The Proceeds of Crime Act 2002 (External Investigations and External Orders and Requests) (Amendment) Order 2018

EXPLANATORY NOTE

(This note is not part of the Order)

This Order makes provision under section 444 of the Proceeds of Crime Act 2002 (“the 2002 Act”) which corresponds to Parts 2 to 5 of the 2002 Act for the purpose of giving effect to “external requests” and “external orders”. This Order also makes provision under section 445 of the 2002 Act for investigative orders (equivalent to those in Part 8 of the 2002 Act) to be made in support of an “external investigation”. The terms “external request”, “external order” and “external investigation” are defined in section 447 of the 2002 Act, and in summary refer to:

• requests from an overseas state to prohibit dealing with property which is suspected to derive from criminal conduct (“external requests”);

• orders for the recovery of specified property or sums of money which derive form criminal conduct (“external orders”), and

• investigations into whether property has been obtained as a result of or in connection with criminal conduct, or the extent or whereabouts of such property, and investigations into whether a money laundering offence has been committed (“external investigations”).

Part 1 of this Order makes general provisions, including that this Order comes into force on 12th November 2018, apart from articles 27, 28, 30 and 31, which come into force on 12th November 2019 in order to allow time for court rules to be amended. Parts 2 to 4 of this Order amend the three principal orders made under sections 444 and 445 of the 2002 Act, and (among other things) insert provisions into those orders which are equivalent to the amendments made to the 2002 Act by the Criminal Finances Act 2017 (c. 22) (“the 2017 Act”).

Part 2 of this Order amends the Proceeds of Crime Act 2002 (External Investigations) Order 2013 (S.I. 2013/2605) (“the 2013 Order”) under which orders can be made in the civil courts for the purpose of assisting with external investigations. Chapter 2 of Part 2 of this Order extends to England and Wales, and articles 7 and 8 insert provisions equivalent to sections 362A to 362I and 362J to 362T of the 2002 Act, which relate to unexplained wealth orders (“UWOs”) and interim freezing orders (“IFOs”) respectively (the sections providing for UWOs and IFOs were inserted into the 2002 Act by sections 1 and 2 of the 2017 Act). UWOs may be made by the High Court in England and Wales where the respondent is a politically exposed person (see section 362B of the 2002 Act) or has been involved in serious crime, and can be made if the court is satisfied that the known sources of the respondent’s lawfully obtained income would be insufficient for the purposes of enabling him to obtain specified property. UWOs require the respondent to provide a statement (or documents and information) explaining how that specified property was obtained.

Articles 5 and 9 make minor and technical amendments relating to the provisions inserted by articles 7 and 8. As a result of these amendments, when a request for assistance with an external investigation has been referred to an “enforcement authority” (as defined in the provision inserted by article 9 of this Order), that authority can decide to seek a UWO or an IFO in furtherance of the request.

Articles 6, 10 and 11 change the definition of “appropriate officer” to include officers of the Financial Conduct Authority and Her Majesty’s Revenue and Customs. The effect is that those officers are now able to obtain orders and warrants under the procedure in the 2013 Order. These amendments are equivalent to those made to the 2002 Act by sections 18 to 20 of the 2017 Act, ensuring that officers from those organisations can exercise the same powers in respect of external matters as they could for a domestic matter under the 2002 Act.

Chapter 3 of Part 2 of this Order make amendments to Part 2 of the 2013 Order (which extends to Scotland), and insert provisions equivalent to sections 396A to 396S of the 2002 Act (as inserted by sections 4 and 5 of the 2017 Act). These measures make UWOs and IFOs available in the Court of Session in Scotland, and the amendments made by this Order ensure that these orders can also be obtained in Scotland in response to an external investigation.

Part 3 of this Order extends to England and Wales, and amends the Proceeds of Crime Act 2002 (External Investigations) Order 2014 (“the 2014 Order”) which applies to criminal investigations. Article 20 inserts provisions equivalent to the UWO and the IFO measures in the 2002 Act into the 2014 Order, and articles 18, 19 and 21 make minor and technical amendments to the 2014 Order to support the provision made by article 20. Article 17 extends the powers available in the 2014 Order to officers of the Serious Fraud Office (“SFO officers”), and is equivalent to the amendments to the 2002 Act made by section 17 of the 2017 Act (and the associated minor and technical provisions in Schedule 5 to that Act). This ensures that SFO officers can exercise the same range of powers for an external investigation as they could exercise in a domestic matter.

