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Experienced policemen are hard to shock. You name it, they’ve seen it, bagged it or banged it up. In April 2005, however, squads from four Midland forces, making a crack-of-dawn “swoop” near Market Harborough, were treated to a sight which, as one officer puts it 2½ years later, “still makes my jaw drop”.

On the dot of half past six, 350 officers from Leicestershire, Derbyshire, Northamptonshire and Lincolnshire raided a number of local addresses, including seven on the Justin Park travellers’ site, where they had “reason to believe” some shady deals were being made. “Operation Lucky” was what they called it, and they couldn’t have chosen better. It didn’t take them long. In a scene reminiscent of Treasure Island, they dug into a traveller family’s garden and levered out a weighty, lozenge-shaped parcel trussed with gaffer tape. Their own video shows an officer tearing at it like a child on Christmas morning.

Inside were four metal cash boxes packed with banknotes – mostly fifties, and in such volume that there was hardly room for them on the table indoors. One officer sized up the stacks and made a stab at valuation by eye: £50,000… £60,000… £150,000… £250,000… From out of the dishwasher came a bin bag containing a rucksack stuffed with Tesco bags filled with yet more money. “That’s me life and me husband’s life in that bag,” said a woman’s voice from off camera. “That’s all we worked for all our lives…” Little did she realise the irony of her words. For investigators with new powers of seizure in their hands, it was exactly what they had hoped.

Panning around, the camera’s eyes almost popped out of its head. The tiny prefab in which the unemployed travellers lived contained the kind of bathroom and personal effects that would normally suggest the proximity of a film star – furs, Chanel perfumes and handbags, period furniture and a litter of Harrods’ receipts. Altogether, the morning’s raids netted £991,861 in cash; 37 vehicles including several Mercedes, BMWs and a Porsche; some road-surfacing machinery; more than 1,500 personal items including, in the police account, “many luxury items, collectables, antiques and designer clothing”; half a million pounds’-worth of jewellery, and £200,000-worth of Royal Worcester porcelain.

For families without jobs or other apparent means of support, this begged a question or two, though you didn’t need a PhD to guess the answers. Also in the haul were three stun guns, fraudulent vehicle documents, service stamps and a stolen MoT embossing stamp. Sixteen men and women, ranging in age from 21 to 68, were charged and variously fined or jailed for the theft of cars and caravans, “clocking” and “ringing” cars (ie, winding back the mileage or altering the registered identity), conspiracy, money-laundering and tax evasion. Then in August last year, in separate hearings eight months after sentencing, came the legal coup de grâce. Judges in Nottingham and Derby Crown Courts ruled that cash and property worth £1,923,285 should be confiscated from one of the two families, the Strettons, and £666,000 from the other, the Biddles. The profit to the state, from the cash and the sale of goods, would be divided between the police and the government and invested in the fight against crime. The miscreants would have learnt that crime doesn’t pay and, on their release from prison, would turn over new leaves as honest, hardworking citizens paying income tax, Vat and National Insurance. Well, maybe…

We need to be quite clear about what happened here. The £3m-plus seized from the families was not stolen property to be restored to its rightful owners. The owners were the criminals themselves, and they had the receipts to prove it. Buying “legitimate” goods with the proceeds of crime is the easiest kind of money-laundering – a simple scam that in the past has allowed millionaire fraudsters, robbers, drug-dealers, counterfeiters and pimps to leave prison by Rolls-Royce. The sight of them rolling in caviar, bling and blondes, two fingers to the world, grated on police and government like grit under an eyelid. The result in 2002 was the Proceeds of Crime Act (Poca) – which gave law-enforcement agencies (Customs and Excise, local authorities, trading standards officers and others, as well as the police) the right to freeze offenders’ assets and pursue them for the value of what policemen still cannot resist calling their “ill-gotten gains”.

David Blunkett, then home secretary, declared that the Assets Recovery Agency (ARA) – set up especially to lead the hunt – would be going after the “yachts, mansions and luxury cars of the crime barons”, and bringing sharper focus to the old piety: “crime doesn’t pay”. Under Poca, crime would pay, but the beneficiary would be the public purse, not the underworld’s Mr Bigs in their sunny hideaways. In future the game would be played on a tilted pitch with Crime City playing uphill and defending a much bigger goal. Suspicion alone would be enough to freeze an offender’s property and bank accounts, and the civil courts’ “balance of probability” (rather than the more stringent “beyond reasonable doubt” required by the criminal justice system) would be the test for confiscating them.

Crime is not an easy industry to put a value on – mobsters don’t register their results at Companies House – but it is generally held that 70% of criminal offences are “acquisitive” (ie, committed for profit). “It is clear,” said Payback Time, a report by the Chief Inspector of Constabulary with the Criminal Prosecution Service and Magistrates Court Service, published in 2004, “that crime represents a multi-billion-pound industry and, at the top end of the scale, individual crime ‘barons’ accrue literally millions of pounds, usually through a combination of drug importation, tax fraud, and high-value acquisitive criminality”. The figure they put on it was £18 billion, or 2% of gross national product. Police and the Home Office began to talk like big-cigar men about how much of this they were going to get their hands on, and how they were going to spend it.

