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Proceeds of Crime Act 2002

Sections 77 & 78: Tainted gifts; Gifts and their recipients

141.Section 77 is another section which aligns two similar but slightly different provisions in the earlier drug and non-drug confiscation legislation (where a tainted gift is referred to as a “gift caught by this Act”). Like the Act, the earlier legislation enables gifts made by the defendant to other persons to be recovered in satisfaction of the confiscation order, and makes ancillary provision (for example, to enable assets of the recipient of a gift to be placed under restraint)..

142.The new scheme provides that, where the court has decided that the defendant has a criminal lifestyle, any gift made by the defendant to any person in the period beginning six years before the commencement of proceedings is caught, together with any gift made at any time out of the proceeds of crime. This is relevant both at the confiscation hearing and for the purposes of enforcement. If the court decides that the defendant does not have a criminal lifestyle, only gifts made since the beginning of the earliest of the offences committed are caught. Again, this is relevant at the confiscation hearing and for the purposes of enforcement.

143.However, in relation to a time before the court has decided whether the defendant has a criminal lifestyle, for example, at a pre-trial restraint hearing, the wider definition of tainted gifts applies. When making a restraint order, the court must exercise its discretion as to how much property to restrain by reference to the size of the confiscation order that may eventually be made. So, although a court can technically apply the wider definition of tainted gifts at the restraint stage, if it is clear at that time that the defendant does not have a criminal lifestyle and that therefore the narrower definition will apply at the confiscation hearing, the court will have to take this into account when making the restraint order.

144.Section 78 makes it clear that a gift includes a transaction for a consideration which is significantly less than the value of the gift at the time of the transfer; for example, if the defendant sells a car worth £10,000 at the time of the transfer for £2,000. This is a departure from the earlier legislation, where an undervalue transaction is defined as the difference between the value of the property when the defendant received it and its value at the time of the transfer. The old definition could cause injustice when the property transferred at an undervalue has depreciated in value between its receipt by the defendant and its transfer.

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