The courts have long been troubled by the intersection between family law and criminal law when matrimonial assets become part of criminal proceedings and are regarded as proceeds of crime. But what takes priority? The rights of the spouse to a share of the assets on divorce, or the Proceeds of Crime Act 2002 (POCA)? In this article, we look at how financial settlements in divorce have the potential to be affected by proceeds of crime.
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Generally speaking, low-level crime, such as shoplifting, theft or bigamy, is unlikely to have much of a bearing on a divorce settlement. From a conduct perspective, it will be taken into account under s.25 of the Matrimonial Causes Act 1973 (MCA) alongside other factors such as earning capacity, financial needs and obligations, the standard of living during the marriage, and the contributions each of you has made, amongst other things. Any conduct must be “exceptional”, so it is extremely unlikely that low level criminal activity, whether or not your ex has been found guilty, will be of much consequence.
In relation to more serious crimes, the Crown Prosecution Service (CPS) can apply for a confiscation order after a conviction has taken place. Although it should be noted that there are other means of recovering the proceeds of crime which do not require a conviction, namely through the civil court, cash seizure, via and taxation powers. The aim of asset recovery is to deny the criminal the use of their property, recover the proceeds of crime, and ultimately disrupt and deter criminality.
Confiscation proceedings are not automatic, and the CPS will have to apply for such proceedings to be started at the end of the criminal case. In quantifying the criminal gain, the court must decide if that individual has benefitted from any “relevant” criminal conduct.
Is a spouse considered to derive a criminal benefit from their ex’s criminal behaviour?
The court construes criminal benefit widely and considers things such as stolen property or the profits from fraud or drug dealing. But it also covers more obscure gains such as the rise in the value of a property following a fraudulent mortgage application or the competitive advantage obtained by a business which has breached health and safety legislation to make profits. Under the law, a spouse can also benefit from such conduct, and as a result, joint assets are usually included in the value of available assets for confiscation.
There are two main types of criminal benefit:
- Particular criminal conduct benefit: this is the amount of benefit arising from the offence which the convicted person was found guilty.
- General criminal conduct benefit: this is typically used in “criminal lifestyle” cases where the person is assumed to have received a criminal benefit from multiple sources for at least a six year period unless they can demonstrate otherwise.
What happens if the assets of the marriage are the subject of proceeds of crime?
Marriages of those involved in serious crime, such as selling drugs, money laundering, financial crime, or any other criminal activity, are not excluded from the proceeds of crime. So, the question of who should be able to benefit from assets acquired from criminal activity during the course of the marriage, is a tricky one. Should an innocent spouse be protected by the MCA, or does POCA take precedence and the state confiscate the assets?
If a spouse is completely unaware of the criminal activity until their ex is arrested and charged, then they could be considered a “victim”, but it must also be balanced with those who have been subjected to the criminal behaviour first hand. The court then needs to answer the question, whether the proceeds are better off in the hands of those affected directly by the crimes, rather than being in the hands of the family of the person who committed them.
How does the court decide?
For any criminal activity that occurred after March 2003, POCA will apply. The court will look at how much the perpetrator’s spouse benefitted from their criminal activity and what is available in the “pot” for confiscation.
The pot will include any free property owned by the perpetrator as well as the value of any “tainted” gifts, such as jewellery or transfers of property to their spouse. It is important to note that the court is not limited to assets acquired from the offending behaviour, and can include all assets held by the perpetrator.
Can a spouse intervene in confiscation proceedings?
If a confiscation order is made by the court, then it must appoint a receiver. The receiver is then duty bound to exercise their powers in a way which allows any person (other than the perpetrator), or a person who has received a tainted gift, to recover their interest in the property.
After a receiver has been appointed, third party property interests, such as those of an innocent spouse, are at risk. The court decides which assets may be confiscated to enforce the order, so it is essential for third parties to establish their interest in the property subject to the confiscation order. At this stage, a spouse may make an application under the MCA to obtain an interest under a property adjustment order.
How do divorce proceedings interact with criminal law proceedings at the same time?
This is a particularly complex area of law, and it is the role of the court to balance POCA and the MCA. It means the case could be heard with the Crown as intervener, negotiating claims in a fair and practical way. If the spouse can demonstrate a need for the property subject to the confiscation proceedings, it is more likely they will be able to successfully claim those assets for themselves and any children.
Divorce and confiscation proceedings are extremely complicated. If you are in this situation, it is sensible to obtain specialist legal advice to help you navigate such a challenging process and assert your right to matrimonial assets, which may be the subject of a confiscation order.
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