Joint thematic report on the Proceeds of Crime Act 2002

Introduction

(i) The Proceeds of Crime Act 2002 (hereafter referred to as 'the Act' or ' POCA') was enacted to strengthen the legislation available to recover the financial benefits of crime. The Act extended the scope of criminal activity which could be considered for criminal confiscation from drug dealing and trafficking to a fuller range of acquisitive or financially motivated criminal activity. Furthermore the previous powers of investigation into financial affairs were also broadened and the mechanisms for removing the benefits of criminal activity strengthened. Finally new substantive offences regarding money laundering were also established. A synopsis of the main provisions of the Act can be found in Appendix 4 of this report.

(ii) Within this report, Her Majesty's Inspectorate of Constabulary for Scotland and the Inspectorate of Prosecution in Scotland (hereafter referred to as 'the Inspectorates') outline the findings of their joint inspection regarding the use of the Act's provisions.

The current picture

(iii) Throughout our inspection we observed a largely effective recognition and use of the powers contained within the Act in relation to serious organised crime, particularly in the sphere of drug related crime. In COPFS, a specialist unit has been created to deal with the money laundering provisions of POCA and to tackle serious organised crime. This is mirrored in policing with the creation of the Scottish Money Laundering Unit within the Scottish Crime and Drug Enforcement Agency ( SCDEA) and the specialist financial investigation units of the eight Scottish forces.

(iv) Beyond the specialist units in both the police service and COPFS there is little evidence that consideration of POCA provisions is a common or mainstream activity for those dealing with lower level crime. At operational levels within police forces and COPFS there is a little awareness of how the provisions of POCA could be invoked to combat a wide range of offending. Reliance is placed on specialists to identify POCA opportunities, rather than these being recognised by operational officers and lawyers. In addition, in the main COPFS rely on police and other law enforcement partners to identify POCA opportunities.

(v) In a criminal justice system focussed on prosecuting and convicting criminals, we believe that the civil recovery and taxation provisions of the Act have not been fully exploited. Specifically a process has been put in place which requires referral of cases to the Civil Recovery Unit only from National Casework Division. As a result only those cases reported for prosecution which either fail or are not proceeded with may be reported to the Civil Recovery Unit. There is no direct route for law enforcement agencies to report a case for civil recovery where it is clear that there is insufficient evidence to reach a criminal standard of proof. In the absence of such a direct route we consider that the mindset of law enforcement agencies will inevitably be upon prosecution to potential exclusion of the civil recovery provisions.

(vi) In summary, a lack of mainstream knowledge throughout police forces and COPFS has resulted in the powers contained within the Act not being used to their full potential. Lower level criminals, who may carry out a high volume of acquisitive crime, and whose benefits of crime may be most visible in communities, are not routinely the subject of financial investigation by law enforcement agencies. Moreover, not all appropriate cases (ie those where there is insufficient evidence for criminal prosecution but good grounds for civil recovery) are reaching the Civil Recovery Unit, due to the narrow referral route that currently exists.

(vii) We conclude that there is far more scope to use POCA powers to redress the financial benefits of crime at all levels across Scotland than is currently recognised. We believe that this represents a significant opportunity for law enforcement agencies to disrupt a much wider range of criminality through financial investigation and the provisions contained within the Act than has been the case in Scotland to date.

The way forward

(viii) While recognising and endorsing the position of the Crown independently to consider the possibility of prosecuting cases reported by law enforcement agencies, a more focussed use of all three strands available under the Act could be made. Clear criteria should be agreed by COPFS, police and other reporting agencies to allow early decisions to be made to have cases reported for prosecution or for civil recovery (and for CRU referral to taxation).

(ix) Further, in order to exploit fully the provisions within the Act a shift in culture is needed in both the police service and COPFS in order that the consideration of financial investigation opportunities becomes everyone's responsibility rather than the exclusive role of a small number of specialist staff across both organisations, which is currently the case. Consequently, from a police perspective the Inspectorates recommend in relation to leadership that ACPOS should consider the appointment of a chief officer (champion) to lead on the development and coordination of the mainstreaming of financial investigation arrangements within policing in Scotland. This should include the development of financial investigation capability and capacity at divisional level as well as at a force level.

