Who pays when asset recovery fails: the cost rules are no longer fit for purpose

Opinion: what taxpayers and victims bear when confiscation and compensation orders fall short under the Proceeds of Crime Act 2002, Sentencing Act 2020 and Crime and Policing Act 2026, and eight policy fixes.

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Charles Pycraft · November 2026 · London

Cover card: Who pays when asset recovery fails. Navy ground with a gold balance scale tipped left: one pan holds a stack of coins, the raised pan a single coin. Labelled POCA 2002, small CP mark. By Charles Pycraft

This article is part of Offshore: the enabler chain. It sits in pillar 3: Why recovery fails. Start with the series overview if you are new to the work.

Opinion. Updated on 13 November 2026.

The short version

Asset recovery is no longer fit for purpose set what is recovered each year against what is owed. This piece asks the next question. When a confiscation order, a compensation order or a civil claim does not pay out, who carries the cost?

The public purse bears costs for prosecution, enforcement, imprisonment in default and, where available, legal aid. Victims bear any loss they cannot recover and may have to fund a civil claim. In my view, the rules leave too much of that burden with taxpayers and victims.

In this piece's reading, a working system lets the cost of harm fall where the harm was caused.

What the taxpayer pays when confiscation fails

The most recent itemised whole-system costing found for this piece is the National Audit Office's December 2013 report, Confiscation orders. It estimated the annual cost of administering confiscation in England and Wales at £102 million, including an estimated £20.8 million of legal aid in hearings and appeals and £18.5 million for keeping people in prison for non-payment. The NAO's March 2016 progress review cited an estimated £100 million a year and said there was still little detail on how it was spent. I found no later published costing of the same scope. The NAO lists a new study, Recovery of the proceeds of crime, for winter 2026/27.

The government accepts the principle. Its Crime and Policing Act 2026 proceeds of crime factsheet says "unlimited enforcement is not viable because it is not without costs ultimately borne by the taxpayer."

Defence costs. Section 41(4) of the Proceeds of Crime Act 2002 (POCA) prevents an exception to a restraint order from releasing restrained assets to pay a defendant's legal expenses for the offence concerned. An eligible defendant may receive legal aid. Sections 41(2A) and (2B) allow payments due under the legal aid rules to be made from restrained assets. Once fully commenced, paragraph 26 of Schedule 21 to the Crime and Policing Act 2026 will allow the court to release restrained assets for reasonable legal expenses under new section 41ZA, subject to conditions set by the Lord Chancellor. As at 13 November 2026, paragraph 26(3) was in force only for making regulations and connected purposes.

Interest added and cash collected. In England and Wales, section 12 of POCA generally applies the civil judgment debt rate to overdue confiscation sums. The HMCTS Trust Statement 2025-26 records £116.2 million of confiscation interest added in the year, against £142.9 million collected. Of the £3,193.3 million gross confiscation debt at 31 March 2026, £2,609.4 million was more than five years old, as were 9,439 of the 13,295 cases with a balance outstanding (71 per cent).

Enforcement tools still waiting. Most of Schedule 21 to the Crime and Policing Act 2026 came into force on 29 June 2026 under SI 2026/689. The exclusions included Part 8 (enforcement, including enforcement plans) and paragraph 17 (provisional discharge of orders with no realistic prospect of recovery). Both were still listed as not in force on 13 November 2026.

Parliament has also limited the adverse costs that enforcement agencies face: section 52 of the Economic Crime (Transparency and Enforcement) Act 2022 for unexplained wealth orders, and section 190 of the Crime and Policing Act 2026 (new section 288A of POCA, in force since 29 June 2026) for civil recovery. Those protections reduce one public risk. They move no cost onto the people whose conduct caused the case.

Where recovered money goes

The Asset Recovery Incentivisation Scheme (ARIS) shares recovered proceeds between the agencies involved and the Home Office. In the year ending March 2026, £129.6 million was distributed to agencies. The ARIS Top Slice awarded £12.8 million to 18 projects, including £1.3 million for a CPS legal team to revisit defendants who have not paid their full criminal benefit.

