Vikram Dodd – Sunday 14 August 2016
Private firms will use civil courts to seize fraud suspects’ assets, prompting concerns over profit motive
Private law firms will be hired by police to pursue criminal suspects for profit, under a radical new scheme to target cyber criminals and fraudsters.
In a pilot project by the City of London police, the lead force on fraud in England and Wales, officers will pass details of suspects and cases to law firms, which will use civil courts to seize the money.
The force says the scheme is a way of more effectively tackling fraud – which is now the biggest type of crime, estimated to cost £193bn a year. It is overwhelming police and the criminal justice system.
The experiment, which is backed by the government and being closely watched by other law enforcement agencies, is expected to lead to cases reaching civil courts this year or early next year.
Officers will use the private law firms to attempt to seize suspects’ assets. If unsuccessful, police could decide to leave it at that or pursue the case themselves through the criminal courts.
Commander Chris Greany, head of economic crime at City of London police, said: “It is a huge shift … Civil recovery allows us to get hold of a criminal’s money sooner, and repay back victims sooner.”
One prominent criminal law firm was sceptical about the plans, expressing concern that a profit motive could damage the fairness of the process.
Currently, police pursue people suspected of making millions through financial crimes by prosecuting them in the criminal courts, and need to prove their case beyond reasonable doubt. After conviction, a lengthy process starts to seize the proceeds of crime, which can take years. Police believe some suspects use the delay to hide their assets.
Under the shakeup being piloted, a law firm will pursue the suspect in the civil courts before any conviction and possibly even without a criminal charge. The burden of proof is lower in civil courts, and they will only have to show that the suspect stole the money on the balance of probabilities.
Katie Wheatley, joint head of criminal law at Bindmans, a London law firm, expressed unease over the proposals, which she said gave police “what they would regard as an easy deterrent, without having the inconvenience of proving an offence to a criminal standard”.
Greany said the law firm and others in the private sector would bear the risk, in return for a share of the money taken off the criminal suspect.
The lead law firm taking part in the pilot is Mischon de Reya, best known for representing Princess Diana in her divorce from Prince Charles.
Greany said: “Who benefits from this? The victim will benefit, because they will get their money back. We’ll benefit because the criminal will be skint and they will be brought back down to having nothing again, and have to get about their normal lives, and they won’t have status in the community.”
What evidence would they be using to strip somebody of their assets?
Money from fraud is being hidden around the world and getting a conviction and then seizing the assets of criminals can be very complex and lengthy. Greany said: “You can destabilise a criminal gang much faster by taking their asset off them [rather] than chasing them around the world for five years.”
But Wheatley asked of the police: “What evidence would they be using to strip somebody of their assets? If a criminal prosecution has failed, well OK, the burden of proof is slightly different, but you still have to wonder whether evidence that has been rejected by a criminal court ought to be the first port of call for a civil forfeiture or a civil confiscation order.”
Wheatley said the plan risked creating a conflict between private firms’ profit motive and the fairness of the process. “We’ve seen privatisation in this context in other ways, for example prison privatisation,” she said. “We all know how badly that’s gone wrong, particularly for young offenders. I appreciate they are not talking about convictions or detentions, but having possibly life savings, large assets stripped from you is a life-changing event. Whereas for the companies that the role was subcontracted to, it would just be a job.”
Robert Wynn Jones, a specialist in fraud at Mishcon de Reya, said the “novel and pragmatic” scheme would boost the deterrent to criminals. Wynn Jones said victims might be asked to pay legal costs, or specialist insurers could fund the fees in return for a 20-30% share of the money taken off criminals.
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He said it would have to be financially worthwhile, meaning the scheme would only work for cases where losses ran into the hundreds of thousands. The use of private investigators would push up the cost.
There are two main downsides. If the suspect appeals and wins, or is cleared in a criminal case, then the money seized has to be repaid with interest added.
The second controversial aspect is the transfer of what was essentially punishment carried out through the state system, with established methods of accountability, to private firms, where it would be done for profit. However, Greany said: “It is a public-private partnership.”
Wynn Jones accepted that the new scheme would “throw up some ethical, political and philosophical questions”, but added: “There is no way the police can investigate and pursue this level of fraud – they don’t have the resources.”
The Office for National Statistics said in July that there had been more than 5.8m incidents of cybercrime in the past year, enough to virtually double the headline crime rate in England and Wales.
The Conservatives have been keen to see greater private sector involvement and expertise used in the criminal justice system
A working group to oversee the experiment has been set up by the City of London police, officers from the National Crime Agency, and Metropolitan police, and law and private investigation firms.
Greany said fraudsters were renting luxury items, such as cars, so they had no visible assets to be taken off them if they were caught.
The Labour MP Keith Vaz, chair of the home affairs select committee, said a key problem in recovering the proceeds of crime was the “way recovery is incentivised”.
He said: “The Asset Recovery Incentivisation Scheme does not appear to us, or the NAO [National Audit Office], to be fit for purpose. It does not sufficiently reward those who have to lay out the resources to recover ill-gotten gains. We suggested in the report that recovered assets be distributed differently to better incentivise recovery, and if the numbers of these pilots work out this could well be an effective way to do increase the proportion of proceeds of crime we recover.
“We also recommend that a higher percentage should be returned to the communities affected by the crimes in question: if using commercial law firms enables us to net recover more, that is a win-win situation.”
Additional reporting by Damien Gayle