(x) In addition, forces in considering their approach to mainstreaming, may wish to review the structure of their current force-level fraud and financial investigative resources and also consider how best to support divisional commanders in their key role of making POCA and its related provisions part of everyday divisional operational policing. In considering this issue we recognise the budgetary constraints affecting forces and the related need to use resources as effectively as possible. As a result we highlight the 'Practice Advice on the Management and Use of Proceeds of Crime Legislation' produced by the National Policing Improvement Agency ( NPIA) ¹, which gives sound advice on developing competence at both force and divisional level. Although this guidance document was originally developed for the police service in England, Wales and Northern Ireland, it is informative from a Scottish perspective. We conclude that comparable advice in a Scottish context is needed and that such guidance should reflect the comments and recommendations contained in this report.

(xi) In relation to the mainstreaming of POCA in COPFS we conclude that it is essential that leaders in COPFS are sighted on mainstreaming developments in law enforcement agencies as they occur in order to ensure that COPFS is able to respond to an anticipated increase in workload. In addition, in promoting their own mainstreaming agenda, a POCA portfolio owner or champion should also be appointed to produce a plan to mainstream arrangements throughout the service.

(xii) Having considered the use of strategy, the report describes largely effective strategic approaches to serious organised crime at a national multi-agency level as well as within the police service and COPFS. In contrast we highlight significant room for improvement in relation to the use of these provisions against lower level criminality throughout Scotland. This is vital if the powers within the Act are to be used to their full potential to disrupt criminality. As a result we have recommended that a Scottish Proceeds of Crime Strategy be developed focusing upon:

• creating sufficient capability and capacity across partner agencies to address all levels of criminality and all crime types included within the provisions of the Act;
• ensuring that the criminal, civil and taxation powers contained within the Act are used as effectively as possible; and
• establishing a proactive rather than reactive approach to financial intelligence gathering and investigation in relation to all relevant crime.

(xiii) The Inspectorates believe that the development of such a strategy will require effective cross-agency working. The mainstreaming of financial investigation to a local level, the full use of civil and taxation as well as criminal powers and the creation of proactive rather than the existing reactive arrangements collectively represent a significant change process affecting many agencies. Consequently, from our experience in conducting this inspection, we believe that the Scottish Proceeds of Crime Strategy needs to be led by a partnership group which has both direct Ministerial involvement and representation at the most senior levels across all agencies involved. Whilst the current partnership group, the Scottish Asset Recovery Group ( SARG) ² has some of these features it has neither ministerial involvement nor national profile. On balance, whilst another similar group could be constituted, we believe that the Serious Organised Crime Taskforce ( SOCT) is the appropriate forum to co-ordinate this work and should develop the strategy assisted by the ACPOS and COPFS champions.

(xiv) Due to the complex nature of the processes that have been developed in relation to the use of the powers contained within the Act we conclude that good communication between parties both within their own organisations and with partners is a critical success factor. During our inspection we observed a number of situations in which better communication and feedback arrangements are needed. Within the relevant section of this report we have highlighted the process areas where mainstreaming could bring about greater awareness of the Act, its powers and the information required to exercise these powers to best effect. We have also described a number of measures that we believe will be helpful in order that each organisation knows and understands the challenges and requirements of the other in relation to this Act. Consequently we conclude that the overall effectiveness of partnership arrangements will increase as a result of the creation of the Scottish Proceeds of Crime Strategy and the mainstreaming of financial investigation in general. As a result of this progression we believe that the minor difficulties we observed, typically related to communication, will inevitably also improve.

(xv) In order to support the development and mainstreaming of financial investigation capability and capacity we have made the case for increasing the resources available for financial investigation within policing. In doing so, we recognise that there will also be a need for an increase in resources within COPFS to deal with the anticipated subsequent increase in workload. Indeed we believe that the relative funding needs of other law enforcement agencies and the court service should also be examined in relation to the Scottish Proceeds of Crime Strategy.

(xvi) We consider that there is a case for reinvesting a proportion of the proceeds of crime that are realised, as was envisaged when the Act was originally debated within the Scottish Parliament. It is also important that a balanced, strategic view of how this reinvestment is distributed across criminal justice agencies is taken. This is necessary to avoid a situation whereby a system that is already stretched in places becomes overwhelmed. This particular issue underpins our recommendation that the Serious Organised Crime Taskforce should develop and co-ordinate a Scottish Proceeds of Crime Strategy.

(xvii) During this inspection we were struck by the widespread agreement that exists among those we spoke to within both the police service and COPFS that the focus of the use of the provisions contained within the Act should be on disrupting criminal activity, or dissuading potential offenders, by removing both the financial rewards of such activities and the funds for future criminal activity. In this way it is believed that the harm caused by crime in local communities will be reduced. The Inspectorates share this view. At the same time we accept that there is a strong sense that communities also want to see criminals lose the trappings obtained through criminality.

