Serious Organised Crime Agency v Pelekanos

In civil recovery proceedings, the claimant must prove on the balance of probabilities that particular property was obtained by, or in return for, unlawful conduct of an identifiable kind. It need not prove a specific criminal offence or identify the individual offender. An unexplained lifestyle or income cannot, standing alone, establish recoverability, but it may form part of the whole evidential picture. Money laundering may be inferred from the manner in which property or money was handled, although the inference must be compelling in the circumstances. Deliberately false and material income statements in mortgage applications constitute mortgage fraud. Where a mortgage fraud materially influenced the lending decision, direct evidence from the mortgage provider is unnecessary. Property acquired with mixed tainted and untainted funds is recoverable only to the extent attributable to the tainted funds, including any corresponding proportionate increase in value.

The claimant sought civil recovery orders under Part 5 of the Proceeds of Crime Act 2002 in respect of several properties held or jointly held by the defendant and others. The claim alleged drug trafficking, money laundering and mortgage fraud. The principal claim against the defendant proceeded to trial, while applications concerning two properties held by other respondents proceeded summarily.

The court considered whether the claimant had proved identifiable unlawful conduct, whether unexplained income and property dealings established drug trafficking or money laundering, and whether false mortgage declarations had materially contributed to the acquisition or financing of the properties.

1. The claim based on drug trafficking and money laundering was not proved. Intelligence evidence was generalised, unattributed and effectively unchallengeable, and the defendant’s associations with persons involved in drug offences proved little without evidence linking him to their criminal conduct. The financial evidence did not establish a sufficiently clear, consistent and irrefutable picture from which money laundering had to be inferred.

2. The claimant was entitled to rely on the whole evidential picture. The absence of an identifiable lawful income source was insufficient by itself, but unexplained income, rejected explanations and suspicious transactions could be considered cumulatively.

3. The defendant had made deliberately false statements in most of the mortgage and remortgage applications considered. A false statement remained fraudulent notwithstanding lax lending practices or the prevalence of similar conduct. The exception concerned self-certification mortgages based on honestly anticipated income from the Basement Construction Company.

4. A substantial misstatement of income was material to the lending decision because income was required information, even for self-certification and buy-to-let mortgages. It was unnecessary to call the actual lending decision-maker. Materiality and the making of the mortgage were sufficient to permit inducement to be inferred.

5. Where property was acquired with mixed tainted and untainted funds, the recoverable portion was the proportion attributable to the tainted funds. The same principle applied to subsequent increases in value. The defendant’s claim based on mortgage fraud succeeded for 5 Guards View and 20b Lower Road, and recovery orders were justified in respect of those properties. The court directed that the precise terms of the orders concerning the other properties be addressed after further submissions.

First-instance decision. The judgment does not state any prior appellate history.