Levelling the Balance of Probabilities in cash forfeiture
The MPC v X, City of Westminster Magistrates’ Court
How do you prevent over £110,000 of cash hidden under the floorboards from being forfeited to the police?
Criminal property can be forfeited under the Proceeds of Crime Act 2002 if the property sought to be recovered was derived from criminal conduct. Despite the criminal context of forfeiture applications, the standard of proof the prosecuting authority (in this case the Commissioner of Police) must satisfy is merely on the balance of probabilities.
One lesson from the recent case of Mrs X, whom I represented, is that it is always necessary for the complainant, hereafter the applicant, to provide sufficient evidence to discharge that burden, even when it appears to be an irresistible application. Mrs X’s case shows that a respondent’s account (no matter how initially unpromising, eccentric or unconventional) can in the absence of countervailing direct evidence be enough to avoid forfeiture, neutralising a seemingly overwhelming case.
Cash forfeiture applications
Under section 298 of the Proceeds of Crime Act 2002, the Court may order the forfeiture of cash if satisfied that the cash, or part of it, is recoverable property or is intended by any person for use in unlawful conduct. “Recoverable property” is property that is obtained through unlawful conduct, which is defined as conduct that is unlawful under the criminal law (sections 304(1) and 241).
The practical effect of the regime is that a defendant might be found not guilty beyond a reasonable doubt in criminal proceedings but nevertheless be required to surrender any property (cash or assets) in these proceedings because the lower standard of proof is easier to satisfy. Equally, a suspect might never be prosecuted for alleged offending but still be subject to a forfeiture application, as was the case in this matter.
In assessing a forfeiture application, the Court must decide on the balance of probabilities whether it is proved that any matters alleged to constitute unlawful conduct have occurred, or that any person intended to use any property in unlawful conduct (section 241(3)). It is irrelevant whether criminal proceedings have been brought in relation to the property (section 240(2)).
The balance of probabilities standard is significantly lower than the usual criminal standard of being sure beyond a reasonable doubt. There is some disagreement in the case law regarding how the lower standard should be applied given the criminal context of forfeiture. In R (On the Application of the Director of the Assets Recovery Agency) v He and Chen  EWHC 3021 (Admin), Collins J stated there should be no gloss on the lower standard in part because Parliament deliberately imposed it instead of the higher standard of beyond a reasonable doubt. The Judge nevertheless noted that “cogent evidence” was required before deciding the balance of probabilities standard had been met (at ).
In contrast, in the later case of Director of Assets Recovery Agency v Virtosu  EWHC 149 (QB) Tugendhat J identified that the Director should be able to satisfy the court to a standard “commensurate with the gravity of the case” (at ). While acknowledging the forfeiture regime is civil not criminal, the Judge recorded that the gravity of the case before him (people trafficking and money laundering) was very great indeed and that the consequences of granting the forfeiture application were significant for the defendant (leaving him and his family “penniless”). Tugendhat J also drew attention to a Cabinet Office report that stated the civil forfeiture route is not to be adopted as a “soft option” in place of criminal proceedings (at ).
Both these decisions should now, of course, be read in the light of the UKSC decision in In re S-B  1 AC 678, when the Supreme Court re-iterated that there is only one civil standard of proof and that is proof that the fact in issue more probably occurred than not. Furthermore, that there was no necessary connection between the seriousness of an allegation and the improbability that it had taken place. In ruling that the standard of proof was the simple balance of probabilities it restated that no more severe standard was to be applied because of the seriousness of the allegations, following the decisions of the House of Lords in In re H  AC 563, and In re B (Children) (Care Proceedings: Standard of Proof) (CAFCASS intervening)  AC 11.
The case of Mrs X
The Commissioner of Police sought forfeiture of £111,000, discovered in Mrs X’s flat, following the arrest of her lodger and close associate [A] who had been arrested (albeit subsequently acquitted) for drug trafficking. It was alleged that this significant cash seizure was derived from Mrs X’s apparent close links to an organised criminal group (OCG), and that she had previously made a statement in confiscation proceedings for a convicted drug trafficker [B], seeking to assert that certain cash transfers in his accounts had been loans made to him by her. Criminal proceedings had not been instituted against her in the public interest because of Mrs X’s poor health but, as noted, that does not prevent a civil forfeiture action. Significantly, as will become clear, there was no evidence that she had any association with B before 2016, and A before 2017.
