A Fair Cop

A simple guide to money laundering, confiscation and corruption

A major bank’s CEO is facing public prosecution in relation to money laundering. There are lessons for civil society, public prosecutors and AML professionals; will they be learned?

GAB | The Global Anticorruption Blog

GAB is pleased to publish this analysis by Emile J. M. Van Der Does De Willebois, Coordinator of the World Bank/UNODC Stolen Asset Recovery Initiative, of the significance of a decision of the Gerechtshof Den Haag, the Dutch appeals court in The Hague. As he explains, for too long authorities in the developed world have ignored the role lawyers, bankers, and other “enablers” play in facilitating corruption in the developing world.  Let us hope that the court’s decision marks a turning point in holding them accountable for their role in corruption crimes.  

Last month, a Dutch appeals court ordered the public prosecutor to initiate the criminal prosecution of the former CEO of the nation’s largest bank. The court directed that Ralph Hamers be put on trial for money laundering and other crimes the Amsterdam-based banking giant ING committed during his sevenyear tenure as its chief executive…

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The confiscation of criminal proceeds is a key global weapon against corruption, intended to ‘take the profit’ out of the crime – with the aim of returning that money to the public and, hopefully, deterring future corruption. The UK confiscation regime has been criticised, but in this blog post I show that the criticism is misplaced and in fact the UK sets a global example of how to use this tool in the fight against corruption and other crime.

In December 2020, the Law Commission of England & Wales finished a consultation on the post-conviction confiscation regime. They described this as a “once in a generation”, “root and branch” review. The project started in November 2018, the consultation had over a hundred questions, arising from a report of over 700 pages. It is a detailed and thorough piece of work.

The background to their review is the ground-breaking Proceeds of Crime Act, 2002, which transformed the ability of the UK justice system to confiscate the proceeds of crime. By any sensible measure POCA has been a world-beating success. The average annual revenue reaped by virtue of the Act increased more than eight times, from £15m to £130m per year, in the two decades before and after 2002. It was a transformational change:

Total value of receipts in England & Wales and Northern Ireland

Average in the 10 years pre-POCA 1992-2002:                      £15m   p.a.

Average in the 10 years post-POCA 2003-2012:                    £130m p.a.

Average in the 5 years 2013-2017:                                        £206m p.a.

(Source: FOIA response from the Home Office)

In addition, the number of people who have been deprived of criminal assets under the Act was transformed from a few hundred each year to an annual average of somewhere between 5,000 and 10,000 (the Home Office does not publish this information regularly, so this is my estimate, based on ten years’ service on the UK Criminal Justice Board).

In 2018, just as the Law Commission started its project, the Financial Action Task Force, the global standard setter for Anti-Money Laundering, reviewed the United Kingdom. It conferred on the UK the highest aggregate grading for any jurisdiction at the time. For the specific immediate outcome of “Confiscation” the UK was evaluated at a “Substantial level of operational effectiveness”, meaning that the “Immediate Outcome is achieved to a large extent.” Only 20% of jurisdictions achieve this level of success (out of just over 100 evaluated).

It is surprising, then, that the Law Commission found that the confiscation regime was perceived as ineffective. It explained that “The perception that the confiscation regime was ineffective took hold from various media reports and the NAO report of 2013 which drew attention to the high value of unpaid orders”. Yet the conclusions of the NAO Report contrasted starkly with the record of ten consecutive record-breaking years of asset recovery since POCA was first enacted. The NAO concluded that “that the process was not working well enough and did not provide value for money”, whilst simultaneously finding that the regime generated £133m, comfortably exceeding the £100m cost of administering the regime (in 2012/2013). In other words, unlike any other aspect of the criminal justice system, it not only generated a substantial amount of money but actually turned a tidy profit.

The key focus of criticism has been the supposedly high value of unpaid orders. This was first reported in the press around 2005 and has been almost the exclusive focus of media reports on the confiscation regime every year since. But the reality is that almost all these unpaid orders are uncollectable, they are an artefact of the system. . The fact that almost all the amounts were in fact uncollectable is not disputed. This was confirmed by the National Audit Office itself in 2013 and by the latest Law Commission Review. The NAO found that 81% was uncollectable[1] in 2013; by 2018/2019 the Law Commission found that this had increased to 92%. A significant part of the uncollected amount is the value of “hidden assets”. Hidden assets are typically criminal assets abroad that have been found by British financial investigators. Their recovery is not possible because the equivalent confiscation regimes do not exist in the relevant jurisdictions which host the assets. Some success over the years has been achieved by British technical assistance to these regimes, but this could be more strategically directed to the direct benefit of the UK and the international effort against corruption and crime.

