Since the 1970s, the UK has attempted to implement a number of initiatives to tackle the financial assets of criminals. Actions have been taken over time to address money laundering, cash forfeiture, and confiscation.
Confiscation powers were first introduced after the failure to recover funds in a 1978 drug trafficking case, known as Operation Julie. “In this case, some £750,000 of drug trafficking proceeds were traced into the hands of the offenders and restrained. These funds had to be released after the House of Lords held that existing powers to forfeit items used in the commission of an offence could not be used ‘to strip the drug traffickers of the total profits of their unlawful enterprises.’ The confiscation regime was introduced in England & Wales by the Drug Trafficking Offences Act 1986.” Most of this legislation was amended over time, but there were still significant challenges and inefficiencies in the existing asset recovery arrangements, which called for a review of the legislation.
The Assets Recovery Agency (ARA) was set up in February 2003, under the Proceeds of Crime Act 2002. Its aim was to extend the previously limited provisions for criminal confiscation. “The Agency had new, unique powers of civil recovery, to recover assets from the proceeds of crime, even when the owners had not been convicted of a criminal offence. The Agency could also use criminal confiscation to recover assets from convicted criminals and prepare taxation estimates for criminal income, gain or profits. Prior to the inception of the Agency, there was no single, individual organisation tasked with recovering criminal assets.”
The ARA intended to take the profit out of crime by removing property obtained by criminal activity, tackling both big and smaller criminals in order to reduce the money available for further criminal activity. Under the 2002 Act, the ARA was also responsible for promoting financial investigation through the training, accreditation and monitoring of financial investigators both inside and outside its walls.
A summary timeline of key events in the existence of the ARA is given below:
- "2000: Report on the proceeds of crime requested by the Home Office and produced by the Cabinet Office and the Performance and Innovation Unit
- "2002: The Proceeds of Crime Act 2002 contained the provisions for setting up the Agency
- "February, 2003: The Agency was set up.”
- "7 January 2007: the Home Secretary announced that the asset recovery functions of the Assets Recovery Agency would, subject to parliamentary approval, transfer to the Serious Organised Crime Agency, and the training functions would transfer to the new National Policing Improvement Agency, with effect from April 2008 at the earliest.”
The public impact
Although the agency did represent an improvement in the government’s capabilities in criminal asset recovery, it fell short of its targets, and was found to operate with a range of inefficiencies that were unsustainable. Therefore, it was eventually dissolved and its responsibilities transferred to a new agency.
A report published by the National Audit Office (NAO) in 2007 found that half of all cases the ARA took on in 2003-04 were still ongoing by August 2006; and it had recovered assets in just 52 cases. Similarly, the report concluded that the ARA had failed to achieve its targets for the recovery of criminal assets and for becoming self-financing by 2005-06. “To date the Agency has spent £65 million and recovered assets worth £23 million. Although the Agency now expects to become self-financing by 2009-10, on current performance it is in danger of missing that target too.”
There was no retention or monitoring of staff. “The Agency had trained some 4,500 Financial Investigators at almost £700 per place, but by summer 2006 only 1,400 of those Financial Investigators were active in the role.” Similarly, the NAO found that there was uncertainty about the number and accredited status of the financial investigators it had trained. “Of those recorded as trained Financial Investigators, 90 percent had not completed their Continuous Professional Development (CPD) which they need to do to retain their accreditation.”
The ARA was also unable to instigate cases, and was therefore reliant on referrals from partner organisations. However, other bodies often failed to make these referrals. “Less than 20 percent of the approximately 700 bodies which can refer cases for investigation to the Agency have actually done so.”
Public Confidence Good
There is limited evidence of the opinion of the public regarding the ARA. However, there was a great deal of favourable publicity in the broadcast media and the press surrounding the Agency's launch.
A poll after the ARA had been in operation for two to three years indicated that citizens did support and legitimise its functions. The survey was conducted to assess whether the public believed its powers were appropriate. "A survey in 2005-06 showed that, as in 2004-05, 85 percent of respondents in England and Wales felt that the Agency should have its powers."
Stakeholder Engagement Fair
Both the Proceeds of Crime Act 2002 and the ARA were instigated after internal consultations from several implementation teams within the Home Office, but later analysis indicated that the teams were not adequately prepared for the challenge. Other civil servants were also engaged, but there is no clear evidence of the extent of their involvement in the design of the agency.
For the establishment of the Proceeds of Crime Act, in October 1998 the prime minister tasked the Performance and Innovation Unit (PIU) of the Cabinet Office with examining asset recovery arrangements with a view to improving the efficiency of the recovery process and increasing the amount of illegally obtained assets recovered. A report was published in June 2000 with proposals that included "the creation of a new agency with lead responsibility for asset recovery and containing a 'centre of excellence' for financial investigation training’." This text was incorporated in the Explanatory Notes to the 2002 Act.
