Kennedy Talbot KC gave evidence.

Good afternoon. We are now sitting in public and the proceedings are being broadcast. We will now hear oral evidence from Kennedy Talbot KC, barrister at 33 Chancery Lane. For this panel, we have until 2.20 pm.

Sir Graham, I was hoping I might declare an interest at this stage. I am a member of USDAW—the Union of Shop, Distributive and Allied Workers—as is my wife, and the Committee has a witness from USDAW coming later.

Thank you very much; that is all recorded. Mr Talbot, may I ask you to introduce yourself?

Kennedy Talbot:

Yes. Good afternoon, ladies and gentlemen. I am a barrister in independent private practice. I am not part of any pressure group; I am not pushing for any particular position. I suppose the only interest that one could say I have and might declare is the fact that at the moment I am not able to be paid out of restrained funds, but if this Bill becomes law, there would be the power for that to happen—whether I would be better off as a result of that I do not know. Apart from that, my only interests are to help the Committee, if I can, to ensure that the Bill operates efficiently and fairly and promotes the orderly dispatch of this business.

Excellent. Thank you very much. We will start with shadow Minister Alex Norris.

Q43 Thank you, Mr Talbot, for your time and expertise today. Given your admirable record in the proceeds of crime field, I am hoping that you might set out for the Committee what you think of proceeds of crime arrangements at the moment, and then, with particular reference to what is in clause 32, which is an attempt to more tightly define the purpose of confiscation under those arrangements, reflect on your view on that as well.

Kennedy Talbot:

Yes. Speaking broadly for the moment and without commenting on the Bill—I do not think the Bill would be a vehicle to make all the changes that might be desirable—the key issue is plainly to investigate and to identify criminal proceeds and then to ensure that they are secure. That is the principal problem: by the time the courts get involved, making orders divesting people of assets, in most cases the assets have long gone. That is if the courts actually are engaged.

As you will probably recall from the report in March by the Public Accounts Committee, looking at the investigation of fraud, something like 41% of crime is fraud, yet it is largely not investigated. Of the 900,000 reports that are made to Action Fraud, only 1% result in any kind of judicial proceeding. That, from the broadest perspective, is where the problem lies—ensuring that fraud and other economic crimes are properly investigated and assets are frozen early. That is the best way to ensure that they are confiscated or forfeited.

Q What do you think about the clause 32 provision to try to tighten up the definition? Will that help to give clarity to the courts about what we are seeking with this legislation?

Kennedy Talbot:

I think it may be possible to make amendments to the Bill in two respects to deal with the issue that I have just mentioned. One involves restraint orders. I am sure that the Committee is familiar with the power for the court to make restraint orders preventing people who are suspected of crime, and then charged with crime, from dealing with their assets. At the moment, a statutory proposal in the Bill is that the risk of dissipation factor—such risk needs to be established for an order to be made under case law, not under statute —should be specified. The answer, in my view, is to scrap the risk of dissipation, so that it is not a requirement.

In many cases, what prevents prosecutors from applying for restraint orders is that they feel they cannot meet that test. Normally, that is because the case is brought to them some time after an investigation first started. The defendants are often aware that they are being investigated, and the case law more or less establishes that unless you can show that a defendant is on the point of selling his house or moving £100,000 to the UAE or whatever it may be, you cannot get a restraint order. Scrap the risk of dissipation.

Q You said two amendments. That was one.

Kennedy Talbot:

That was one. The other is about receivers. Receivers have always been a very useful tool, in particular with economic crime involving businesses, because they enable the court to appoint a court officer, a receiver—normally an insolvency practitioner—to manage, run and control businesses. That was from the time that a restraint order could be made, so from the very beginning of an investigation. As a result of case law that went to the Supreme Court, however—a 2013 case named for the Eastenders Group—management receivers, as they are called, have dried up. The reason for that is that the Supreme Court held that if the management receiver was wrongly appointed in the first place, the prosecutor had to meet the costs. In that case, it was more than £1 million, which had a chilling effect, so prosecutors simply have not applied for receivers at all.

The amendment would be to make receivers’ costs payable out of central funds. There may be a way to ameliorate the problems that one might have with the Treasury. I do not know whether you know about ARIS, the asset recovery incentivisation scheme, but with that up to half of the recoveries are hypothecated back to the investigating and prosecuting authorities, but they must use them within particular accounting periods. The answer, rather than sending it all back, might be to put a portion into a fund that could be used for those special expenses. That would not cost the Treasury a single penny.

Q I wanted to ask about the various forms of suspended account and suspended account schemes, which appear in schedule 5 to the Act to complement the confiscation provisions. Will you comment on them? Is that different from what you have currently? I am not an expert in this area.

Kennedy Talbot:

No, neither am I. I am just here for clause 32 and schedule 4, and that is in schedule 5. However, I can say that I acted for a bank in a case in the High Court last year, which was effectively part 5 of the Proceeds of Crime Act 2002 being used to recover all the funds that were in suspended accounts, so it is possible to do it without new law, but I have not looked at the provisions of schedule 5 in any detail to be able to help with that; I am sorry.

Q As a barrister, what do you think the kind of practical benefits of the confiscation measures will be?

Kennedy Talbot:

Do you mean as they stand?

In the Bill.

Kennedy Talbot:

I think that the good things about the Bill include the statutory process to reach settlements immediately after a defendant is convicted. It is abbreviated to EROC, early resolution of confiscation, where the court can direct the parties to meet and seek to reach a settlement. I think that is a good idea. In my view, it needs some tinkering with, because at the moment the convicted defendant has no incentive to co-operate, and most defendants want to put off for as long as possible the day when their assets are confiscated, as you might expect. Unless we can work in some incentives, I do not think that will work as well as it might.

Q Can you give me an idea of what those incentives might look like?

Kennedy Talbot:

It might be difficult for the court to be able to ameliorate the sentence that the defendant might suffer. It may be possible to reduce slightly his confiscation liability—to give a reduction, as one gives a reduction to defendants who plead guilty—but by that stage, when we come to confiscation, most defendants are serving prison sentences, and their prison conditions are the most important thing to them, so prison privileges and categorisation might be the way to incentivise without damaging the public interest and people getting reductions in their sentences unjustifiably.

Do any other Members have questions for this witness? No. In that case, thank you very much, Mr Talbot, for your time and for assisting the Committee in the way you have.

Kennedy Talbot:

It has been a pleasure and a privilege. Thank you for inviting me.