Proceeds of Crime report published

Thursday 28 July 2016

The Home Affairs Select Committee have released their Proceeds of Crime report, and it doesn't make for comforting reading.

And a lot of the blame lies at the feet of the London property investment market according to the committee. They call for stronger supervision of agents, buyers and sellers. 

Key facts from which were considered by the committee as part of the review:

  • 640,000 offenders were convicted of a crime in the UK in 2014–15. Over the same period 5,924 confiscation orders were made, meaning that less than 1% of convictions led to a confiscation order.1
  • In that time, 1,203 restraint orders were used to freeze assets before they could be hidden.2
  • The overall enforcement rate of all confiscation orders was 45%. This varied with the size of the confiscation order, ranging from 96% of orders up to £1,000 to 22% of orders above £1 million.
  • Enforcement agencies collected £155 million from confiscation orders in 2014–15. The cost to administer that process was estimated to be more than £100 million.
  • In the five years between 2010 and 2015, £116 million was returned to victims of crime.
  • It is estimated that at least £100 billion is laundered through the UK every year. More than 130 countries in the world have a GDP smaller than £100 billion (including Angola, Hungary and the Ukraine).
  • The value of property in the UK subject to criminal investigation for being proceeds of international corruption in 2004–15 was £180 million.
  • By the end of October 2015, the National Crime Agency had closed 119 suspicious bank accounts in the UK.

The Chair of the Committee Keith Vaz said of the current reporting system: "The main method of reporting suspicious transactions, the ELMER system [for Suspicious Activity Reports (SARS)], is not fit for purpose. Designed to identify money laundering or terrorist financing, it is desperately overloaded to the point where it is now completely ineffective. Capable of managing 20,000 reports a year, it is currently burdened with 381,882. This has rendered the whole system a futile and impotent weapon in the global fight against criminal financing, with no indication from the Home Office as to when a new state of the art system will be purchased."

RATE OF SARS SHOULD BE HIGHER AMONG PROPERTY PROFESSIONALS

The committee said in their findings: "It is astonishing that just 335 out of some 1.2 million property transactions last year were deemed to be suspicious. This suggests to us that supervision of the property market is totally inadequate, and that poor enforcement has laid out a welcome mat for money launderers. The recent policies announced by the Government must include enhanced supervision of the property market and both sides of the transaction—buyers and sellers—must be included.

"At the moment it is far too easy for someone intent on laundering money to buy a property with their ill-gotten gains, and rent it out in a very buoyant and robust letting market, and take in clean money in perpetuity. We recommend that, as with estate agents and other professional services, letting agents must use the Suspicious Activity Reporting regime (SARS) system and undertake appropriate due diligence when taking on new clients. " 

NAEA WELCOMES FINDINGS

Mark Hayward, Managing Director of NAEA said:

“NAEA welcomes the work done by the Home Affairs Committee in bringing about this report. Under the Proceeds of Crime legislation there is a necessity for estate agents to report suspicious activity and despite remaining low, SARs from the estate agency sector are increasing. Last year NAEA embarked on a roadshow of events around the country with speakers from NCA and HMRC to ensure members know what is required of them. We also run a Financial Crime Update course and feature articles in our magazine and newsletter."

“It is clear that we are at a cross-roads in tackling money laundering particularly in London’s property market. A ‘confiscation court’ is a positive suggestion from the Committee, but what we need is strong and clear measures from the Government in order to deter those who think the UK is a safe place to launder illicit cash.”

Following the review, the committee made an extensive list of recommendations including:

  • The creation of a specialist 'confiscation court' to hear complex cases featuring cross-border financial transactions. 
  • Assets to be frozen at the first point which the criminal becomes aware of the investigation. At present it's only when they have a conviction that assets can be frozen, giving organised criminals plenty of time to 'hide' proceeds of crime.
  • Police Officers to be given mandatory financial investigation training
  • Asset Recovery Incentivisation scheme (ARIS) to be overhauled. 
  • Recovered assets to contribute to reimbursing victims of crime
  • National Crime Agency to be appointed as the lead agency for recovery of criminal assets and to oversee ARIS
  • Government to confiscate passports of criminals until confiscation order paid
  • Non-payment of confiscation order to be made a criminal offence, with criminals unable to leave prison until such time as a confiscation order is paid. 
  • The creation of a single 'asset recovery database
  • People who actual use SARS to report suspicious activity to be involved in developing a replacement for ELMER 

>> READ FULL PROCEEDS OF CRIME REPORT <<

>> SKIP TO THE CONCLUSIONS AND RECOMMENDATIONS <<