(xviii) We believe that the use of the provisions contained within the Act can and should play an important part in the wider efforts of partner agencies to reduce acquisitive crime. This is likely to have clear societal benefits in communities across Scotland. Furthermore, given the current economic climate it is increasingly important that the combined efforts of law enforcement agencies tackle criminal activity that threatens legitimate business. For these reasons it is vital that the powers contained in the Act are used equally well against both serious organised crime and lower level criminals. Within this context and recognising the need to maintain a balanced and objective overview of such matters, our report sets out a clear and straightforward route map to achieve the outcome that both professionals and communities want to achieve.

Summary of Recommendations

(xix) In order to improve the current arrangements in relation to the Act and financial investigation in general we have made four principal recommendations. These reflect the changes that we believe need to be made to mainstream financial investigation in order that the provisions contained within the Act are fully exploited against all levels of criminality.

Recommendation 1. That as a matter of routine, the use of the Proceeds of Crime Act be mainstreamed within the police service in Scotland and COPFS so that from intelligence gathering to investigation and prosecution:

(a) all confiscation opportunities are considered and where appropriate brought into effect against the full spectrum of relevant crime as provided in the Proceeds of Crime Act 2002; and

(b) where it is clear that criminal proceedings are not appropriate, that civil recovery (and taxation) provisions are considered at an early stage of investigations and that a direct route is made available to the Civil Recovery Unit in clearly defined circumstances.

Recommendation 2. That the Serious Organised Crime Taskforce broaden its focus in relation to proceeds of crime and develop a Scottish Proceeds of Crime Strategy in order to co-ordinate action among partner criminal justice agencies including but not limited to ACPOS and COPFS. In particular the Strategy should focus upon:

(a) creating sufficient capability and capacity across partner agencies to address all levels of criminality and all crime types included within the provisions of the Act; and

(b) establishing a proactive rather than reactive approach to financial intelligence gathering and investigation in relation to all relevant crime.

Recommendation 3. That ACPOS and COPFS appoint leads (champions) to focus on mainstreaming POCA throughout their respective organisations.

Recommendation 4. That the current processes used in both policing and COPFS are reviewed to ensure their effectiveness in all aspects of POCA work (as more fully detailed in the suggested action points below) and, that COPFS and ACPOS assure themselves that these activities are taking place through their normal performance management regimes.

(xx) Whilst not underestimating the scale of the task at hand, we consider that the outcomes we describe above should be achievable within 3 years from the publication of this report and that considerable progress should be made within twelve months.

(xxi) Equally whilst recognising that the relevant agencies have both the necessary skills and determination to develop a plan to achieve this outcome, our experience gained from conducting this inspection leads us to make the following suggestions for ACPOS and COPFS.

ACPOS

Suggestion 1. That the ACPOS- POCA champion:

(a) be invited to join SARG and assist the Serious Organised Crime Taskforce in the development of the Scottish Proceeds of Crime Strategy;

(b) lead on the development of practice advice, training and development opportunities for the Service on the use of financial investigation and intelligence management at force and local levels;

(c) assist forces as appropriate in establishing optimum levels of resources to be put in place at force and divisional levels to fully use the powers contained within the Act;

(d) liaise with the regulated sector, in conjunction with the Serious Organised Crime Agency ( SOCA), in order to improve the quantity and quality of Suspicious Activity Reports ( SARs) produced in Scotland; and

(e) ensure that proactive opportunities related to SARs are fully exploited.

Suggestion 2. In reviewing current processes, forces should:

(a) review force level Financial Investigation Unit structures;

(b) develop plans to increase capability and capacity at divisional level assisted by the ACPOS- POCA champion; and

(c) ensure effective monitoring of any post-confiscation change in the financial circumstances of criminals.

COPFS

Suggestion 3. That the COPFS champion:

(a) be invited to join SARG and assist the Serious Organised Crime Taskforce in the development of the Scottish Proceeds of Crime Strategy; and

(b) in relation to mainstreaming arrangements regarding POCA, review case marking guidelines, and training and development opportunities.

Suggestion 4

In reviewing existing processes, COPFS should:

(a) ensure that effective communication exists between internal departments and units, and with law enforcement and criminal justice agencies, including review/feedback arrangements; and

(b) ensure that robust systems are in place to monitor compliance with settlement guidance.