The 2002 Act required the ARA's director "and other persons with investigation or prosecution functions" to cooperate in the exercise of their functions under the Act. This referred to police officers, officers of HM Customs & Excise, and members of the Crown Prosecution Service and the National Criminal Intelligence Service, and associated civil servants. On the other hand, there is no evidence that these stakeholders were involved in the initial establishment of the organisation.
Political Commitment Good
The UK government has implemented several initiatives over the years to tackle criminal activity in the country through different approaches, and has demonstrated a continued commitment towards these goals. Despite the fact that the ARA did not live up to its targets in the first years of operations, the government's commitment and will towards the issue has been recognised internationally.
An OECD report published in 2011 praised the UK, among other countries, for its policies, tools and teams dedicated to asset recovery. “The report found that experiences in Switzerland, the United Kingdom, and the United States had shown that political will – the credible intent of political actors, civil servants, and state actors, most often demonstrated through a well-resourced, high-level country policy or strategy – could generate progress in terms of legislative, institutional, or operational changes, as well as in case results. Those same countries have further developed and improved their policy initiatives over the past two and-a-half years.”
In public speeches the government has maintained a commitment to these objectives over time: “The Government remains committed to tackling economic crime and corruption in all its forms. A cross-government anti-corruption strategy is being developed which will set out our long-term vision for tackling corruption. This will sit alongside the Government’s existing Serious and Organised Crime Strategy which also looks to address economic crime and asset recovery,” said Attorney General Jeremy Wright in September, 2016.
Clear Objectives Good
The ARA had a number of clear and measurable targets for the disruption of criminal activity, the recovery of criminal assets, the training of financial investigators, and gaining public confidence in how it used its powers. However, a number of targets were subsequently revised over the years.
The ARA set separate targets for every financial year. The targets set in 2003-2004 (also anticipating 2004-05 and 2005-06) were:
- “In 2003-04, to disrupt at least 35 criminal enterprises at all levels of criminality through the institution of taxation or civil recovery proceedings led by the ARA, or confiscation action by law enforcement and prosecuting authorities
- “To make a substantial contribution towards the achievement of the 2004-05 systematic target of doubling to £60 million asset recovery receipts. Assist partner law enforcement and prosecuting agencies to realise confiscation receipts to the value of at least £5 million in 2003-04. In 2004-05 realise asset recovery receipts in ARA cases to the value of at least £10 million
- “To become effectively self-financing no later than 2005-06, and to increase the ratio of receipts to operating cost by at least five percent a year thereafter
- “To maintain public confidence in the professionalism and integrity of the work of the Agency
- “To maintain the confidence of stakeholder organisations, the judiciary, and the legal profession in the professionalism and integrity of the Agency
- “To deliver high quality training to Financial Investigators within and outside the law enforcement community, including the training of 400 investigators during 2003-04, accrediting them where appropriate."
The targets were then reviewed in 2005-06 with modifications such as making them more specific by adding sub-targets for certain components (e.g. disruption of criminality), while others were dropped or merged together.
A consultation and resulting report commanded by the cabinet office in the year prior to the creation of the ARA established the basis for its creation, but did not include clear evidence to support the structure of its operations.
In 1998, the PIU was tasked with examining the asset recovery arrangements to improve the efficiency of the recovery process and increase the amount of illegally obtained assets recovered. The PIU published its report in 2000. “The aim of that report was to look at three things, first of all, were the powers that currently existed to take money off criminals sufficient; secondly, were the powers that were in existence being used properly; and thirdly, were there other things that were being done by other parts of the world that might be more efficient."
It provided the basis for the creation of a dedicated agency, as well as other recommendations to guide the design of its operations. “The PIU report was published by the government in June 2000 with a number of legislative and other proposals including:
- “The creation of a new agency with lead responsibility for asset recovery and containing a 'centre of excellence' for financial investigation training;
- “The consolidation of existing laws on confiscation and money laundering into a single piece of legislation;
- “The introduction of new powers to recover criminal assets through civil proceedings, without the need for a criminal conviction;
- “Gateways for the exchange of information between the new agency and the other authorities;
- “Enabling the new agency to carry out tax functions in relation to criminal gains; and
- “Ensuring that all the agencies involved in asset recovery have sufficient trained staff to enable the system to function efficiently.”
The ARA was established without conducting a thorough feasibility study to set reasonable targets, and some of the assumptions made were inaccurate. "No pilot studies were undertaken, and no one had any idea what would happen when the new agency's legal powers began to be tested in the courts." There were also weaknesses in the management of its human capital, which resulted in poor use of resources and continuity of work.
The Home Office set up an implementation team to assist in the establishment of the ARA, but it was not prepared for the task. “Insufficient preparatory work was carried out, however, with no feasibility study or business case setting out what the Home Office expected to be achieved, resulting in delivery expectations which proved unrealistic. The Agency assumed, for example, that the cases it pursued would take the same length of time to progress as civil cases. In practice, however, cases have taken twice as long on average, partly due to the additional requirement to set legal precedents.”
