Jaffery v R.

Tanveer Jaffery appeals with leave of the single judge against a confiscation order made at the Crown Court at Isleworth on 16 April 2012 in the sum of £4,830,000, with seven years imprisonment in default to run consecutively to a sentence of 10 years imprisonment imposed on the appellant on 22 February 2011 following upon his conviction, on 21 February 2011, of transferring criminal property pursuant to Section 327(1) of the Proceeds of Crime Act 2002.

The appellant was a director of a money service business (MSB) incorporated in July 2004 and registered with HM Revenue and Customs for the purposes of the money laundering regulations. The appellant was named as the “responsible officer”. The company’s registered office was the appellant’s home address. In December 2005 the company changed its name to R2PK.com Ltd (“R2PK”). His co-accused, Mr Ahmad, was appointed a director in March 2006. Mr Ahmad also conducted a registered MSB from a business known as Stoke Travel Centre which operated as a branch of R2PK. The appellant was the principal of both organisations.

In the early stages of its operation, R2PK conducted its business in a manner broadly compliant with the money laundering regulations. However, from May 2007 until 30 September 2008, R2PK handled large amounts of cash and transmitted it overseas without keeping proper records of the remitters and recipients. These transactions were funded by cash deposited into either the R2PK bank account, or direct into the accounts of other UK based MSBs such as “Wall Street Forex” and “Zarco Exchange Ltd”. The amount of criminal property transferred by the appellant and Mr Ahmad during the period of the indictment was in the region of £48.3 million out of a total turnover of some £52.2 million.

On the 9 October 2007 HMRC officers arrested the appellant after £151,000 odd was found in his Mercedes motor vehicle. Earlier the same day he had made three transfers totalling £307,000 odd to an exchange business in Dubai. The sum seized from his car was forfeited in an uncontested hearing.

In August 2008 HMRC commenced an investigation into the affairs of the appellant in respect of suspected money laundering and, on the 29 September 2008, he was arrested at his home address where officers found credit slips for sums totalling £215,000.

The prosecution submitted a statement of information in accordance with Section 16(3) of the Proceeds of Crime Act 2002 dated 15 July 2011. In that document the extent of benefit from criminal conduct was identified as £48,379,532. That, effectively, comprised the total value of money transferred abroad during the indictment period, including the activities of Stoke Travel Centre.

The confiscation hearing, which commenced on the 2 April 2012, resulted in a ruling on the 16 April 2012, following an adjournment during which the appellant made certain written submissions to which we will return. The appellant contended that the “benefit” was £17.9 million, on the basis that the appellant did not personally control any more than that sum.

The learned Judge concluded that the “benefit” was £48.3 million. He concluded that it was the appellant who had the power of disposition and the control of all of those funds. He said in paragraph 19:

“It was he who took responsibility for collecting cash, or arranging for others to collect cash. He organised the payment in to various organisations, be they banks or other money service businesses. Having done so and creating choses in action he had the ability to direct the money to the intended recipient be they in Dubai or Pakistan.”

The conclusion that the “benefit” amounted to £48.3 million is not the subject of appeal.

The Judge had to determine the recoverable amount as required by s.7 of the 2002 Act which provides:

“7(1) The recoverable amount for the purposes of Section 6 is an amount equal to the defendant’s benefit from the conduct concerned.

(2)

But if the defendant shows that the available amount is less than that benefit the recoverable amount is –

a.

the available amount or –

b.

a nominal amount if the available amount is nil …”

By the date of the confiscation hearings certain matters had been agreed between prosecution and defence. There was realisable property in the equity of 10 Headingly Grove (£24, 650), in 77 Trent Bridge Close (£12, 650), certain life policies (£4988) and a Silk Bank account whose balance was £200. The total ascertainable realisable property was agreed as £42,398.

It was also common ground that, as the appellant was guilty of laundering money for the benefit of others, he did not retain the whole benefit of his criminality so, to that extent at least, the appellant would be able to show that the available amount would be less than the benefit. The issue for the Judge was the extent of the shortfall which the appellant could show.

