Understanding POCA’s Third Assumption: Expenditure Incurred
Under the Proceeds of Crime Act 2002 (POCA), when a defendant is found to have a criminal lifestyle, the court must apply a series of statutory assumptions to determine the extent of their benefit from criminal conduct.
One of the most significant — but often misunderstood — is the third assumption, which concerns expenditure incurred by the defendant.
What Is the Third Assumption?
The third assumption provides that:
Any expenditure incurred by the defendant at any time after the relevant day is assumed to have been met from property obtained through general criminal conduct.
In other words, if the defendant has spent money after the relevant day, and the source of the funds used to make that expenditure is not explained or verifiable, the court will assume the funds came from criminal activity — unless the defendant can prove otherwise.
What Is the “Relevant Day”?
The relevant day is a statutory reference point that determines the starting point for when the assumption applies. Under POCA, it is defined as:
The first day of the period of six years ending with:
the day when proceedings for the offence were started, or
if there are multiple offences, the earliest date proceedings were started.
The third assumption applies to any expenditure incurred by the defendant after that day.
What Counts as “Expenditure”?
The third assumption targets expenditure where the source of the funds is not otherwise explained — either by legitimate income or by assets already subject to other POCA assumptions.
It does not apply to spending from a bank account, where the origin of the funds is either:
Already captured by the second assumption (property held), or
Clearly traceable to a legitimate source such as salary or benefits.
Instead, this assumption typically applies in situations where:
The defendant has incurred expenditure (e.g. made a purchase or payment), and
The source of the funds is unclear, undocumented, or disputed.
Examples include:
Cash expenditure with no matching bank withdrawal
Assets acquired using funds not reflected in any account
Third-party payments made on behalf of the defendant
Example: How the Assumption Applies
A defendant is shown to have purchased a car for £10,000 in cash after the relevant day. There is no record of a corresponding bank withdrawal, no evidence of a loan or gift, and no available legitimate income.
In the absence of a clear explanation, the court may apply the third assumption and conclude the funds used were criminal property, increasing the benefit figure — unless the defendant can rebut the assumption with credible evidence.
Challenging the Expenditure Assumption
Like all POCA assumptions, the third assumption can be rebutted. The defendant must show:
The source of the funds used for the expenditure was legitimate, or
The assumption is incorrect, or
Applying it would result in a serious risk of injustice
Supporting evidence may include payslips, inheritance records, loan agreements, or other verifiable sources of income. Often, a detailed forensic accountancy analysis is required to reconstruct the financial picture and trace the origin of funds used in cash purchases or third-party transactions.
Final Thoughts
The third assumption under POCA 2002 allows the court to treat unexplained expenditure after the relevant day as being funded by criminal conduct. It is a powerful tool — especially where the prosecution identifies spending but the defendant cannot clearly account for the source of the money used.
This can have serious implications for confiscation proceedings, often inflating benefit figures significantly. Defence teams must identify all affected expenditure and be prepared to challenge the assumption with strong evidence where the funds had a lawful origin.
Need expert help tracing and explaining a defendant’s financial history? Get in touch to see how forensic accountancy can support your POCA defence strategy.
