Speed read: The Criminal Finances Bill 2016 is set to be passed in Spring 2017. Clause 12 proposes to expand the definition of “unlawful conduct” appearing in Part 5 of the Proceeds of Crime Act 2002 to include gross abuse of human rights. Bright Line Law was instructed by the Magnitsky Justice Campaign to draft the initial legislative amendment proposal. The mechanics of the provision, which could lead to non-conviction based confiscation of property, are detailed below.
The intended inclusion of “gross human rights abuse” as grounds for non-conviction based civil recovery represents the unprecedented use of the UK’s primary criminal financing legislation to condemn human rights atrocities. Specifically, Clause 12 of the Criminal Finances Bill 2016 proposes that the definition of “unlawful conduct” in section 241 of the Proceeds of Crime Act 2002 (“POCA”) would be expanded to include conduct occurring outside of the UK which “constitutes, or is connected with, the commission of a gross human rights abuse or violation.” In so doing, property derived from such activity could be forfeited, irrespective of whether a person has been prosecuted in connection with torture or other human rights abuse. The mechanics of the proposed addition to POCA and its origins are detailed below.
Widely referred to as the “Magnitsky” amendment, Clause 12 draws its name from Sergei Magnitsky, a Russian lawyer who died in detention in 2007 having been imprisoned and tortured after exposing an alleged US $232 million fraud implicating Russian public officials and business figures. To date, no person has been prosecuted in connection with Magnitsky’s death or fraud allegations other than Magnitsky himself who was posthumously convicted as a consequence of his whistleblowing. In a bid to end the impunity surrounding Magnitsky’s death, in 2012 the US implemented a sanctions-style regime, targeting the movement and property of approximately 30 Russian individuals identified as being involved in his torture and/or the alleged fraud. The list, which remains in force, includes both public officials and private individuals believed to have profited from the fraud that Magnitsky exposed. In 2016, during the last days of the Obama Administration, the US passed further legislation, widening the sanctions-style regime to capture any person, wherever situated, responsible for or connected to gross human rights abuse perpetrated against a whistleblower. Under both the 2010 and 2016 US legislation, designation on the list is a presidential decision, based on information about individuals compiled by US government departments and law enforcement authorities.
Situation within Part 5
Clause 12 differs substantially from the US sanctions-style regime – the UK Magnitsky framework requires judicial oversight at every stage, applies solely to property and is situated within the UK’s existing criminal proceeds, as opposed to sanctions, legislation.
Part 5 of POCA enables an enforcement authority to apply to the High Court for an Interim Receiving Order, effectively a property freezing order, on the basis that there is a “good arguable case” that property is recoverable or, more specifically, derived from unlawful conduct. An Interim Receiving Order serves as a precursor to a confiscation order being made by the High Court where it is satisfied, on the balance of probabilities, that the property is recoverable or, in other words, derived from “unlawful conduct”. It follows that the definition of “unlawful conduct” is central to Part 5. Against this background, the practical effect of Clause 12 is to expressly open up Part 5 proceedings to enforcement authorities where the underlying unlawful conduct is “gross human rights abuse” which has occurred in particular circumstances. Specifically, Clause 12 provides that conduct can constitute “gross human rights abuse” where it comprises torture or other inhuman or degrading treatment carried out against a person who has:
a) sought to expose illegal activity carried out by a public official or person acting in an official capacity; or
b) to obtain, exercise, defend or promote human rights and fundamental freedoms.
Acts that are “connected” to the gross human rights abuse also fall into the category of unlawful conduct. This includes directing or materially assisting or, importantly in the light of the Magnitsky case, profiting from the activities. There is also no requirement that the individual be a public official.
Accordingly, the provision aims to capture the full spectrum of those who could be said to be involved in “gross human rights abuse”. In so doing, it seeks to minimise the ability of an individual who has profited from the abuse but is otherwise distant from the victim to argue that he or she was simply not involved in the torture or inhuman treatment. The application of the provision, however, is subject to two conditions. Specifically, to constitute “gross human rights abuse” the conduct must have been carried out with the consent or acquiescence of a public official, acting in the performance or purported performance of his official duties. This is a significant factual hurdle. Further, there is a timing limitation. Part 5 proceedings can only be brought in respect of torture which has taken place in the last 20 years. Where the unlawful conduct is identified as being other inhuman or degrading conduct, Part 5 proceedings can only be brought if the conduct occurs after the coming into force of the section.