The appellant chose not to give evidence at the confiscation hearing. He relied on his Section 17 statement as well as report of a forensic accountant, Peter Luscombe, dated November 2010.

In addition, he had given evidence during the trial. The Judge also had the benefit of the other evidence in the trial of the appellant and his co-defendant. Finally, in so far as is relevant, there were two “ ledgers” which purported to show, in some detail, the financial transactions of the appellant’s business. The first was the “new ledger,” which had been seized by HMRC when the appellant was arrested. This covered the second part of the indictment period, some 7 months. The other was the “old ledger” which was disclosed by the appellant and which purported to show the detailed transactions of the business during the earlier part of the indictment period.

In the Section 16 statement, dealing with benefit, the prosecution addressed the question of the percentage commission charged by the defendant as reward for the services he had undertaken. It recounted that he had stated in his evidence during the trial that he charged between 1.5% – 3% commission depending on his relationship with customers. This was reflected in the GLS accounting system documents served as part of the trial evidence. The s.16 statement went on to state that, on the basis of an average commission rate of 2.25%, the commission on the benefit of £48.3 million would be £1,088,535.42. The section 16 statement also summarised the known realisable assets already referred to.

At Part 15 of the s 16 statement, the prosecution set out its case on “hidden assets”. It stated that it believed that the defendant had access to other funds which it had not been possible for the Crown to value. It then set out its reasons for that belief.

First, he had declared that he held a bank account with the Silk Bank. Material obtained by the prosecution showed a transfer on the 14 November 2007 of $99,200 to that bank account by a company of which the appellant had been a director and, on that basis, it believed he had hidden assets to at least that sum. Second, the defendant had used his own company to transfer the proceeds of crime beyond the jurisdiction. Third, between July 2007 and August 2008, the defendant made frequent visits to Pakistan, Saudi Arabia, Syria, the UAE and to Holland and Belgium. Fourth, in his evidence he had admitted collecting a total of 1,080,000 United Arab Emirates Dirhams from the Economic Exchange in Dubai in August 2008.

In his Section 17 statement, dealing with assets, the appellant disputed that he was in possession of any hidden assets. He said the $99,200 was sent to the Silk Bank for the benefit of a client and that the monies had been paid out to the client’s beneficiary, a Mr Hanif, to his account at the Standard Chartered Bank in Lahore.

In relation to the Economic Exchange in Dubai, he maintained his position at trial that these monies were clients’ funds. He referred to certain documents said to explain those sums and said that, save for one transaction, those documents showed that had been paid direct by that bank to specific clients.

In the further s.16 statement in response, the Crown, whilst accepting that the documentation supported the suggestion that sums had been transferred from the Silk Bank to Mr Hanif, contended that there was no evidence why such a payment was made or that it was for good value. In relation to the Economic Exchange transaction the Crown pointed out that the “new ledger,” on which the appellant relied, was discredited during the trial.

In the report of Mr Luscombe, at paragraph 9.6, he summarised what the appellant had told him about how R2PK made its income. One way was by charging commission. The appellant had told Mr Luscombe that different rates were agreed between different MSB customers. Initially the rates were quite low, at around ½%. Later, R2PK was asked to fix exchange rates immediately on receipt of funds, thus taking on an exchange rate risk, prior to being able to deposit the funds and effect a transfer. In order to cover that risk, R2PK agreed higher commission of around 2½ - 3%.

Analysing the “new ledger,” Mr Luscombe identified that, during the period 1 March – 22 September 2008 income from remittance charges totalled £117,747, during a period when funds received were £9,409,218, thereby constituting a percentage charge of 1.25%. However, after making allowances for various costs and charges, that gross figure resulted in a net profit of £36,278 - 0.39% of funds received .

In the appellant’s written submission at the confiscation hearing, it was pointed out that, applying that net profit ratio to the total amount going through the appellant’s companies during the indictment period, the net profit would be £202,051.

Relying upon the account given by the appellant to Mr Luscombe that, during the earlier part of the indictment period, the rates of commission were between ½% and ¾%, and applying ½ % to the figures contained in the “old ledger,” gross commission before expenses would be £223,142. Assuming a similar rate of expenditure that “gross commission” would result in a net profit of about £43,000 for the first 10 months of the indictment period. That would give a total net profit of £79,278 over the whole indictment period. The appellant argued that such a figure was accounted for by normal living expenditure.