The nature of the uncollected backlog is fully explained in an excellent paper by Helena Wood of the Royal United Services Institute, who concludes: “In sum, to judge the success of the system on the uncollected total is to misrepresent the results”

https://rusi.org/publication/occasional-papers/enforcing-criminal-confiscation-orders-policy-practice

It quotes the NAO report at some length, making clear that its headlines have contributed to the adverse perception of the UK confiscation regime. The Commission states that the NAO Report “has influenced strongly the continuing debate about POCA’s effectiveness to the present day” and further find that it “included eye-catching data which appeared to demonstrate that the regime was not working” – strong words when set against a convention that UK government bodies do not criticise one another.

The NAO Report directly triggered a Public Accounts Committee review of the regime and a concurrent Home Office Committee review of the same topic. The current Law Commission review is itself driven by the perception of failure created by the NAO.

The Law Commission consultation has finally found a solution that had escaped the NAO, the Public Accounts Committee and the Home Affairs Committee. They are to be commended for proposing, in Question 77:

“We provisionally propose that the court should be able to direct that enforcement be placed in abeyance where it is satisfied that an order cannot be enforced.”

In other words, the simplest solution would be to administratively write off these uncollectable amounts, to avoid misleading the public and undermining public confidence in the system.

If this simple solution is adopted, the undeserved and misleading publicity surrounding the UK’s confiscation regime might finally be laid to rest. The UK has an excellent system which is rightly applauded by the FATF and emulated by experts all over the world. It is high time it was recognised at home and actively promoted abroad.


[1] In 2012/13 the uncollected amount was £311m of £1.61bn, in 2018/19 it was £161m out of £2bn according to the relevant HMCTS Trust Statements.

The Law Commission is taking a “once in a generation” opportunity to turn a good law bad. The review consultation closes on 18 December 2020, so there is still time to stop them. The paper has 104 questions, by Question Five, I was wondering how Britain had gone from the vaulting ambition of the new millennium to the stunted legal treacle of 2020. What on earth has happened?

The Law Commission has already consulted experts, they even mention me, in Appendix 3 (on page 677, if you were wondering) and if sheer size is a measure of anything, they have been busy. However, I want to begin at the very beginning, such a very good place to start. Questions 1 to 5 address the crucial question of objectives. The ‘why are we here?’ question that should be on every working-from-home screen-saver. If we assess objectives wrongly then it is a double waste of time and money. First, we set off doing something wrong and then we have to turn back and start all over again. That’s why it’s important to have your say. The Commission themselves say that this is a “once in a generation” review. Have look at their proposal for objectives and see what you think. Does it sound reasonable to you? Read and contemplate their question, have a long cup of coffee and mull it over. Here is their summary of questions 1 to 5:

“Do consultees agree: 

That there ought to be a statement of the statutory objectives of the confiscation regime set out clearly in law? 

That the statutory objectives ought to be:

a) A primary objective of depriving a defendant of his or her benefit from criminal conduct, within the limits of his or her means; 

b) Secondary objectives of:

i. deterring and disrupting criminality; and 

ii. compensating victims (where such compensation is to be paid from confiscated funds)?”

I mean, there is nothing to dislike about this on a first reading, so why did it jar with me?

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The global anti-money laundering regime is in crisis, not from lack of resources but from lack of understanding. We need to get back to basics, right back to Eve, the first woman (in the Christian tradition) and the first thief and money launderer. Eve was the one who took the Fruit of the Forbidden Tree and gave it to Adam. When she took the fruit, she committed the crime of money laundering, as this article will explain.

Prevention versus enforcement

Preventing money entering the global financial system is obviously not working as numerous recent scandals and massive regulatory fines have repeatedly shown. Unless the authorities confiscate money from launderers, thereby altering their behaviour, the AML regime will never really work. One of the key reasons that authorities fail to confiscate the proceeds of crime both domestically and internationally is because they don’t recognise that Eve was the first money launderer. If the authorities could accept this as true, we might manage to make the European Union’s 5th Anti Money Laundering Directive will work AND reduce crime around the world, as this article will also explain.