The focus on human rights abuse is a marked change to POCA and, indeed, legislation and regulation targeting proceeds of crime more generally in the UK. Ahead of the change, three practical points arise for consideration.
Firstly, although on one view, Clause 12 is narrowly focused by requiring a nexus to a particular type of victim, the provision deliberately does not identify those who may fall into the ‘victim’ category. Accordingly, acts of torture or inhuman and degrading conduct carried out against journalists, human rights campaigners, NGO workers, professional advisers and political opponents – not only conventional whistleblowers – all potentially fall within the ambit of “gross human rights abuse”. The critical feature will be that the person was seeking to expose illegal activity carried out by public officials or obtain, defend or promote “human rights and fundamental freedoms.”
This, in turn, begs the question - what precisely will constitute human rights and fundamental freedoms for the purposes of the soon-to-be expanded definition of “unlawful conduct” in POCA? Whether property has been obtained as a result of or in connection with the gross abuse of a person seeking, to exercise fundamental rights will be a matter for determination by the High Court but definitional matters will require consideration from the outset.
In its present form, the provision offers little definitional assistance. Accordingly, the meaning of human rights in section 1 of the Human Rights Act 1998 is instructive. Section 1 of the Human Rights Act 1998 refers to Schedule 1 which lists the inalienable human rights as recognised by the UK and appearing in the European Convention on Human Rights and Fundamental Freedoms, including not least the right to life, right to liberty and security and right to a fair trial. Schedule 1, however, does not contain all of the rights recognised by the Convention and its associated Protocols. A significant omission, for instance, are the various socio-political rights which the UK has opted-out of.
As for the definition of torture, it is worth noting that the High Court considered the matter at length in R (on the application of EO and others) v Secretary of State for the Home Department  EWHC 1236 (Admin) albeit in the context of detention policy. Following a lengthy exploration of the UN Convention Against Torture and various UK legislative and policy instruments, at  the Court considered that, in the context of UK detention policy, the word “torture” referred to “any act by which severe pain or suffering, whether physical or mental, is intentionally inflicted on a person for such purposes as obtaining from him or a third person information or a confession, punishing him for an act that he or a third person has committed, or intimidating or coercing him or a third person, or for any reason based upon discrimination of any kind.” The definition was subsequently affirmed by the High Court in Khalesh v Home Office  EWHC 2995 (QB) at .
Removal of dual criminality requirement
Finally, the question arises as to how much the new provision adds. On one view, torture of a person and acts amounting to inhuman treatment already falls within the ambit of “unlawful conduct” in section 241, and any consequential profitmaking can already be forfeited. Such a view, however, overlooks an important feature of Clause 12, which closes a loophole that would otherwise be available to human rights abusers. Specifically, in the context of “gross human rights abuse” the standard dual criminality requirement appearing in the definition of “unlawful conduct” in section 241 will not apply. Instead, Clause 12 proposes that conduct will amount to “gross human rights abuse” (and therefore unlawful conduct) if it occurs outside of the UK and, if it had occurred in the UK, would be a triable offence. The clear purpose of the disapplication of the dual criminality requirement is to avoid Part 5 proceedings being thwarted by an argument that the conduct against the victim was sanctioned by the state and, therefore, entirely lawful.
The Criminal Finances Bill 2016 is likely to be passed in the Spring and the Magnistky amendment, ultimately tabled by the government, has received strong cross-party support. However, when enacted, it can be expected that Part 5 proceedings connected to “gross human rights abuse” will be initiated sparingly. As explored, the provision is tightly framed and subject to several factual conditions first being fulfilled to the requisite civil standard. Notably, there is also no duty on enforcement authorities to take steps where there is evidence that property derived from gross human rights abuse is in the UK, and it remains unclear whether an annual report will detail how many times the provision is used or was at least considered for use, once it enters into force. Notwithstanding this, the proposed expansion of “unlawful conduct” presents an opportunity for NGOs, who often lead the investigation of human rights abuses and any profit trail, to share information with law enforcement with a view to Part 5 proceedings being brought if appropriate. Seen this way, the expansion of section 241 of POCA presents new opportunities for collaboration between the public and the private / NGO sectors and an important addition to existing proceeds of crime legislation.