On that basis the appellant’s case was that there were no hidden assets. Accordingly he had shown that the available amount was less than the benefit and was no more than the £42,000 odd, the value of the known realisable assets.

In its skeleton argument at the confiscation hearing, the Crown focussed on hidden assets and stated, amongst other things, as follows:

“1.

It is believed that TJ has access to other funds which it has not been possible for the Crown to value. It is the prosecution’s submissions that TJ has hidden some of his assets.

2.

TJ was entrusted by those involved in organised crime to transfer £48,379,532 out of the jurisdiction.

3.

TJ would have been proportionately remunerated to carry out this high risk money laundering.

4.

The tangible assets attributed to TJ do not even amount to 0.2% of the cash money TJ transferred …”

Reference was then made to evidence in relation to: the Silk Bank $99,200; frequent visits to Pakistan, Saudi Arabia, Syria and the UAE; and his collecting in cash large sums transferred from Economic Exchange in Dubai.

The skeleton argument said:

“8.

The disclosed material indicates that TJ, on presentation of his UK passport, collected the following cash amounts in Dubai …”

[The skeleton set out 10 transactions between 8.March.08 and 7.October.08 amounting to UAE Dirham equivalent to £460,020.52]

It concluded:

“9.

In the circumstances it is submitted that it would be just and proportionate, within the confines of the statute itself, to assess the value of the available assets in the case of TJ as including hidden assets (R v McIntosh [2012] 1 Cr App R(S) 60).”

The first day of the confiscation hearing was 2 April. It was adjourned until 3 April when it was anticipated the Judge would give his ruling. However, there was insufficient time for him to do so and it was adjourned further to 16 April. On 3 April, the Judge brought to the attention of the parties the case of Mehta [2009] EWCA Crim 1601 and invited further submissions on whether he was entitled to arrive at a “not less than” figure when considering the available amount. The defendant made a written submission on the impact of Mehta as well as on other issues.

In Mehta the appellant had been convicted of cheating the revenue. A confiscation order had been made of just over £1 million on the basis that the Judge found that the appellant had not less than £1 million hidden away somewhere. The appeal was on the ground that there was no proper basis for that finding. In that case £7.28 million had been obtained and £5 million was unaccounted for. The Crown’s case was the appellant must have had a substantial part of it and must have assets hidden away. The Judge’s conclusion was that the appellant had not demonstrated that his realisable assets were fully disclosed and the Judge concluded that he had not less than £1 million in hidden assets.

One of the grounds for criticising the Judge in that case was said to be that the Judge had given insufficient reasons for his conclusions that there were hidden assets and that the defendant had not shown that the sums available were not less than £1 million. It was argued that the figure of £1million had been plucked out of the air.

The Court of Appeal said that it was obvious that there was no point in committing such a fraud unless the money gained could be retained. It was inherently improbable that the person controlling the fraud would undertake it without ensuring that he made a substantial amount of money out of it and arranged matters so that he could keep it and that it should be put somewhere where it could not be traced by the authorities. Such a conclusion might be displaced by evidence from whatever source. The Judge had expressed himself in the following terms:

“I am perfectly satisfied that this fraud was instigated by Mr Mehta and that he has received substantial sums of money which are now hidden. I am being as fair and robust as I have to be to find that he has at least £1 million benefit from this fraud which is now hidden.”

The Court of Appeal acknowledged that the Judge had said nothing about how he had derived the figure of £1million. There was no reasoning why it should be that sum, rather than £5 million or £200,000 and it also acknowledged that the sum itself was not a precise figure but was expressed by the Judge to be a “not less than” figure. The Court of Appeal concluded that the Judge had heard the evidence, not only of the appellant but his co-accused, and that what mattered was that the conclusion was one which the Judge, who had heard the evidence, was plainly entitled to arrive at. The question for the Court of Appeal was not whether the Judge might have undershot the correct figure but whether he had overshot it. The question was, whether the Judge was entitled to conclude that there was not less than £1 million hidden away somewhere. The Court of Appeal was satisfied that the Judge’s conclusion, that at least £1 million must remain in the hands of Mr. Mehta, was one to which he was fully entitled to come and that whether or not there was more than £1 million, the Judge’s conclusion that there was no less than that in Mr Mehta’s hands was one which, the Court of Appeal was satisfied, could not be criticised. It was not unfair nor was there an absence of an evidential basis for it.

