16 September 2013

Proceeds of Crime

The Victorian Auditor-General's Office has released a 76 page report [PDF] titled  Asset Confiscation Scheme, ie on the state's proceeds of crime (aka POC) regime.

The report states that
the Asset Confiscation Scheme is not operating as effectively or efficiently as it should. Its ability to deprive people of the proceeds of crime, and to deter and disrupt further criminal activity, is hampered largely by weaknesses in Victoria Police's approach to identifying assets, and weaknesses in how the Asset Confiscation Scheme operates as a whole.
The report comments that
Asset confiscation is a tool that Victoria's law enforcement and public prosecution agencies use in response to criminal activity. The Confiscation Act 1997 (the Act) and associated regulations enable the state to confiscate property in order to deprive people of the proceeds of certain offences, to disrupt further criminal activity by preventing the use of that property, and to deter others from engaging in criminal activity. The Act also enables the state to preserve assets for victims' compensation and restitution.
Asset confiscation only applies to certain offences. These include indictable offences, as well as more serious, profit-motivated offences that contravene various Acts including the Drugs, Poisons and Controlled Substances Act 1981, Crimes Act 1958, and the Sex Work Act 1994.
Assets that the state seeks to confiscate through a forfeiture order not only need to relate to specific offences and thresholds, but also need to be tainted or reasonably suspected to be tainted. Tainted assets are those that have been derived wholly or substantially from the proceeds of crime, or have been used, or are intended to be used, in connection with a crime.
 It notes that
The Asset Confiscation Scheme  was established in 1998, following the commencement of the Act. There are three key agencies that work together to achieve the objectives of the Scheme: • Victoria Police—primarily through the Criminal Proceeds Squad (CPS) • the Office of Public Prosecutions (OPP)—through the Proceeds of Crime directorate (POC) • the Department of Justice (DOJ)—through the Asset Confiscation Operations unit (ACO). In addition, the Scheme includes two committees: the Asset Confiscation Scheme Executive Management Group (ACSEMG), which oversees the Scheme, and the Confiscation Operations Committee, which is concerned with the operational, practical and administrative aspects of the Scheme.
The Auditor General goes on to conclude 
The Scheme is not operating as effectively or efficiently as it should. Its ability to deprive people of the proceeds of crime, and to deter and disrupt further criminal activity, is hampered by weaknesses in the way that assets are identified for confiscation, and by how the Scheme is governed.
Victoria Police plays a critical role in the Scheme as it is responsible for identifying assets for confiscation through its investigative processes. However, it is not maximising opportunities to identify such assets related to profit-motivated, serious and organised crime.
Its asset confiscation functions are undermined by a failure to make the most of its investigative tools, by a lack of effective planning, and by capacity and capability weaknesses. Its current focus on victims of crime work does not directly or demonstrably contribute to the Scheme’s objectives and diverts it from focusing on profit-motivated crime.
The other Scheme agencies—OPP, and ACO within DOJ—rely on, and react to, the work that Victoria Police generates. While opportunities exist to enhance their operations—such as planning and performance management for OPP, and procedures and performance management for ACO—both agencies are generally performing their core asset confiscation functions effectively and efficiently.
Significant governance weaknesses within the Scheme limit the ability of the agencies to work together effectively to implement the government's policy objectives. For example, there are unclear objectives, a lack of planning or effective oversight, a lack of clear accountability and leadership, a failure to address known longstanding weaknesses and the inability to assess performance against objectives.
The report comments that "How well the Scheme is performing is unknown as it lacks an effective performance framework".
Exacerbating this is the absence of effective performance frameworks within the individual agencies.
The need for a performance framework to assess the effectiveness and efficiency of the Scheme was first identified in VAGO’s 2003 Report on Public Sector Agencies. The recommendation to develop overarching performance measures was accepted by DOJ. Despite its commitment ten years ago to develop such measures for the Scheme, this has not yet occurred.
The Scheme has been subjected to three commissioned reviews between 2008 and 2012. In each review, consistent findings and recommendations were made, particularly in relation to weaknesses with the Scheme’s governance and performance. While improvements to the Act have been made as a result of these reviews, little apparent action has occurred to address other significant problems, resulting in issues that have persisted unnecessarily.
While the Scheme has been operating for over 15 years, it has experienced, and continues to experience, governance problems that undermine its effectiveness and efficiency. These governance issues have been known since at least 2003, and were further identified in the 2008 and 2009 reviews, and the 2012 evaluation. While efforts have been made to address them, these have not been effective.