When the police searched Mrs X’s home in connection with their investigations into A they located the cash hidden in a spare room, allegedly occupied by A. Mrs X, from the moment it was seized, maintained it was hers. She stated in her police interview that the sum represented her life savings, which she had withdrawn from the banks during a prolonged period of mental illness. Regular deposits and withdrawals were explained by her desire to reduce the size of the cash she held by changing the denominations from £20 notes to £50 notes. Her explanation was that fewer notes would fit better in her home safe. She at all times cooperated with police and assisted by giving unrestricted access to her laptop and mobile phone and by providing the police with all relevant financial documentation. She even maintained that more cash was to be found hidden in the flat. Curiously, the police did not re-enter to search, or interview her further.
In the interim period, before these cash forfeiture proceedings took place, she had given evidence at A’s Crown Court trial, maintaining on oath that the monies seized were hers, whilst also (of her own volition following being cautioned by the Judge) confessing to benefit fraud. A significant fact that emerged in that trial was that she had been on notice of A’s arrest, as he had texted her once he had been stopped by the Police, several hours before her flat was searched. In the interim she had taken no steps to remove the monies.
At the hearing of the forfeiture application, counsel for the Commissioner of Police argued that Mrs X’s idiosyncratic behaviour was on the balance of probabilities characteristic of money laundering and therefore the cash should be forfeited. The Commissioner’s case was that Mrs X was a liar and that she was covering for others, and that this large cash sum was derived from drug trafficking and/or money laundering.
In cross-examination of the Financial Investigation Officer, it was established that the vast majority of the notes seized looked fresh, like they had come straight from the bank, were in their original wrappers (dated 2011-2014), withdrawn years before any connection to the alleged OCG, dovetailing with her account in interview that she had withdrawn the money between 2012-2014. The officer also confirmed that Mrs X had been aware of A’s arrest hours before the police raided her premises.
Consistent with her conduct throughout the investigation and all proceedings, Mrs X was a candid and direct witness and accepted once more that she had carried out benefit fraud by receiving allowances even though her life savings had disqualified her from making a lawful application. She rationalised that she had failed to inform the DWP of her life savings because mentally she regarded them as already belonging to her nephew and niece. Paradoxically, the motive for benefit fraud (to keep her life savings for close family once she died) was surprisingly credible, and undermined the applicant’s case, especially given the age of the notes. She refuted all suggestions of involvement in money laundering.
Having heard the evidence, the court was not satisfied that on the balance of probabilities the cash was derived from money laundering. It described Mrs X’s behaviour as eccentric and unconventional but that there was no direct or circumstantial evidence of the criminal conduct asserted. Mrs X’s cooperation with the investigation was to be expected of someone not involved in money laundering. Equally it appears that Mrs X’s candid admission of benefit fraud provided an alternative explanation that was not rebutted by the Commissioner.
Accordingly, the Judge directed that a portion of the funds was to be forfeited as a result of the admitted benefit fraud but over £86,000 was ordered to be returned to Mrs X forthwith.
This case is a reminder that the Commissioner of Police must provide sufficient evidence linking the property to be recovered with the criminal wrongdoing. While it is easier for the Commissioner to satisfy the balance of probabilities, direct evidence – no matter how eccentric or unconventional – can be enough to negate these applications. Admitted dishonesty to the benefit fraud in the context of this case was ultimately a more cogent explanation of what had occurred.
There is, of course, a clear distinction to be drawn between considering cogency of evidence and the standard of proof, and it is important that the two are no elided or conflated. That is not why the major part of the application failed. It was not determined by a debate about the standard of proof, but a reflection on the quality of evidence: Mrs X being on notice of A’s arrest, yet doing nothing; the apparent age, yet pristine appearance, of the notes predating the alleged association with the OCG, all of this apparently corroborating what she had said in interview.
In that regard, Virtosu confirms that despite the lower standard of proof the burden of proof remains with the Commissioner. Notwithstanding the unpromising circumstances, it is not a foregone conclusion that the applicant would succeed – and that large sums of cash hidden at home are inevitably recoverable property under the forfeiture regime.
A vital consideration in these matters is disclosure. I had previously represented A, and was thus aware of the text messages on the night of his arrest between him and Mrs X. Unfortunately, the Financial Investigation Officer did not include them in the applicant’s bundle. It was not suggested at the hearing that this omission was deliberate, and the Officer confirmed this important fact in cross-examination. It demonstrates, however, that the most thorough analysis of linked proceedings is an imperative.