The appellant, in his submissions on Mehta, accepted as a matter of law that the Court is entitled to find that a defendant has assets which are hidden away and that the value of those assets is “not less than” a particular amount. He sought to distinguish his case from Mehta on the basis that the appellant was not a principal in the crimes which created the property, but was a principal in the organisation responsible for laundering the proceeds. The inference, therefore, was, not that he took a share in the profits of the crime, but that he took a commission for handling the money. He relied on the records, showing the levels of commission and net profit, and on the documentary evidence showing that the withdrawals from the Economic Exchange in Dubai were paid to those for whom the appellant was, on the proven case, laundering money, and that the $99,200, transferred to the appellant’s bank in Pakistan, had been paid on to Mr Hanif.

Having made his ruling in respect of benefit, the Judge turned to the recoverable amount. He said that the Crown and the defence had overlooked the obvious. (This, in our judgment, may have been overly critical of the Crown in the light of the terms of its skeleton argument and its oral submissions). He said that the sums of money transferred by the appellant were enormous, such that it was an inevitable conclusion that they were the proceeds of wholesale crime and, in his judgment, it was extremely likely that the majority was proceeds of drug trafficking. He then outlined the difficulty now presented to drug traffickers in laundering the proceeds of their crimes in light of the regulations designed to prevent it. In paragraph 34 he said:

“It follows that if money is truly laundered it is a service that is worth a great deal to the criminal and one for which I have no doubt he is prepared to pay a substantial sums. This is … an obvious conclusion …”

He pointed out that, in this case, there were examples of very large sums of money being seized and forfeited, some from the appellant himself. In those circumstances it meant either, that there was such confidence in the appellant on the part of the criminals that they accepted the losses on those forfeits, or that the appellant’s profits were so large that he could comfortably write them off. In addition, he pointed out that the appellant’s money laundering business was a sophisticated organisation which ran for a sustained period of time and must have involved a great deal of planning, at the heart of which was the appellant. It involved the risk not only of forfeiture of cash seized but also of prosecution. He pointed out that it followed that those involved do not take such risks without substantial reward. He referred to the Crown’s alluding to commercial rates for sending money abroad, normally between 0.5% and 3% . In fact this evidence had come from the appellant himself describing the commercial rates he charged in his legitimate business.

The Judge pointed out that the jury, by its verdict, had rejected the appellant’s account and accepted the Crown’s case that he had fabricated a ledger in order to advance his defence. Furthermore, the appellant had not given evidence in the confiscation proceedings whereas the burden was on him to show that the available amount was less than the benefit figure.

He reminded himself of the case of Mehta and quoted the passage in paragraph 14 in which the Court had said:

“It is inherently improbable that such a person will undertake such fraud without ensuring, first, that he makes a substantial amount of money out of it and, second, that he arranges matters so that he keeps it. In order to do that it is inevitably a necessary part of the fraud that money should be put somewhere where it cannot be traced by the authorities …”

He pointed out that, as in the case of Mehta, there was no explanation as to where the money had gone. The admitted available assets amounted to a fraction of 1% of the sums transferred. Whilst acknowledging the submission that the nature of the fraud in Mehta was different, he concluded that the principles were the same.

The Judge then referred to the evidence of the offshore accounts and that the appellant had made several trips abroad. He concluded that the evidence of the accountants, well meaning and honest, called by both sides was of no value to the Court. He was not dealing with a commercial enterprise charging a market rate for legitimate business, but with a criminal enterprise headed by the appellant taking considerable risks and achieving high rewards.

He acknowledged that there was little doubt that a substantial proportion of the sums ended up in the pockets of the original criminals, but he was satisfied, in the absence of any cogent evidence to the contrary and based on the appellant relying on no more evidence than he had adduced during the trial, that there were substantial assets available to the appellant.

