R v. Harvey - assessing the benefit

Advice and Assistance from Cohen Cramer

Case Study

Proceeds of Crime Act 2002 – assessing the benefit by considering the VAT collection system, the interpretation of POCA and determining legitimate cash from trade and criminal money.

The conviction

My client’s confiscation proceedings started following a conviction for allowing his premises to be used to grow cannabis.  They were held up for two years whilst he was investigated and then convicted for a separate money laundering offence.  The relevant period, which is the period allowed by the Crown to go back through his finances was 2008.  This was due to the pause in proceedings and he was expected to provide clear and cogent evidence to support cash credits going into his bank account going back to 2008.

To complicate matters further he ran a legitimate business but did not keep proper business records.  This was known by the Crown due to previous investigations into his business by HMRC.  So proving the source of the cash credits would be impossible.

Difficulty in determining the extent of proceeds from crime

The Crown said he had benefitted to the tune of £1.3 million and may have hidden assets.  The Crown couldn’t deny though that he had a legitimate business and that there may be a serious risk of injustice if it was to be assumed that all of the cash credits going into his bank account had come from the proceeds of crime.  The difficulty faced by all parties was that there was no way to prove that the cash was legitimate nor that it was from the proceeds of crime.

Despite my client not keeping proper business records he did instruct accountants to prepare his tax returns each year.  The tax returns did not match the cash in the bank.  However, it should be noted that cash obtained through legitimate trade does not turn into criminal property because of the non-declaration of legitimate profits (Ahmed v HMRC).  The pivotal question was therefore how the Judge would distinguish between legitimate cash from trade and criminal money?

The court’s decision

R v Harvey [2013] EWCA Crim 1104 considers this issue and the method of assessment of benefit in a similar case.

A finding of fact in relation to the under-declarations allowed for a fair and reasonable calculation to be made in relation to the amount which could be accepted as deriving from the proceeds of crime.

The complexities around this case stemmed from the lack of trading records and the difficulty of identifying legitimate business profits from the proceeds of crime.  Clear and cogent evidence must be provided to rebut the statutory assumptions which spanned back to 2008.  However, this must be balanced with a level of fairness to the Defendant who in this case did not keep proper business records.

The Judge presiding said, “I have never seen a more thoroughly prepared case on both sides”.  With the assistance of a forensic accountant, benefit was reduced from £1.3 million to £204,208.00.

As a result of our work in this matter our client is able to pay his confiscation order in full and does not face the threat of further applications under s22 POCA 2002 in the future.

Lauren Bowkett – Associate Solicitor – Head of Proceeds of Crime Department