The Financial Action Task Force Strategic Review

Every year hundreds of thousands of people in the worldwide financial sector generate information about money they suspect to be the proceeds of crime, they do this so that law enforcement can identify and recover it. Every year they assume that courts confiscate at least some of the money. The courts could do this, in most countries, but they don’t.

The World Economic Forum noted that fraud and financial crime was a trillion-dollar industry, reporting that private companies spent approximately $8.2 billion on anti–money laundering (AML) controls alone in 2017. Source.

This year the Financial Action Task Force, the global guardian of the AML regime, is undertaking a strategic review. The time is right to take a look at the endgame of the AML regime, the confiscation of the proceeds of crime. Critics say that not enough is confiscated from criminals compared to the amount of suspect money in circulation. This article says the problem is far worse than that, the regime has no clear idea of what confiscation even is. Subsequent articles will examine why confiscation is perceived to be difficult, how these difficulties have been overcome and how to measure its impact on crime.

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A decade of funding cuts and now the need to police a public health emergency means an ever-increasing need to do more with less. In the mid-nineties the gap between resources and demand led to innovative solutions like computerisation and intelligence-led policing. We need to innovate again. One way to focus stretched resources would be to focus them on the people causing the most harm in society, the ‘real’ criminals. Unfortunately, despite seemingly endless discussion, we have never been able to settle on a working definition that the public understands and yet is operationally and legally robust. A definition which would allow us to really focus our resources on criminals and assess the results.

Strangely the UK did come up with a brilliant, legally robust definition, that fits what an ordinary member of the public would think of as ‘being a criminal’, but it was overlooked. It had been wrongly named and therefore misunderstood. It’s time to look again at Section 75 of the Proceeds of Crime Act and understand what it means to ‘be a criminal’.

One of the main hurdles to fighting crime in the UK is that we have not agreed who are the real criminals. One person’s criminal is another person’s climate warrior. A persistent parking nuisance might well be a criminal if they keep blocking your drive. Even dabbling your finger in some water may be a crime, it depends where you do it.

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On 17th March 2020 France went into lockdown. As a policing consultant, I was interested to experience how this worked. How do you train a population to protect itself? How do you police the fringes who need policing?

On the 16th March, I was free to go where I wanted; on the 17th of March I was still free, provided I carried a Certificate with me. The new requirement was well broadcast on the TV and radio, but I picked it up on the internet.

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Long before I joined the Metropolitan Police Fraud Squad I has fascinated by the concept of deception. How did apparently clever, even street-wise people get caught out by deceivers? Deception takes many forms, of course, this article is about the one-off deception, the sort that ruins lives, where the loss is the life savings, sometimes more, as I will explain. I want to start this tale at the end, the anguish of the victim.

The victim’s choice

My experience of hundreds of cases boils down to one common thread. At the point where the victim gets to choose, the choice made by the victim is irrelevant. This is because the deceiver has created an environment in which the victim believes they have to make a choice, they are so distracted by that choice that they fail to see the environment that the deceiver has created. In fact, whichever card they choose the Queen is no longer there at all. The choice feels wrong and risky but the victim is so ensnared that they focus, wrongly, on the detail, not the bigger picture. If you are reading this and it sounds all too familiar, including pressure to make a choice you are not happy with, get some third-party advice right now, don’t make the choice alone.

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The crime rate in England rose year on year for forty years from 1955 to 1995. Then it fell steadily for twenty years until 2015. Something happened, but what was it? This short paper is focuses on the acquisitive crime rate (theft, burglary, robbery, etc.). Acquisitive crime is on the rise again, will we learn from history?

A changing society had increased crime, plus the inability of traditional controls to work. Major factors included: increased dealing in illegal drugs; stealing to support addiction to new drugs; localised poverty and inequality; unemployment in traditional occupations; increasing availability of small, expensive, desirable, electronic items and the temptations of consumerism. Policing failed to keep pace with the changes and struggled with the ever-increasing crime wave.

Then, in a few short years, the steady increase in crime was stalled and then reversed by a perfect storm of policing in the late 1990s.

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This post explains the difference between confiscation, forfeiture, restraint, sequestration, seizing, freezing, civil recovery and asset recovery. This is to help you understand what is in the news, whichever country you are in.

Being frozen

These terms are all lawful ways to deprive people of the proceeds of crime in litigation against criminals or criminal assets. They are all English words with everyday meanings but also technical terms which are frequently used wrongly by journalists, lawmakers and commentators. Unfortunately they have also been wrongly used in English translations of foreign legislation and technical papers.

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