Settling Civil Recovery Cases
Part 5 of the Proceeds of Crime Act 2002 (‘PoCA’) provides the authorities with several options for applying to recover the proceeds of unlawful conduct. These powers are civil in nature, so a person or company can be subjected to the process without having been convicted of a crime.
By far the most common method of civil forfeiture used by the authorities is the Account Freezing and Forfeiture Orders (‘AFOs’) found at Chapter 3B of Part 5, PoCA. AFOs accounted for 76 per cent of the total amount of civil recoveries in 2023 / 24. In real terms, that’s £175 million, an increase of £37 million from 2022 / 23.[1] The comparatively new Cryptowallet Freezing Order powers have no statistics yet, probably because they were only introduced to PoCA halfway through the financial year 2023 / 24.
The asset recovery system (both civil, and criminal e.g. Confiscation Orders) is set up to incentivise public authorities to pursue recovery, meaning that they have a significant private interest in the outcome of such applications. Nearly £100 million was distributed to Proceeds of Crime Agencies (the Police, HMRC, NCA e.g.) in 2023 / 24 under the Home Office’s Asset Recovery Incentivisation Scheme (‘ARIS’).[2]
This private interest is something to bear in mind when deciding whether to make an offer of settlement in an AFO case. We have written previously about the practical realities of opposing an AFO. These cases can be complex, meaning they can be costly to fight – both in terms of time and money – for both parties. Respondent businesses in particular feel the strain of having large amounts frozen for a lengthy period. Some don’t survive the experience. In some cases, an offer to settle can be the quickest resolution.
The Home Office has issued guidance to PoCA Agencies about how to they exercise their PoCA powers.[3] Of note, in the context of settlement offers, this guidance says the following (at paragraph 10):
“A relevant authority may agree to accept a reduced sum in satisfaction of a civil recovery claim if satisfied that:
- the sum is reasonable, having regard to all relevant circumstances including the chances of recovering the full amount claimed and the time and public funds likely to be expended in attempting to do so; and
- accepting the reduced sum would not damage public confidence”
Taking the Agencies’ private interest and the guidance together means that a settlement offer may be a way of concluding matters that is attractive to both parties. Some respondents may have the resources and resolve to fight recovery. But some respondents – particularly a company suffering damage to its goodwill because of a freezing order – may feel that it can afford to settle a case, viewing the settlement as a cost of doing business. By contrast, the public authority may be willing to accept an offer to agree forfeiture of less than the full amount frozen to avoid prolonging a complex, expensive investigation; particularly one in which there is no guarantee of a successful outcome.
Every case is different, and settlement is not always the right option. A lawyer’s advice and assistance in this process can be invaluable. If you would like to discuss a freezing / forfeiture case, or any issue raised in this article, please contact our Crime and Regulatory Department on 020 7632 4300 or emailing [email protected].
[1] https://www.gov.uk/government/statistics/asset-recovery-statistics-financial-years-ending-2019-to-2024/asset-recovery-statistical-bulletin-financial-years-ending-2019-to-2024#civil-forfeiture-powers
[2] https://www.gov.uk/government/statistics/asset-recovery-statistics-financial-years-ending-2019-to-2024/asset-recovery-statistical-bulletin-financial-years-ending-2019-to-2024#asset-recovery-incentivisation-scheme-aris
[3] https://www.gov.uk/government/publications/the-proceeds-of-crime-act-section-2a/the-proceeds-of-crime-act-section-2a-accessible-version