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Decision by City police to hire law firms to seize fraudsters’ assets welcomed

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The decision by the City of London Police to use private sector law firms to seize the assets of fraudsters is a vital step forward to prevent law enforcement agencies being drowned by the growing scale of fraud says international law firm Pinsent Masons.

However, Pinsent Masons says police forces risk seeing their budget eaten up by expensive solicitors and barristers if law firms are not asked to work on a “no win no fee” basis, or if competitive tendering is not used.

Alan Sheeley, partner and head of civil fraud and asset recovery at Pinsent Masons explains that law firms could be forced to only charge a percentage of the funds they seize from fraudsters.

Pinsent Masons says that given the amount of fraud taking place in the UK, competitive tendering should also be undertaken to ensure that law firms who do win cases are still working hard for any fees they charge.

Mr Sheeley continued: “This is a really exciting and long overdue step for law enforcement agencies in the UK. However, we don’t want it to impact the budgets of police forces and nor do we want negative headlines about law firms profiteering so it is vital that the billing by law firms is kept under control.”

“Fraud is one of the fastest growing categories of crime with the biggest financial cost, but it is a crime that every police force around the world is struggling and failing to control.”

Alan Sheeley
Alan Sheeley

“Law firms, rather than the police, are best placed to pursue the assets of fraudsters through the civil courts. The skills and experience of undertaking civil recoveries and injunctions lie in the law firms and not in police forces. Law firms are also used to undertaking these cases at a moment’s notice and seizing the assets of fraudsters before they are spirited around the world through a network of international bank accounts.”

Proposals by Pinsent Masons for police forces to make use of private sector law firms have been endorsed by the Home Affairs Select Committee following the inquiry into the effectiveness of the Proceeds of Crime Act (2002). The recommendations, if implemented, should deliver much-needed improvement to the recovery of assets from criminals involved in financial crime.

Pinsent Masons’ specialist civil fraud and asset recovery team explains that the authorities’ performance in seizing assets under the Proceeds of Crime Act (2002) has come under criticism. A parliamentary inquiry was launched in January 2016, the report of which was published this month. The report has credited the written evidence provided by Pinsent Masons’ for proposing several of the recommendations adopted by the Committee.

Pinsent Masons says that the report confirms that UK law enforcement agencies are not geared up to move sufficiently quickly when it comes to freezing and recovering criminal assets. The report concurs with Pinsent Masons’ evidence that decisive action needs to be taken at the commencement of a fraud investigation to maximise the chances of recovering losses.

The report has recognised Pinsent Masons’ testimony that budgetary constraints, prosecution targets and other pressures mean that the recovery of assets is simply not a top priority for law enforcement. In light of these realities, the report has endorsed Pinsent Masons’ recommendations that victims of fraud should pursue civil proceedings to recover their losses, rather than relying solely on law enforcement agencies.

Following input from Pinsent Masons and other experts, the report’s recommendations include:

  • Earlier restraint and seizure of assets- the report acknowledges the need for earlier freezing of criminal assets. It states that ‘ideally, assets should be frozen simultaneously with the criminal becoming aware of the investigation for the first time’. It recommends that all officers should receive additional financial investigative training, so that they are equipped to secure recovery at a much earlier stage.

  • Creation of specialist ‘confiscation courts’- the report recommends the creation of courts dedicated to confiscation orders in order to combat ‘the current lack of interest in confiscation orders among prosecutors and judges’. It claims specialist courts would enable complex confiscation hearings to be dealt with more efficiently and with much greater expertise.

  • Greater coordination and collaboration between public bodies involved in POCA and the private sector – the report argues that collaboration with the private sector could result in more efficient collection of proceeds of crime. It recommends that the Government creates ‘a market for the private enforcement and collection of unpaid confiscation orders once they enter arrears, earning a fee from a portion of that order’.

  • Tackling non-payment of confiscation orders- the report recommends that non-payment of a confiscation order be made a separate criminal offence, and that any individual subject to a confiscation order should have their passport confiscated until paid.

  • Establishing a lead agency for recovery of proceeds of crime- a number of bodies and agencies are currently engaged in the recovery of assets. It suggests the NCA is established as a ‘lead agency’ and takes overall responsibility.

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