Wake-up call: Could you be clobbered for ‘proceeds of crime’?

Breach your alcohol licence or planning order, and you may find yourself treated as a criminal mastermind, as James Daglish explains

The problem

The Proceeds of Crime Act 2002 created a way for the state to recover the financial rewards of criminality. To most people, that will conjure up images of seizing the ill-gotten gains and assets of career criminals, gangsters and drug lords. While the legislation certainly covers all those possibilities – indeed, that is arguably its main aim – it also has a more run-of-the-mill application that may come as a surprise to the uninitiated.

The law

One of those applications is in connection with what might be called regulatory offences, such as breaches of planning control, breaches of alcohol and entertainment licensing, and noise abatement. If prosecution is an enforcement option, then the Proceeds of Crime Act can apply.

**Expert advice **

The use of the Proceeds of Crime Act in planning control has grown. In alcohol and entertainment licensing and noise abatement, our firm has seen an increasing readiness by local authorities to prosecute offenders – in the past they would have been more likely to look at other forms of enforcement.

Local authorities are interested in using the Proceeds of Crime Act because they have a direct financial interest in any money recovered: under the Home Office’s asset recovery incentivisation scheme, the prosecuting council can take up to 37.5% of the total amount recovered. It should be stressed, though, that a council must not take the decision to prosecute lightly, and that decision must be made objectively. However, once that threshold has been crossed, cash-strapped councils have a clear financial incentive for tacking a Proceeds of Crime Act application on to any regulatory enforcement action.

**Beware **

Proceeds from a relatively simple regulatory breach can be large as the Proceeds of Crime Act bases the calculation on turnover, not profit, and can stretch back as far as six years. In one key case, a landowner was ordered to pay £760,000 for failing to procure planning permission for using the grounds of Bishop’s Stortford FC as a park and ride business. And Southwark Council secured an order for £1.1m against a landlord in the borough who had turned three flats into studios and a bedsit.

One of the quirks of the Proceeds of Crime Act is that if a conviction for a regulatory breach is secured, the prosecutor can ask for the matter to be referred for a Proceeds of Crime Act order hearing without any warning, and the court cannot decline. Another quirk is its relatively robotic operation: if the relevant tests have been met for the order, then unless the court comes to the conclusion that making the order would be fundamentally disproportionate, then it must allow it.

In one recent case we dealt with, but before we were involved, the client discussed an alleged breach with the authorities in a relatively open way, an approach that would often be recommended in licensing. What the client had not fully appreciated was the significance of an interview being conducted under caution, which meant that the authorities could use the verbal evidence against our client. Shortly afterwards a prosecution was indeed launched, which we (having by then been instructed) were able to head off. Openness in that case was not the wisest approach, and behind the relatively small fine that would likely have followed from a successful prosecution may well have lain a much bigger cost in the form of a Proceeds of Crime Act order.

The lesson here is that if a regulatory breach occurs, and the enforcing council is talking about prosecution, take it very seriously indeed, and seek legal advice early on.

Contact James Daglish is a partner and head of the licensing team at Goodman Derrick www.gdlaw.co.uk