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This Emerging Insights paper explores the potential benefits and risks of expanding the use of the civil recovery mechanisms in Part 5 of the Proceeds of Crime Act 2002 in the UK, via outsourcing of the litigation phase of proceedings to private law firms in return for a share of the proceeds recovered.
Civil recovery has been under-exploited in the UK in the fight against criminal finances since its inception 20 years ago, largely due to under-resourcing of enforcement agencies. The need to expand the use of these powers has become more urgent in light of the Russia–Ukraine war (given UK-based Russian assets) and the UK’s growing fraud problem. However, the realities of public sector financing in the UK mean that this growth is unlikely to come from public financing, reinvigorating a discussion around the potential role of private law firms.
This paper originally intended to explore the practicalities of a panel system model to harness these resources. However, during the course of the research credible arguments both in favour of and against the adoption of such a model emerged. This paper therefore seeks to summarise the issues to ensure they are considered in a balanced way, rather than taking a firm position.
The argument in favour largely hinges on the view that the scale of the problem will continue to outstrip the resources of the public sector and, on this basis, it is better for victims of these crimes to receive a lower share of the proceeds in compensation, rather than no compensation at all. Furthermore, on a practical level, given the fact that civil litigation expertise lies traditionally in the private rather than public sector, outsourcing may give access to high-quality litigation expertise without a cost to the taxpayer, while at the same time offering a more objective and experienced lens to the viability of the litigation.
A primary argument against the adoption of this model rests on the difficulties of reconciling the commercial drivers of the private sector with the public interest drivers of the public sector – an inherent tension in the model which risks undermining the legitimacy of the system. Furthermore, there is a potential conflict with other areas of policy relating to victim compensation, given that the proportion of eventual proceeds paid to private firms is likely to be substantial. Combined with potential conflicts of interest in client adoption and the issues around transfers of evidence and legal disclosures, it is clear that the adoption of a panel system model is not without risks.
In conclusion, there is a clear consensus that a way must be found to upscale the capacity in UK civil recovery in the face of growing recognition of the scale of criminal proceeds in the UK economy, and that the realities of public finances mean that a viable alternative must be found.
Whether the adoption of a panel system model of outsourcing is the right solution requires careful consideration of all the issues. The decision may ultimately rest on what is seen as the greater risk – the continuation of the status quo or the adoption of a model with some risks and limitations.
Senior Research Fellow
Centre for Financial Crime and Security Studies