2 Bedford Row

When is silence not golden? 04 July 2012
Posted by: 2bedfordrowchambers

The Court of Appeal recently considered an application for leave to appeal against the imposition of a confiscation order in R v Koli [2012] EWCA Crim 555. The challenge was to the basis upon which a defendant is obliged to incriminate himself when providing information pursuant to s.18 and s.17 of the Proceeds of Crime Act 2002 and to the limits of the statutory protection against self-incrimination. The Crown alleged in confiscation that Mr Koli had obtained £1.4m (in addition to the matters charged in the indictment) through laundering the proceeds of frauds and these proceeds were available to him as "hidden assets". In defeating the Crown's application, the defendant had to consider the risk of prosecution for further offences in the event that he admitted that allegation but sought to explain that these assets were no longer available to him.

Mr Koli had been represented by solicitors and counsel at his original trial. He had pleaded guilty to a conspiracy to conceal, disguise, convert or transfer criminal property on the basis that he had been paid £4,000 to move a holdall containing £400,000 cash. This money was part of a wider money laundering conspiracy, although he pleaded on the basis of this single activity. Although accepted for sentencing, this basis was not accepted for confiscation purposes.

The confiscation proceedings then predictably inflated the value of his criminal conduct. The Crown asserted that the assumptions should apply, as a result of which it was asserted that Mr Koli had benefitted from his criminal conduct in the sum of £3,296,314. In particular, the Crown alleged that £1.4m had flowed through Mr Koli's bank accounts and these funds represented the proceeds of frauds perpetrated by third parties who had used Mr Koli's bank accounts to launder their criminal proceeds. Mr Koli had not accounted for these funds, therefore he had hidden assets available. The Crown sought confiscation in the total sum of £3,296,314, which represented both his benefit and his available assets.

His solicitors had to advise him about the consequences of admitting the Crown's application but seeking to explain the present whereabouts of the money. In preparing his response to the Crown's application, Mr Koli had been advised at the outset of the proceedings that although any information he provided in writing pursuant to s.17(1) could not be used in any subsequent criminal proceedings, his oral evidence was not so protected. S.17(6) of the Act states:

No acceptance under this section that the defendant has benefitted from conduct is admissible in evidence in proceedings for an offence.

S.17 refers only to the written response to the Crown's confiscation application so, as a matter of statutory construction, the protection would not extend to any oral evidence given at the hearing even if such evidence was in accordance with the written document. Support for this construction could be found in many other statutory provisions which make it clear that the protection against use in criminal proceedings also extends to the oral evidence given in the course of ancillary proceedings (e.g. s.98 of the Children Act 1989). The difference in Parliamentary drafting between these other examples and the wording of s.17(6) indicated that no such protection was intended in confiscation proceedings.

Mr Koli then proceeded to instruct his lawyers that there was a legitimate provenance to this £1.4m, albeit he had not paid tax on any of this sum. There was little, if any, evidence to support his explanation but he persisted in his instructions and the s.17 statement was drafted and served accordingly. He subsequently gave evidence at his confiscation hearing but was disbelieved. The judge found that he had £600,000 of identifiable assets before turning to the question of hidden assets. The judge observed that the burden was upon Mr Koli to prove there was a legitimate source of the funds, but that he had wholly failed to discharge that burden. Consequently, as there was no explanation of what had happened to these funds, the judge concluded that he had just short of £1m in hidden assets and made a confiscation order in the sum of £1.6m.

Mr Koli sought to appeal the confiscation order. He accepted in the appeal proceedings that the money going through his accounts had been the proceeds of frauds committed by third parties, but that he had returned the money to those responsible for the offences. He had not originally instructed his lawyer to this effect as he was concerned about being further prosecuted if he had told the truth. The Crown's assertion that £1.4m represented the proceeds of frauds carried out by third parties who had then used his accounts to launder the funds was, in fact, completely correct. However, he had not felt able to instruct his lawyers truthfully for three reasons:

• 1. He had been advised that the burden was upon him to prove that the funds were not available to him. He had to give evidence in order to discharge this burden;
• 2. He had been advised he could be cross-examined on his s.17 response to the confiscation application; and
• 3. He had been advised that his oral evidence was not protected in the same way that his written s.17 statement was, and therefore his oral evidence could be used in subsequent criminal proceedings against him.

Essentially, his complaint was that the proceedings had been a violation of Article 6(2) of the ECHR as the way in which the Crown had put its confiscation application obliged him to incriminate himself if he wanted to truthfully explain the provenance and current whereabouts of the money. This difficulty was obvious to the Crown and the judge. Furthermore, he had only allowed his bank accounts to be used to launder the proceeds and consequently did not have these proceeds available as "hidden assets" as he had returned the funds to those responsible for the frauds. Authority was relied upon to show that a violation of Article 6(2) can occur prior to the actual use in criminal proceedings of evidence obtained in breach of the privilege against self-incrimination.

Unfortunately, the Court of Appeal avoided grappling with the central issue on the appeal, which is so relevant to practitioners in confiscation proceedings: Is a defendant's oral evidence in confiscation proceedings protected from use in subsequent criminal proceedings? The Court held that the defendant had chosen to give untruthful evidence and had failed to argue at the original proceedings that he could not properly defend himself. It held that although there was conceivably a technical argument in relation to the extent of the protection provided by sections 17 and 18 of the 2002 Act, they did not arise on the facts of this case and the Court declined to grant permission to appeal.

Can admissions of criminality from the witness box in confiscation proceedings be used in subsequent criminal proceedings? The position remains uncertain.

JAMAS HODIVALA