The objective of the Scheme is unclear, with multiple documents referencing different objectives. The current terms of reference for the Scheme's oversight committees detail objectives that differ from what the Scheme participants actually work towards. There is no documentation that provides evidence of a decision for the Scheme’s objectives to be changed to reflect the Act’s objectives.
A draft set of objectives for the Scheme was developed and approved by the oversight committee in 2006, but not adopted. It is unclear why, despite being approved, these objectives were not adopted and did not drive the activities of the Scheme. Adding to the confusion, the 2009 review recommended to ACSEMG that different objectives be approved. While there was agreement to adopt them, again this did not occur, and there is no record to explain this.
It concludes that - 
ACSEMG has failed to fulfil its oversight and leadership roles. In particular, it has not set a strategic focus for the Scheme, nor ensured that objectives are being achieved. This is because it has failed to implement a performance framework to assess the achievement of outcomes, and has not developed clear objectives or prepared a strategic plan. These are all issues that have been known since at least 2008. Between October 2010 and October 2012 ACSEMG did not meet. The lack of meetings was not planned and there is no documented or reasonable explanation for the interval. The Confiscation Operations Committee did not meet over the same two-year period. One obvious impact of not meeting for this duration is that the committees have missed opportunities to address the Scheme's weaknesses for two years.
While DOJ is ultimately accountable for the Scheme, and performs a leadership role, the unclear governance arrangements mean that accountability and leadership are only notional. In practice, the Scheme includes two statutorily independent bodies, Victoria Police and OPP, over which DOJ has no control. This is not an ideal arrangement, and undermines the Scheme's governance.
Effective planning for asset confiscation does not occur at the Scheme level, and varies across the three agencies. Despite reviews since 2008 identifying the need to improve the Scheme’s strategic planning, no effective planning has been undertaken. There is no plan that brings together information about the Scheme’s opportunities and risks, that clarifies the objectives and outcomes, or how performance will be assessed. There is also no plan that establishes the Scheme’s direction or its priorities. The absence of effective planning is most notable at Victoria Police, which is essentially the driver of Scheme activity, and which therefore has a greater need for effective planning. Regular turnover of CPS staff—particularly its management— makes strategic and business planning more critical. The overall success of the Scheme is heavily dependent on how effectively Victoria Police and CPS plan and perform.
The CPS does not have any strategic or business plans, and other than at a high level, what it is tasked with doing is not clearly documented. It is not evident that CPS has undertaken or documented any assessments of the proceeds of crime-operating environments, including where there are opportunities, priorities, gaps or challenges. POC’s role in relation to asset confiscation is necessarily a reactive one, based on the assets that Victoria Police identifies for confiscation, and the number of supporting affidavits it sends to POC. Given this, its planning is partly reliant on there being effective planning at CPS. This would enable POC to understand the priorities and the active and planned investigations across Victoria Police, and to plan both strategically and operationally around these.
Regardless of the lack of planning at CPS, POC itself does not have effective planning systems and processes in place. It has no strategic or business plans that detail the broader and longer-term issues impacting on its role, the external workload pressures, what it aims to achieve each year, its priorities or its resource needs. Like POC, ACO’s role is a reactive one as it responds to the orders that POC obtains in court. This presents the same challenges in terms of effective planning if the other stakeholders in the process are not planning. However, unlike either CPS or POC, DOJ and ACO have comprehensive planning around asset management and disposal activities—with some non-material weaknesses.
Effective risk management is fundamental to public sector operations, as well as effective governance and planning. It enables entities and agencies to identify and manage risks and opportunities that may arise while performing their functions. Risk management across the Scheme and Victoria Police is inadequate to properly manage known risks. Risk management practices within the both POC and ACO are more advanced—both POC and ACO have developed risk management frameworks that identify risks pertinent to the functions they perform.
No adequate assessment of risks for the Scheme has been undertaken, and there is no risk management plan within CPS, even though a range of problems with the squad are well known to CPS and Victoria Police management.
Victoria Police, and more specifically CPS, is responsible for identifying assets for confiscation. That Victoria Police has had a dedicated squad for many years is a positive development towards achieving the Scheme’s objectives, and it is evident that the CPS is performing asset confiscation work. However, issues relating to the type of investigations it undertakes, and how it undertakes them, along with administrative weaknesses around the prioritisation and allocation of cases, mean it is not operating as effectively or efficiently as it should.
