposed on offenders for failing to pay confiscation orders do not work. Offenders who do not pay their confiscation orders face a default prison sentence of up to ten years, which follows their imprisonment for the original offence. They must also pay more as the amount outstanding accrues 8% interest. But many criminals, particularly those with high-value orders, are willing to serve a prison sentence rather than pay up and around £490 million is outstanding for offenders who have served or are currently serving default sentences. The Government plans to strengthen the prison sentences for non-payment, but it is not yet clear how this will be implemented in practice.
Recommendation: The Home Office, in conjunction with the Ministry of Justice, must set out how, and by when, it will strengthen the confiscation order sanctions regime. The Joint Committee on the draft Modern Slavery Bill might include this in their deliberations.