Part 4 of this Order amends the Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 (“the 2005 Order”), which provides the framework for giving effect to external requests and external orders. The 2005 Order provides that the Secretary of State can refer an external request to law enforcement agencies, who are then able to take measures to freeze the property (such as obtaining a restraint order or a prohibition order). The Secretary of State may also refer an external order to a law enforcement agency, who can then obtain an order from the Crown Court to give effect to the external order (if it derives from a criminal conviction) or take proceedings in the High Court to obtain a recovery order (if it is a civil matter).

Articles 23 and 24 of this Order extend to England and Wales only, and make amendments to Part 2 of the 2005 Order, which relates to giving effect to external requests in connection with criminal investigations or proceedings, and to external orders arising from such proceedings. Specifically, the amendments will allow SFO officers to apply for restraint orders and for orders for the recovery of property in the Crown Court, under the procedure in Part 2 of the 2005 Order.

Articles 25 and 26 of this Order extend to Scotland only, and insert (respectively) new articles 141ZHA to 141ZHC and 166A to 166C into Part 5 of the 2005 Order, which contains the procedure for giving effect to external requests and orders by means of civil procedure. The amendments made by articles 25 and 26 relate to prohibition orders and prohibitory property orders obtained in the Court of Session. A prohibition order prevents any person from dealing with property, and can be obtained where the property is identified in an external request. A prohibitory property order can be obtained where an enforcement authority may take proceedings for a recovery order, and prevents any person from dealing with property where there is a good arguable case that the property derives from unlawful conduct. The amendments made by article 25 allow the Court of Session to make an order appointing receivers to manage any property subject to a prohibition order, for the purposes of an external request and the amendments made by article 26 allow prohibitory property orders to be made by the Court of Session where the enforcement authority is giving effect to an external order. These amendments are equivalent (with modifications) to sections 255G to 255I of the 2002 Act (those sections were inserted by section 23(1) and (2) of the Serious Crime Act 2015 (c. 9)).

Article 29 amends the definition of “enforcement authority” for the purposes of Chapter 5 of the 2005 Order. The effect of the amendment is that the Financial Conduct Authority and Her Majesty’s Revenue and Customs are defined as enforcement authorities, meaning that they can exercise the procedure in Part 5 of the 2005 Order in order to give effect to external requests and orders via civil proceedings (this is equivalent to the amendments made by sections 18 to 20 of the 2017 Act, as set out above).

Articles 27 and 28 make minor and technical amendments to the 2005 Order to support the provisions inserted by articles 30 and 31 of this Order. Article 30 inserts a new Part 5A into the 2005 Order, which allows HMRC officers, constables and SFO officers to give effect to external orders by seizing certain listed items of recoverable property and seeking their forfeiture in the magistrates’ court in England and Wales, or the Sheriff’s court in Scotland. “Listed items” are defined by reference to section 303B(1) of the 2002 Act, and include precious metals, precious stones and artistic works. The new Part 5A is equivalent to the provisions in Chapter 3A of Part 5 of the 2002 Act, which was inserted by section 15 of the 2017 Act. The provisions inserted by article 30 include a power to search for, seize and detain property, and to apply to the magistrates’ court and the sheriff’s court for forfeiture. They also include a procedure to deal with jointly owned assets, including allowing the magistrates’ court to refer complex cases to the High Court.

Article 31 inserts a new Part 5B into the 2005 Order, which allows HMRC Officers, constables and SFO officers to give effect to external requests and external orders by applying for an account freezing order in respect of money held in a bank or building society account, and then to apply to the magistrates’ court and the sheriff’s court for the forfeiture of money subject to an account freezing order. Part 5B is equivalent to Chapter 3B of Part 5 of the 2005 Act, which was inserted by section 16 of the 2017 Act.

A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sectors is foreseen.