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Criminal Restraint Proceedings by Andrew Marshall

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In January 2017, MONEYVAL, the Council of Europe body for anti-money laundering (AML) and counter-terrorist financing (CFT), published its fifth-round mutual evaluation report on the Isle of Man. The report analyses the Island’s level of compliance and effectiveness in relation to the latest international standards on AML/CFT, and makes recommendations for the future.

The report details a number of key findings. In particular, the investigators found that the Isle of Man’s legal framework on restraint and confiscation is comprehensive, but the authorities do not pursue the confiscation of proceeds of crime as a policy objective. The investigators believe that the legal principle of proportionality is over relied upon when applying for confiscation, which in some cases has led to a situation where not all possible assets have been confiscated. MONEYVAL concluded that the overall value of property restrained, confiscated and actually recovered remained extremely low and does not reflect the risks in the Isle of Man.

The report recommended that the Island should develop a strategy to pursue the effective restraint and confiscation of the proceeds of crime as a high-level criminal justice policy objective, especially with regard to offences committed abroad.

In response to the MONEYVAL report, the Isle of Man Government issued a progress report in May 2017. As part of the Island’s steps taken to comply with MONEYVAL’s recommendations, the Isle of Man set up its first dedicated asset recovery unit (“ARU”). HM Attorney General, with the support of the Chief Constable, established the ARU with the international co-operation and asset recovery team (“ICART”) of HM Attorney General’s Chambers. The ICART’s strategic aims in relation to asset recovery is to prioritise identification, restraint and recovery of assets resulting from serious and organised crime, with particular focus on economic crime, both in the Isle of Man and overseas. The objectives also include the intention to pursue, through all available statutory powers, the assets of individuals who profit from crime, wherever committed, when it is proper to do so.

In light of the MONEYVAL report and the Isle of Man Government’s strong desire to comply with MONEYVAL’s recommendations, it is not surprising that there has been a significant increase in the number of Restraint Orders in the Island. It could be argued that the increase in Restraint Orders is due to the Isle of Man Government trying to meet the MONEYVAL quota. This has had a huge impact upon a number of individuals with assets within the jurisdiction who have found their assets completely frozen and out of bounds, pending the determination of a criminal investigation.

While it is important for the Island to be recognised for its high level of standards in respect of AML/CFT, there is the risk that innocent investors in the Isle of Man are facing Restraint Orders over their assets which might impact upon their future decisions as to whether to invest in the Island.

The Proceeds of Crime Act 2008 (POCA 2008) provides the legislative framework for Restraint Orders. An Application for a Restraint Order is made by a Prosecutor, usually without notice to the Respondent, and the Application will be heard in a private Court hearing. This contradicts the principle of ‘open justice’, and it means that the Respondent and/or his advocate is not present at the hearing to argue against the Application for a Restraint Order. The Respondent is likely to be caught by surprise and suddenly find himself with limited means for living expenses and legal fees. Sometimes open justice has to be sacrificed in the interests of the state.

If an individual is subject to a Restraint Order, there are a number of grounds upon which it can be challenged, or at least varied.

POCA 2008 largely mirrors the English equivalent, namely the Proceeds of Crime Act 2002. However, in England and Wales the legislation is supplemented by the Criminal Procedure Rules 2015 (as amended), which assist with the practicalities of restraint proceedings.

Although the Island has been recognised by MONEYVAL for its comprehensive legal framework on restraint and confiscation, the Island is yet to introduce any rules to support POCA 2008, despite the legislation specifically providing for rules to be made. In the absence of any rules, the legislation enables a Deemster ‘to adopt such practice and procedure as he thinks fit’. In other words, the Deemsters are expected to legislate from the bench. This is a dangerous practice which can result in inconsistencies.

Due to the lack of Criminal Procedure Rules in the Island, a number of matters relating to Restraint Orders have been before the Court in which the Prosecution has refused to disclose any documentation which would enable a respondent to understand why all of his assets have been restrained, including the Application and supporting evidence. The courts have intervened and in some cases the Prosecution has been ordered to disclose the necessary documentation. This serves as an example of the issues we will encounter in restraint proceedings in the Island in the absence of any proper Criminal Procedure Rules.

If the Isle of Man Government is going to adopt an aggressive strategy which will involve restraint proceedings being the norm instead of the exception, there needs to be in place robust and comprehensive rules to enable restraint proceedings to be dealt with in a fair and appropriate manner.