Chapter 9A – FREQUENTLY ASKED QUESTIONS (FAQ) – PROCEEDS OF CRIME ACT 2002
These FAQs are intended to be a useful introduction to the Proceeds of Crime Act 2002, or to be used as a training tool, but should not be seen as a replacement for the more detailed advice given in Chapter 9A.
Restraint Orders
What is a restraint order?
A restraint order is an order made in the crown court to prevent the person specified in the order from dealing with realisable property (see paragraph 9A.4) during a criminal investigation or criminal proceedings, see Part 2. It has the affect of freezing property anywhere in the world that may be liable to confiscation following a trial and subsequent conviction of a defendant. The restraint order protects property which may be required to be sold to satisfy any confiscation order made by the court should the suspected offender (defendant) be found guilty. See Part 2, paragraph 9A.14 for more details.
What property is affected by restraint?
A restraint order will specify which property is restrained – whether that is specifically listed items, or all realisable property belonging to the person listed in the order (see paragraphs 9A.24 to 9A.25). It may also affect jointly owned property, see paragraph 9A.35, or property no longer held by that person, see paragraph 9A.75.
Is there any property exempt from restraint?
The court will aim to strike a balance between keeping the defendant’s assets available to satisfy a potential future confiscation order should the defendant be convicted, and making provision to meet the defendant’s reasonable general living expenses, legal expenses or funds to enable the continuation of a trade, business, profession or occupation requirements pending any trial. See paragraph 9A.23.
How does a restraint order made before the insolvency affect the insolvency proceedings?
If a restraint order is in force as at the date of the winding-up or bankruptcy order, then any property subject to that restraint does not form part of the insolvent estate, see paragraphs 9A.26 to 9A.34 for more information and the action to take.
How does a restraint order made after the insolvency affect the insolvency proceedings?
In theory this situation should not happen (see paragraph 9A.38), but where it does happen, the assets will fall to the official receiver to deal with as liquidator or trustee, although he/she should not take any action in relation to the assets prior to the court lifting or varying the restraint order as he/she may be acting in contempt of the court order (see paragraphs 9A.40 to 9A.44). The official receiver may need to make an application to court where the prosecuting authority does not to have the restraint order discharged or varied.
How does restraint come to an end?
Restraint orders can be varied or discharged prior to the making of a confiscation order, but would normally stay in place until a confiscation order is made and then remain in force until the confiscation order is satisfied or discharged by the court, see paragraph 9A.20.
What happens to any remaining property (which didn’t form part of the insolvent estate) when a restraint order is subsequently discharged?
In the normal course of events, any property not needed to satisfy a confiscation order will be returned to the defendant after the restraint order is discharged.
With company property, provided the company has not been dissolved, then the property will fall to the liquidator to deal with. Where a bankruptcy order has been made, then any remaining assets will then vest in the trustee as part of the bankruptcy estate, see paragraph 9A.47. For this reason, the official receiver should ensure that any cases with assets subject to a restraint order are marked for review (see paragraph 9A.30).
Confiscations Orders
What is a confiscation order?
A confiscation order is an order that a convicted criminal pays a certain sum of money (the recoverable amount, see paragraph 9A.65), representing their benefit from crime, see Part 3. It can be made after a restraint order, on its own, or before a restraint order. A confiscation order does not “confiscate” any particular property, only a restraint order attaches to specific property.
How does the court arrive at the recoverable amount?
By looking at the amount that the defendant has benefited from his/her crime by and the value of his/her remaining assets if that is lower, see paragraphs 9A.65 to 9A.66. The court can also take any tainted gifts into consideration, see paragraph 9A.75.
Can the family home be subject of a confiscation order?
Although a confiscation order does not attach to particular property, if the recoverable amount is not paid the court can appoint an enforcement receiver, see paragraph 9A.73. The enforcement receiver will have the power to recover assets or order third parties to make payment in respect of the defendant’s beneficial interest in property. Also see paragraph 9A.78 to 9A.79.
How does confiscation affect liquidation proceedings?
A confiscation order does not stop the official receiver as liquidator and office-holder from dealing with company property, whether made before or after the winding-up order, see paragraph 9A.57. The only thing that would prevent the official receiver from dealing with company property is if a restraint order has also been made (see Part 2) or a receiver has been appointed (see paragraph 9A.73).
