Lauren Bowkett is a fraud and financial crime expert in the Business Crime and Compliance Team at Shoosmiths. She is an expert in confiscation proceedings under the Proceeds of Crime Act 2002 (‘POCA’) and has successfully intervened in numerous POCA cases to assert her clients third party interest rights.

In this article Lauren explains what a third-party interest application is, how an application may arise through a COVID-19 related fraud and how she can help her client by making representations to the Court about the extent of their interest.

What is a third-party interest application in POCA proceedings?

The Serious Crime Act 2015 introduced Section 10A into the POCA. The section gives a third party the right to join a Defendant’s POCA proceedings during the Crown Court proceedings and inform the Court of their financial interest in an asset which the Prosecution or the Defendant says belongs to them.

In most cases, the third party is well known to the Defendant, and under the legislation the Court must give the third party a ‘reasonable opportunity’ to make representations as to the extent of their interest in the asset. The asset in question will feature on a list which the Prosecution or the Defendant say is available to pay the Defendants confiscation order. This application can also be made during the enforcement proceedings.

A Confiscation Order is an order of the Court for a Defendant to pay a specified amount of money within 3 months. There are two figures on the Confiscation Order. The first is the benefit figure, which is the amount the Defendant financially benefitted from their crime. The second is the available amount, which is the value of the assets which the Court deem available to be sold. The proceeds are then used to compensate the victim or if there is no victim the proceeds are paid to the Home Office and distributed as per the Asset Recovery Incentivisation Scheme.

A third party will need to prove on a balance of probabilities that they have an interest in the asset which is listed on the proposed Confiscation Order to either reduce its value by proving that they have an equitable share of it or removing it from the proceedings all together. This is done by making representations to the Court about the extent of their interest. Representations may involve complicated issues of trust and property law and therefore seeking expert legal advice is key to the success of the application. 

How could a third-party interest arise?

A third-party interest can arise in a number of different ways and every application should be considered on a case-by-case basis.

The government have invested over £100 million in a Taxpayer Protection Taskforce to combat fraud in the HMRC-administered COVID-19 schemes. Taking a Bounce Back Loan fraud as an example, a third-party interest application could arise when the Bounce Back Loan lump sum is misused and used to purchase new personal assets jointly with someone who is using legitimate money to purchase the item. Examples of a personal asset could be a car, property, tech items, designer clothing and pets. 

It should be noted that there does not need to be a direct financial payment to obtain a third-party interest and a solicitor specialising in POCA will be able to advise an interested third party on the strength of their application.

Whichever way the interest arises the third party must inform the Court of their interest. If they do not the Court could make a finding that the asset is available in its entirety, sold and the proceeds paid towards the Defendants Confiscation Order.

This application can be made during the enforcement proceedings. However Section 10A amended POCA 2002 to resolve competing interests in property at an earlier stage of the Confiscation Proceedings.

How does a third-party intervene in POCA proceedings?

Third parties can intervene during the POCA proceedings or during the enforcement stage. Prior to a Confiscation Order being made, the Prosecution may find out through their own investigations that a person has an interest in the Defendant’s assets. If they do, they are expected to contact that person and let them know that the asset is being investigated and forms part of the Confiscation Proceedings. The Prosecution will usually inform the person by letter and they will be invited to join the proceedings by confirming the extent of their interest and submitting an application to the Court.

If the Prosecution are not aware of the person’s interest. The person will need to inform the Prosecution and the Court of their interest. In both scenarios a person who believes that they have an interest in an asset should instruct a solicitor who specialises in this area. The solicitor will advise them on joining the POCA proceedings and preparing the application.

What does the application look like?

Once a third party has officially joined the Defendant’s POCA proceedings they will need to prepare an application to the Court outlining their financial interest in the asset. If we again use the purchase of new personal assets, in this case a car with money from a Bounce Back Loan, mixed with legitimate funds. The third-party could include in their application an explanation of how they obtained their legitimate source of funds for the car and provide documentary evidence such as a bank statement in support. The application is prepared by the solicitor in the form of a Section 18A Statement and will be served on the Prosecution and the Court by a date set by the Judge.

What happens next?

Once the Section 18A statement has been served the Prosecution will decide one of the following:

1. That the third-party interest application is accepted. The asset will be removed from the proceedings and will no longer feature on the available assets list or the value of the asset on the available assets list will be reduced to take into consideration the value of the third party’s interest.
2. That the third-party application is accepted in part. The third party must then decide if they wish to settle or carry on pursuing their application at a contested hearing. A solicitor will be able to advise on what they believe are the appropriate next steps.
3. Or that the third-party interest is not accepted. The third party must then decide if they wish to carry on pursuing the application. If they wish to carry on, it is likely that they will need to attend court and give evidence. It will then be up to a Judge to decide if the third party has an interest in the asset.

Conclusion

Assessing a third-party’s interest in an asset is not straightforward and must be considered on a case-by-case basis. As mentioned not every application may have arisen from a direct financial payment and it can be difficult to calculate what a thirdparty’s interest should be.

At Shoosmiths we have a dedicated and experienced Business Crime and Compliance Team, who can advise on any potential third-party interest application by considering the merits of the case. We have vast experience in the preparation of Section 18A Statement’s and if the matter proceeds to Court we have the expertise to defend a contested application.