He then addressed how much was available. He said he had regard to various factors in the following terms:

“i.

The amount of benefit £48.3 million.

ii.

The fact that nearly £0.5 million was seized and forfeited without contest during the scope of the indictment.

iii.

The frequent occasions that the appellant went abroad and the occasions when he was proved personally to have collected over £400,000 worth of currency.

iv.

The obvious crucial and leading role the appellant played in enabling criminals’ access to tens of millions of clean money which would be impossible for the authorities to trace.”

He then referred to two other relevant authorities and, at paragraph 46, said as follows:

“In my judgement, having regard to the expenses that the appellant would have incurred in operating this enterprise, the least amount he would make would be 10% of the benefit. I consider this to be a conservative figure albeit it is for the defendant to show that the figure is less than the benefit …

Accordingly I find that the available assets are £4.83 million …

The agreed assets should be included within it so as to avoid double counting”

The grounds of the appeal are twofold. They allege procedural defects as well as a substantive challenge to the Judge’s finding on an available amount of £4.83 million.

The procedural challenge, as developed in oral argument, is put on two bases. The first is that the prosecution did not assert, in its Section 16 statement, that, included in the hidden assets, was an element of secret commission over and above that shown by the ledgers, so that it was not open for the prosecution to seek to rely on such an argument at the confiscation hearing. The proposition that the appellant was secretly and proportionately rewarded for the high risks undertaken first appeared in the skeleton argument on hidden assets presented to the appellant the day before the hearing on 1 April 2011 .

In our judgment this argument is of no merit. Section 16 of the Proceeds of Crime Act 2002 provides that:

“ (1) If the court is proceeding under Section 6 in a case where Section 6(3)(a) applies [which is the present case] the prosecutor must give the court a statement of information within the period the court orders”

Subsection (3) provides that:

“If the prosecutor believes the defendant has a criminal lifestyle the statement of information is a statement of matters the prosecutor believes are relevant in connection with deciding these issues –

a)

whether the defendant has a criminal lifestyle

b)

whether he has benefited from his general criminal conduct

c)

his benefit from the conduct”

Subsection 6 provides:

“If the prosecutor gives the court a statement of information –

a)

he may at any time give the court a further statement of information

b)

he must give the court a further statement of information if it orders him to do so and he must give it within the period the court orders”

Thus, the focus of the Section 16 statement is on the question of benefit.

In the present case, the Section 16 statement was made pursuant to Section 16(3) of the 2002 Act and dealt extensively with the matter of benefit. It also addressed the “available amount” and dealt explicitly with the issue of hidden assets in Part 15. It stated the Crown’s belief that the defendant had access to other funds which it had not been possible for the Crown to value. It set out the reasons for that belief. It focussed on the matters already referred to. It is true that it does not contain the assertion of secret award or commission, which first found expression in the skeleton argument immediately prior to the confiscation hearing. In our judgment, however, there was nothing in Section 16 which required the Crown to include such an assertion, if it was minded to make it, in the Section 16 statement.

It has not been suggested that, at the confiscation hearing on the 2 April, any objection was taken to the Crown advancing written and oral submissions to the effect that there must have been hidden rewards, whether or not in the form of commission, for the defendant’s undertaking high risk money laundering activity. In our judgment there was no procedural error in the Crown being permitted to advance such arguments.

The second basis of procedural challenge is that the learned Judge, having alerted the parties to Mehta, which, he indicated, might be relevant to the issue to be determined, failed to alert the appellant that he was minded to find that he must have received “no less than” a level of commission much higher than was reflected in the evidence.

In our judgment the judge cannot be criticised on how he proceeded on the issue of principle. The potential impact of Mehta upon the Judge’s deliberations was obvious and it informed the Appellant’s submissions that Mehta could be distinguished on the facts, though he did not challenge the principles of law identified in Mehta. In our judgment there is no merit in the attempt to distinguish the facts of the present case from Mehta. The principles which informed the decision in the Court of Appeal in Mehta, are equally applicable in this case. The Judge, in his ruling, set out his reasons for concluding that the appellant must have been in receipt of rewards over and above standard commercial rates of commission the appellant had put forward during the trial.

