John Binns writes for Law360 on complex funding question in fight against financial crime

John Binns writes for Law360 on complex funding question in fight against financial crime

BCL partner John Binns writes for Law360 discussing a new report from Spotlight Corruption, which suggests that the revenue from the penalties might be added to the budgets of the various state agencies involved.

*Here is a short extract from the article:

A new report from Spotlight on Corruption[1] seems to think so, suggesting that the revenue from those penalties might be added to the budgets of the various state agencies involved, as a way of injecting new fuel into the fight against financial crime.

But, while it has its superficial attractions, the idea that state agencies might fund their work in this way also raises some complicated questions. Indeed, it might ultimately do more harm than good.

A Complicated Landscape

 

As others have noted recently, the landscape of state agencies charged with tackling financial crime is complicated. Along with local police forces and trading standards, the national agencies involved include the Crown Prosecution Service, the Financial Conduct Authority, HM Revenue & Customs, the National Crime Agency, and the Serious Fraud Office.

All these agencies have their own distinct roles, which, except for the SFO, go beyond financial crime. Most of these agencies are funded through general taxation, except for the FCA, which is funded by the firms it regulates. The HMRC, and in some cases the NCA, can collect interest and penalties on top of taxes due where nonpayment was reckless or deliberate.

The FCA and HMRC also act as supervisors of money laundering regulations for various businesses, alongside the Gambling Commission, and a set of independent professional bodies. A new anti-money laundering levy will soon collect additional funds from those businesses.

Among other things, the levy will be used to fund reforms to Companies House, whose difficulties in policing U.K. companies have lately come under increased scrutiny.

Penalties and Other Payments

 

The nature of the sums paid in criminal cases is only slightly less complicated. Strictly speaking, the word “penalties” should only be used for the fines paid by convicted offenders, companies entering into deferred prosecution agreements and regulated businesses that are found to have breached the rules.

But there are also various other orders that a court can make in financial crime cases, many of them under the Proceeds of Crime Act 2002, or POCA. Though of course it will be limited by the total amount available, in theory at least the financial orders made at the end of a case in the U.K. could include:

– Confiscation under Parts 2 to 4 of POCA — a sum equivalent to the benefit obtained by a convicted offender from their criminal conduct;

– Civil recovery under Part 5 of POCA, forfeiting money and other property found to represent the proceeds of unlawful conduct, or to have been intended for use in such conduct — no conviction is necessary for these orders;

– Compensation to the victims of the crime; and Costs of the prosecuting agency and sometimes, the legal aid fund.

– U.K. criminal cases can, of course, also overlap with cases in the civil courts, such as civil claims by victims, and restitution orders in FCA cases, or in other jurisdictions, complicating the picture even further.

*This article was first published by Law360 on 02 March 2022. If you wish to read the full article, please visit Law360 website.

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John Binns is a partner at BCL specialising in all aspects of business crime, with a particular interest in confiscation, civil recovery and money laundering under the Proceeds of Crime Act 2002 (“POCA”). His business crime experience includes representing suspects, defendants and witnesses in cases invoking allegations of bribery and corruption, fraud (including carbon credits, carousel/MTIC, land-banking, Ponzi and pyramid scheme frauds), insider trading, market abuse, price-fixing, sanctions-busting, and tax evasion. He has coordinated and undertaken corporate investigations and defended in cases brought by BEIS, the FCA, HMRC, NCA, OFT, SFO and others.

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