What difference is there if I am dealing with a bankruptcy?
No difference, the official receiver as trustee can still deal with all the bankrupt’s property whether or not a confiscation order has been made before or after the bankruptcy order, see paragraph 9A.58. The only thing that would prevent the official receiver from dealing with a bankrupt’s property in this situation, is if a restraint order has also been made (see Part 2) or a receiver has been appointed (see paragraph 9A.73).
When is a confiscation order satisfied?
A confiscation order is satisfied when it is paid in full, including interest where applicable (see paragraph 9A.70). Where it is not paid, the defendant (offender) may be sentenced to a term in prison, but the confiscation order will stay in place until it is discharged or paid, see paragraph 9A.72.
Civil Recovery Orders
What is civil recovery?
Certain enforcement authorities can take action through the High Court to protect and/or recover property obtained through unlawful (not criminal) conduct, See Part 4. The authority can either obtain a freezing order or get an interim receiver appointed to protect property pending a civil recovery order hearing, where the assets would be forfeited if the court finds the property was obtained through unlawful conduct, see paragraph 9A.87.
What is recoverable property?
Recoverable property is property that was obtained through unlawful conduct, or property with which that property has been replaced with, see paragraph 9A.89.
What effect does a freezing order or interim receiving order have on the insolvency?
Where a freezing order or interim receiving order is made prior to or after the insolvency proceedings, then the assets listed within the order will still belong to the company (to be dealt with by the liquidator) or vest in the official receiver as trustee, but he/she will not be able to take any action against them without an application to court, see paragraphs 9A.110 to 9A.112.
The official receiver should liaise with the relevant authority to establish which assets are subject to the freezing or interim receiving order, and how those assets were obtained. If the assets are shown to be the property of a third party (i.e. they were obtained through unlawful conduct), the official receiver should allow the property to be returned to that person, and not make an application to court for the order to be varied, see paragraph 9A.114.
How should the official receiver deal with property that is subject to a civil recovery order?
Where a civil recovery order has already been made, a trustee for civil recovery will have been appointed at the same time. The official receiver should not object to this trustee realising assets subject to the civil recovery order as the court will have already considered and declared the assets to be the result of unlawful activity, see paragraph 9A.116.
Cash Seizure and Forfeiture
What is cash seizure?
A police officer, HMRC officer or accredited financial investigator can seize cash if it is thought to be recoverable property or intended for use in unlawful conduct, see paragraph 9A.125. It can be held without a court order for 48 hours while the officer investigated the origin of the cash.
When might cash get seized?
This may happen, for example, at an airport if someone is found to have a large amount of cash and no reasonable explanation for having it.
What is cash forfeiture?
If seized cash is found to be recoverable property in respect of a civil recovery order, or found that it was intended for use in unlawful conduct, then the magistrates’ court may order that the cash be forfeited, see paragraph 9A.129.
How should the official receiver deal with cash that has been seized?
The official receiver should determine whether the cash seized is a company or bankruptcy asset, see paragraphs 9A.131 to 132. In bankruptcy cases, the official receiver will need to claim the cash as after-acquired property where there is any doubt as to whether it was an asset of the bankrupt at the date of the bankruptcy order, see paragraphs 9A.136 to 9A.137.
The official receiver should also ensure that the enforcement authority holding the cash notes his/her interest in the cash. A copy of the winding-up order or bankruptcy order should be placed on the magistrates’ court file, see paragraphs 9A.133-135.
How should the official receiver deal with a forfeiture application?
The official receiver should not object to the forfeiture of cash which has been obtained as a consequence of unlawful conduct, but should ensure that any cash that is not forfeited, is passed to the official receiver as liquidator/trustee of the insolvent estate rather than the insolvent, see paragraph 9A.129.
How should the official receiver obtain seized cash which is not subject to a forfeiture order?
Where seized cash is held by an enforcement authority and the official receiver is in doubt as to the legal owner, he/she should seek the directions of the insolvency court, see paragraph 9A.138. Where the official receiver is of the opinion that the cash is an asset of an insolvent, an application should be made to the magistrates’ court for the release of the cash, see paragraphs 9A.139-143.