ARIS is legitimate reinvestment. The point here is narrower. When confiscation and compensation orders are made against the same person in the same proceedings, sections 13 and 55 of POCA give unpaid compensation priority over the sums otherwise payable to the state, subject to the statutory order of payments. Section 22A can also direct money to victims whose losses the court already knew about when it increases an order under section 22(4). Without either route, receipts can go to public budgets while a victim's loss remains unpaid. In the year ending March 2026, the Home Office recorded £26.1 million paid to victims, 17 per cent of £150.9 million in confiscation receipts across England, Wales and Northern Ireland.

What victims carry: unpaid compensation orders and the cost of suing

Unpaid compensation orders. Section 135(4) of the Sentencing Act 2020 tells a court to give preference to compensation over a fine where the offender cannot pay both. The HMCTS Trust Statement 2025-26 shows £33.1 million of new compensation impositions in the year and £22.1 million collected. Outstanding compensation rose from £109.0 million at 1 April 2025 to £118.8 million at 31 March 2026. HMCTS impaired £87.6 million of that balance, about 74 per cent, and administratively cancelled £1.2 million in the year.

Private litigation. Victims seeking further compensation may have to bring a civil claim. In England and Wales, Part 2 of Schedule 1 to the Legal Aid, Sentencing and Punishment of Offenders Act 2012 generally excludes trust, company and partnership matters and negligence claims from civil legal aid, subject to the Act's exceptions. Victims outside the scope of legal aid must find another way to fund any claim they bring.

Litigation funding after PACCAR. In R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28, the Supreme Court held that litigation funding agreements of the kind before it, which entitled the funder to a percentage of damages recovered, were damages-based agreements. Those agreements were unenforceable because they did not meet the statutory requirements. The Civil Justice Council's final report of 2 June 2025 recommended reversing that effect. In written statement HCWS1192 on 17 December 2025, the government said it would legislate, "with prospective effect", and introduce proportionate regulation, "when parliamentary time allows". On 3 September 2026 a justice minister told the House of Lords that the government was "working urgently to identify a new legislative vehicle". The previous government's Litigation Funding Agreements (Enforceability) Bill fell in 2024. In November 2026, the Ministry of Justice restated the current government's commitment to legislate when parliamentary time allows, without naming a Bill.

Reimbursement that stops at the edge of scope. The Payment Systems Regulator's authorised push payment (APP) reimbursement requirement, which section 72 of the Financial Services and Markets Act 2023 required it to impose, has applied since 7 October 2024. Between then and 31 March 2026, 88 per cent (£316 million) of the money lost in reimbursable claims was returned to victims. Of about 438,300 claims reported, 301,500 were in scope. The Faster Payments rules cover eligible UK transfers by individuals, micro-enterprises and charities with annual income under £1 million, up to £85,000 per claim. Separate CHAPS rules also cover eligible domestic transfers. In my view, the reported reimbursement rate shows the value of protection within that scope. International transfers fall outside these rules. The Financial Services and Markets Bill [HL] 2026-27, which had its Commons second reading on 10 November 2026, would abolish the PSR and move its functions to the FCA.

When professional enablers can be made to pay

In England and Wales, civil claims for dishonest assistance or knowing receipt can be brought where their respective legal tests are met. Since 1 September 2025, qualifying large organisations have also been liable to prosecution for failure to prevent fraud under section 199 of the Economic Crime and Corporate Transparency Act 2023. In this piece's reading, the gap is in where money goes after a finding. A fine is paid to the state, and CPS guidance treats compensation orders as a tool for simple cases. A deferred prosecution agreement may require a company to compensate victims under paragraph 5(3)(b) of Schedule 17 to the Crime and Courts Act 2013, but it is not required to. Under section 19B of the Prosecution of Offences Act 1985 and the regulations made under it, a court can order a third party to pay costs incurred by a party to criminal proceedings where the third party engaged in serious misconduct and the court considers an order appropriate.

The Economic Crime Levy under Part 3 of the Finance Act 2022 shows the same pattern. In 2024-25, 3,069 regulated entities paid £96.9 million, and the government expects about £225 million a year from April 2027. Its six spending deliverables fund technology, investigators, intelligence and Companies House work. None is a fund for victims. Liability to pay the levy is based on anti-money laundering regulation and UK revenue bands.