The Scheme's focus is on profit-motivated, serious and organised crime. Similarly, CPS considers that its focus is on the ‘upper echelons of organised crime’. However, in practice, up to 60 per cent of the CPS work relates to victims of crime. While victims’ compensation is a purpose of the Act, it is unclear why CPS is performing this function, at least to the current extent. This work is time intensive and anecdotally results in few victims pursuing the offender in court. The focus on this type of work detracts from what CPS should be focusing on—profit-motivated, serious and organised crime. Consideration needs to be given to whether it remains the responsible agency for working with victims of crime—particularly if the Scheme’s objectives are to be given every chance of being achieved. CPS has adequate investigative tools and sources of information available to undertake investigations to identify assets for confiscation. However, CPS is not making full use of its investigative tools, and may therefore be missing important assets. In addition, the way that CPS prioritises and allocates its cases creates a risk that prioritisation will not be undertaken appropriately and investigative action will not start in a timely way. The consequence is that assets may dissipate before action can be taken, reducing the likelihood of the Scheme's objectives being met.
Restraining property, through the use of restraining orders, is an important stage in the asset confiscation process. Its purpose is to prevent the disposal of property so that it will be available for a potential forfeiture order, an automatic forfeiture, a pecuniary penalty order, or for restitution or compensation.
Broadly, this process involves POC applying for restraining orders in the County and Supreme Courts, and ACO identifying and securing the assets identified in the restraining order. Delays in obtaining restraining orders and securing assets increase the risk that the assets will be dissipated.
While these agencies' functions are necessarily reactive—POC reacting to the outcome of CPS investigations, and ACO reacting to the outcome of the restraining order application process—both are performing this part of their roles effectively and efficiently. Similarly, the ACO’s practices and controls around the management, maintenance and disposal of forfeited assets are generally effective and economical, therefore minimising costs and maximising financial returns to the state.
The report features several recommendations-
  • The Asset Confiscation Scheme Executive Management Group should: 
  • develop a performance framework linked to the objectives of the Asset Confiscation Scheme that includes relevant and appropriate indicators that enable reported performance to be a fair representation of actual performance 
  • identify and document actions required to improve the effectiveness and efficiency of the Asset Confiscation Scheme, including previously identified issues 
  • develop an implementation plan that details the actions, accountability, time frames, resources, implementation risks and monitoring arrangements for these actions 
  • clarify and confirm the objectives of the Asset Confiscation Scheme 
  • update the terms of reference for the Asset Confiscation Scheme Executive Management Group and Confiscation Operations Committee, and schedule routine reviews so that they remain current 
  • clarify and confirm the Asset Confiscation Scheme governance arrangements, including leadership, accountability, roles and responsibilities, and issue resolution mechanisms 
  • undertake a risk assessment for the Asset Confiscation Scheme, including the risks associated with working in a joined-up arrangement 
  • develop strategic and operational plans for the Asset Confiscation Scheme, linked to Asset Confiscation Scheme agency planning.
  • Victoria Police should:
    • develop a performance framework, independent of the Asset Confiscation Scheme, to enable Victoria Police management to assess the performance of the Criminal Proceeds Squad 
    • implement quality assurance processes around data and databases 
    • develop strategic and operational plans, linked to those of Crime Command, the Asset Confiscation Scheme and other Asset Confiscation Scheme agencies 
    • undertake a risk assessment of the Criminal Proceeds Squad and its operating environment 
    • review the resourcing model for the Criminal Proceeds Squad, including the cost-effectiveness of using Victorian Public Service staff 
    • refocus the Criminal Proceeds Squad's investigations to be predominantly focused on profit-motivated, serious and organised crime 
    • reallocate responsibility across the organisation for assisting victims of crime in identifying and restraining assets 
    • redevelop practices to ensure that investigative tools are used to their full potential 
    • develop and implement a Criminal Proceeds Squad training strategy that includes consistent, compulsory inductions for new staff members
    • establish processes for the routine and regular review of criminal proceeds guidance 
    • develop, document and enforce the consistent use of case prioritisation and allocation procedures 
    • improve the way that the Criminal Proceeds Squad records prioritisation and allocation information to enable better management reporting.
  • The Office of Public Prosecutions should:
  • develop a performance framework, independent of the Scheme, to enable the Office of Public Prosecutions' management to assess the performance of the Proceeds of Crime directorate 
  • implement quality assurance processes around data and databases
  • develop strategic and operational plans, linked to those of the Asset Confiscation Scheme and other Asset Confiscation Scheme agencies.
  •  The Department of Justice should:
  • improve the current performance framework of the Asset Confiscation Operations unit to better enable the Department of Justice's management to assess its performance
  • review and update the procedures for the Asset Confiscation Operations unit.