The method for acquiring cases was also unsustainable, and was not properly assessed beforehand. An NAO report found that the agency was unable to instigate cases and was therefore reliant on referrals from partner organisations. “Only 129 of a possible 696 referral partners had submitted cases to the Agency by the end of August 2006.”
The recovery procedures were also unviable. “The agency was a UK-wide operation set up to make a profit, by using civil recovery procedures to seize unearned assets. In the end this proved impractical because those targeted could challenge the ARA through the civil courts, where cases invariably dragged on for years. So while substantial assets were frozen pending legal rulings, the ARA could not seize them quickly enough to cover its own costs.”
The 2002 Act set out the legal basis of the organisation and the guidelines for its management responsibilities. The ARA was led by a director, Jane Earl, who was appointed by the home secretary. “In practice, functions of the Secretary of State relating to the Agency will be carried out by the Home Secretary, in consultation with the Secretary of State for Northern Ireland and the Scottish Ministers (for the Director's revenue functions in Scotland) as necessary. The section enables the Director to employ staff to assist him in carrying out his functions, and to enter into contractual arrangements for this purpose. It also enables the Director to delegate the exercise of his functions to his staff and to others working on a contractual basis for him.”
There was no clear process or organisation in the management of cases, so teams kept different records that were not compatible. “The Agency purchased a case management system at its outset but it is not widely used by Financial Investigators and does not provide the basic information to track cases. For example, it is unable to produce management information on the number of cases at different stages of the process, nor does it record the current position on the recovery of assets. As a consequence, each area and team has devised its own method of tracking cases and we came across at least five different databases. This meant, for example, that the Agency was unable to tell [the NAO] how many cases had been referred to it.”
Although there was a need to improve the system over time, the ARA was also slow in reacting to feedback. “The Agency was dealing with novel legislation introduced under the Proceeds of Crime Act 2002, and it was always intended that there would be feedback to allow the legislation to be amended in the light of experience to enable efficient recovery of assets. Although there have been a few examples of this approach working effectively, it can still take two years or more for the Agency to review specific issues, and then for the Home Office and the Ministry of Justice to propose amendments to the legislation. So the changes indicated by the feedback are not getting implemented quickly enough.”
The overall management of staff was widely criticised: “At least 30 percent of Financial Investigators retired or moved on from financial investigation shortly after completing their training. Although the Agency requires trained Financial Investigators to complete formal CPD activities, it is not effectively monitoring their performance as required under the Proceeds of Crime Act 2002.”
This failure of monitoring was exacerbated by high turnover and therefore a lack of continuity, which is critical for the type of work. “Cases take over four years to complete on average. Continuity in the workforce is therefore key but the Agency had experienced staff turnover of almost 25 percent in twelve months, rising to 50 percent within its legal team... The Agency had relied heavily on temporary staff, using a high proportion of secondees from other organisations including lawyers who were part of the Government Legal Service, which encouraged lawyers to move post every three years.”
Reports indicate that the Agency allocated insufficient resources and attention to monitoring and tracking of KPIs and staff performance, resulting in gaps and inefficiencies. Record-keeping and processing of information relating to cases were not well organised and therefore data was not used effectively. “The data the Agency collects and uses on cases is incomplete and held across several disparate databases. As a result, the Agency could not conclusively say how many cases had been referred to it. Case management is informal, with no targets for the completion of tasks; and there is no time recording in place to assess the staff resources spent on each case.”
According to a report by parliament, the ARA reviewed cases under investigation on a monthly basis, but followed no formal or consistent case management processes. Similarly, staff were not held accountable for the progress of their cases. “The Agency decided against purchasing a staff time recording system, which they estimated would have cost some £300,000. As a result the Agency had no records of the time staff spent on individual cases, making it difficult for the Agency to estimate the cost of individual cases, to make informed decisions on the prioritisation of cases and to make the best use of staff resources, or to monitor the productivity of staff.”
The NAO indicated in its report that “staff do not record their time and therefore the Agency cannot measure the resources deployed on each case. There is no effective case management and no consistent use of targets and deadlines to incentivise staff to progress cases.”
Although there was a strong commitment from the UK government to improve their asset recovery capabilities, the coordination of efforts at the operational level was weak.
There was little attention to internal operations and management of staff, who seem to have been dissatisfied with their career opportunities. “In a staff survey conducted in 2006, half of respondents were dissatisfied with their career opportunities at the Agency and between September 2005 and September 2006 a quarter of the staff who had worked for the Agency had left. In some specialist disciplines this figure was higher: in the same year, almost 50 percent of legal staff and 40 per cent of training and development staff had left.”
There also appeared to be poor alignment with associated agencies meant to collaborate with the agency, and as of 2006 it had received limited support. “Less than 20 percent of the approximately 700 bodies which can refer cases for investigation to the Agency have actually done so. The Agency and the Serious Organised Crime Agency should promote the powers provided by the Proceeds of Crime Act 2002 with referral parties, and put in place relationship management arrangements to facilitate referrals and monitoring of performance.”