Furthermore, there was every opportunity for the appellant, if he had so wished, to have indicated to the Judge that he wished to give evidence in the light of this new development, having previously declined to do so. Thus we reject the contention that, as a matter of principle, the judge erred procedurally in relying on Mehta to inform his decision.

We consider, below, the omission by the judge to give notice of the level of the “not less than” figure he had in mind

The substantive ground is that there was no reasoning to support a conclusion that the appellant must have received commission of not less than 10% of the sums laundered. It is said that this is a figure plucked out of the air for which there was no evidential basis. Furthermore, it is said that, in the light of the evidence on the extent of the gross and net commissions, the Judge could only reasonably have concluded that the “available sum” was no more than the £42,000 odd admittedly available assets.

The Judge described the activities undertaken by the appellant in collecting, delivering and laundering huge sums of cash from various parts of the country as going far beyond the type of activity legitimately conducted by an MSB. On that basis, as well as the risks of being detected, convicted and imprisoned, the Judge legitimately concluded that the rewards must have been much greater than reflected in the ledgers.

We are, however, concerned, both procedurally and substantively, about how the Judge came to the figure of not less than 10%. Although he drew the parties’ attentions to Mehta and the principles informing that decision, it is by no means clear that he ever canvassed with the parties the level of commission which such a criminal undertaking would attract.

Furthermore, it became apparent, in the course of argument before us, that there had been some evidence on this issue in the trial. Mr Mackay, for the Crown, informed us that his recollection was that counsel for the co-defendant, Ahmad, had cross-examined a Customs’ Officer and put to him that money laundering activities will usually attract levels of commission substantially higher than legitimate MSB business. Mr Mackay recalled it being put to the Customs’ Officer that levels of commission of between 10%-15% represented the level of return that money launderers would expect. Mr Mackay’s recollection was that the Customs’ Officer agreed that, sometimes, levels of commission of that order were charged, but he had also said that the levels of commission could be somewhat below 10%. Mr MacKay could not recall whether any specific figure, and if so what, was specified by that officer in that answer.

The Judge, in his ruling, explicitly adopted the approach in Mehta whereby the Judge was able to use whatever evidence was available, from whatever source, at whatever stage, and come to a judgment about a “not less than” level of commission. Had the Judge remembered this evidence from the trial, he may have found it difficult to justify “not less than” 10% in the light of evidence that money launderers sometimes charged less than 10% .

Whilst the Judge was entitled to adopt the approach he did, we are concerned that he came to his conclusion on this issue without having given the appellant and the Crown a sufficient opportunity to address him on the level of reward, or commission, and may also have come to a conclusion which was inconsistent with evidence he had received in the course of the trial.

Accordingly, on this narrow basis, this appeal succeeds. Given the uncertain state of the evidence, this Court is not in a position to determine a specific “not less than” figure. We have, therefore, decided to exercise the power under Section 11(3A) of the Criminal Appeal Act 1968, to quash the Confiscation Order and to direct the Crown Court to decide the recoverable amount by re-addressing the question: “to what extent has the defendant shown that the available amount is less than the benefit?” by considering what is the “not less than” level of reward or commission which the appellant can persuade the Court is the amount which is available. Section 11(3C) provides that the Court of Appeal shall give directions so as to ensure that any confiscation order made by the Crown Court does not deal more severely with the appellant than the order quashed under subsection (3)(a)

We anticipate that the Crown Court may wish to be reminded of such of the evidence to which Mr Mackay has referred, as is relevant to this issue. In addition, it would be open to either side to seek to adduce further evidence on this issue, as well as addressing written and/or oral arguments. These matters of procedure are, however, for direction by the Crown Court to which we remit this matter for further consideration.

This appeal succeeds. The confiscation order is quashed. The Crown Court is directed to proceed afresh under the Proceeds of Crime Act 2002 to the extent indicated above and to ensure that any confiscation order made by it does not deal more severely with the appellant than the order which we have quashed.