Verdict: why the cost rules are no longer fit for purpose

Section 5A of POCA now states the principal objective of the Part 2 confiscation powers: to deprive the defendant of the benefit from criminal conduct, so far as within the defendant's means. The public figures above show part of what taxpayers and victims bear when recovery falls short. HMCTS recognised an impairment allowance equal to about three quarters of outstanding compensation at 31 March 2026. In my view, the lack of a current public costing and the limited routes for shifting those costs leave the regime short of the government's aims for victims and public services.

What should change

The asset recovery piece proposed a victim-first share of receipts and a public dashboard. The fixes below add the legal routes and the cost side.

  1. Extend access to compensation from confiscation receipts. Amend sections 22A and 55 of POCA so a court can direct receipts to an identified victim for unpaid loss from the offence without an increase under section 22(4). Set how the new direction ranks against existing payments and apply it before ARIS sharing. Owner: Home Office and Parliament for legislation, HMCTS for administering payments.
  2. Bring the outstanding enforcement and legal expenses measures into force. Publish a timetable for commencing Part 8 and paragraphs 17 and 26 of Schedule 21 in full. The Lord Chancellor should consult and make regulations under section 41ZA so courts can release restrained assets for reasonable legal expenses where the conditions are met. Owner: Home Office for commencement, Lord Chancellor for section 41ZA regulations.
  3. Compensation after fraud facilitation or failure to prevent fraud. Sections 133 to 135 of the Sentencing Act 2020 already allow compensation for loss resulting from the offence of conviction or an offence taken into consideration. Amend section 133 to specify when a court can award loss from the underlying fraud on conviction for a specified facilitation offence or failure to prevent fraud, subject to findings on causation and credit for sums already recovered. For eligible deferred prosecution agreements, revise the Code to make compensation the starting point where victims and losses can be identified, subject to court approval. Owner: Ministry of Justice and Parliament for legislation, with Home Office input. Director of Public Prosecutions and Director of the Serious Fraud Office for the DPA Code.
  4. Recover public costs caused by serious misconduct. Review how section 19B operates for costs already incurred by a party. If the policy is to recover specified public costs incurred outside the proceedings, amend the Prosecution of Offences Act 1985 to give courts that power where they find serious misconduct caused those costs. Owner: Ministry of Justice and Parliament for any wider power, Lord Chancellor for regulations and Criminal Procedure Rule Committee for procedure.
  5. A fund for victims' recovery and litigation costs. Set aside a share of ARIS receipts after statutory payments and allocate part of the additional Economic Crime Levy receipts expected from April 2027 through an agreed spending allocation. Use the fund to help eligible victims pursue losses outside the APP scheme, including cross-border fraud and losses arising from misuse of trusts. Owner: Home Office and HM Treasury, with the Ministry of Justice and Attorney General's Office for ARIS allocations.
  6. Legislate on PACCAR. Bring forward the prospective change announced in HCWS1192 at the earliest opportunity, with proportionate regulation of litigation funding agreements. Owner: Ministry of Justice and Parliament.
  7. Preserve APP reimbursement through the transfer. The Financial Services and Markets Bill would repeal section 72 of the Financial Services and Markets Act 2023. The Treasury intends to preserve the existing reimbursement requirements through transitional regulations, after which the FCA would determine its approach under the new framework. Parliament should require the FCA to maintain equivalent protection, the Treasury should ensure continuity at transfer and the FCA should publish a review of cases outside scope. Owner: HM Treasury, Parliament and FCA.
  8. A yearly "who paid" statement. Publish outstanding compensation by age, victim payments per pound of confiscation receipts on a consistent geographic basis, enforcement costs, imprisonment costs for default and legal aid spending in confiscation proceedings. HMCTS should publish the compensation and receipts figures with its Trust Statement, and the Home Office and Ministry of Justice should publish the joint costing alongside it. Owner: HMCTS, Home Office and Ministry of Justice, with figures from the Legal Aid Agency, HM Prison and Probation Service and enforcement agencies.

A note on records

Partisan issues dated receipts for file fingerprints that can be used to check whether two fingerprints match. I work on business development and communications for Partisan.

About this piece

This article draws on the public sources listed below. It is for general information and is not legal advice.

Previous: Asset recovery is no longer fit for purpose

Related: The SRA and the Legal Ombudsman are no longer fit for purpose; HMRC is no longer fit for purpose on serious offshore evasion; The Swiss SRO layer, STEP, and the cost of fighting back

Series overview: Offshore: the enabler chain

Sources

Sources