On the face of it, they have the power of royal emissaries in medieval England. If police or customs find £1,000 or more in cash, cheques or bonds, and believe it is either the wages of crime or likely to be invested in criminal enterprise, then they can simply seize it. They don’t have to prove an offence has been committed – it is up to the “owner” to prove the legitimacy of his money – though they do have to get approval from magistrates within 48 hours. Crown courts can also restrain suspects from selling or gifting their property before they are brought to trial, and after conviction they can confiscate a sum equivalent to the criminals’ profit. This often means the enforced sale of houses, cars and other “ill-gotten gains” bought with dirty money. It is not even necessary for the criminal still to be alive. Paul Daly, for example, was a Belfast drug-dealer whose criminal pedigree included robbery, assault and firearms offences. In May 2001, in front of his partner and 12-year-old daughter, he was given a typical, 10-bullet Belfast sendoff as he pulled up outside a relative’s home in his car. In March last year the ARA auctioned his home in Laurelgrove Dale for £240,000 – £60,000 above list price. In October, the ARA raised £234,000 from the estate of Mark McCall, another drug-dealer with convictions for violence, who was shot dead in an alley in Pudsey, West Yorkshire in 2003.

Neither does a not-guilty verdict guarantee that the ARA will keep its hands out of your money box.

In November, the High Court granted a civil-recovery order against 31-year-old Fabian Jackson from Hackney, whom a criminal court earlier had acquitted of drugs charges. Despite the acquittal, the judge accepted the ARA’s argument that Jackson had made his money through drug-dealing, money-laundering and mortgage fraud, and allowed it to “recover” £628,000-worth of property including four houses, cash and jewellery worth £260,947, a Ford Focus and two Yamaha motorbikes. This came only days after the ARA, with great cock-a-doodle-doo, had pulled off its biggest ever confiscation order – £41m-worth, from a jailed fraudster, Gerald Smith, who had “misappropriated” £34m from a software company. It inspired the Home Office minister Vernon Coaker to congratulate the ARA, Serious Fraud Office and Thames Valley Police on a “landmark achievement”.

No doubt similar fanfares will be played if the investigators manage to square the accounts following the Hollywood-style, £53m raid on a Securitas warehouse in Tonbridge, Kent, in February 2006. A seven-month trial ended last month in the conviction of five defendants on kidnap, robbery and firearms charges after the beautician who had fixed their disguises did a “talk and walk” deal with the prosecution. With £32m still missing and thought to be stashed in Morocco or northern Cyprus, the avengers may well have to cast their eyes over the robbers’ bank accounts, cars and houses. Even when they are released, the men will carry the outstanding balance as a price on their heads.

But not all verdicts on the ARA have been as generous as Vernon Coaker’s. The criminals themselves obviously are no great admirers of its Robin Hood tendencies, which conflict with their own highly specialised definition of justice. With chutzpah bordering on insolence, a few of them were able to jam the legal mechanism by invoking the European Convention on Human Rights, which their lawyers claimed safeguarded their personal property and, by implication, denied Poca’s and the ARA’s right to exist. One armed robber successfully stalled the agency for three years by arguing in successively higher courts that the action against him was criminal and not civil, and that it therefore should be subject to a higher standard of proof. With the ponderous speed and weight of due process, the courts found in favour of the government, but it all took time and fed mounting criticism of the agency’s profitability.

Yes, that’s right – profitability. Critics in press and government began to complain that the ARA was costing too much to run, and was not bringing in enough booty. They seemed to see it not so much as a crime-prevention mechanism as some kind of official money-laundering or fencing operation whose success should be measured by how much it earned. In February last year the National Audit Office criticised it for spending £65m to recover £23m, and for failing to become self-financing by its target date of 2005-6. It spoke of “weaknesses in the agency’s internal processes”, case-management and record-keeping. “We had great difficulty,” it complained, “in compiling a comprehensive list of cases and tracking their value and progress.” In some cases where it did keep track, it found that fees charged by court-appointed receivers were higher than the value of the assets they were managing. This was not what the government had in mind when it said crime shouldn’t pay.

There were complaints, too, that Blunkett’s bold promise, to strip the barons of their yachts, remained unfulfilled. Newspapers ran “rich lists” of the top-10 criminal oligarchs, worth between them more than a billion, who seemed forever beyond the agency’s grasp. In May 2004, a “senior Scotland Yard source” told The Times that, without a vast injection of government cash, trained investigators, tax lawyers and accountants, “these big-time villains will continue to run financial rings round us”. The ARA’s then assistant head of operations, Adrian Brenton, agreed. “The top criminals are paying the best people to hide their assets,” he said. “If we were going after one of the so-called top-10 underworld figures we would need to employ between 20 and 30 accountants and set them to work for maybe five years – and the chances are that we might find only 10% of the money.”

Yet the agency continued to insist that it was wielding its power effectively. Targeting Bond villains, it seemed to think, was not the only – or even the best – way of bringing down evil empires. Far better to target the criminal “middle managers”, who directed the traffic, and the underlings who actually climbed the drainpipes or delivered the drugs. The National Criminal Intelligence Service (NCIS) argued that taking £20,000 – a kilo of heroin at 2004 prices – out of the hands of a dealer would prevent 220 burglaries with at least 220 victims losing an average of £1,000-worth each. It would save also £100 per offence for each police response, and £650-£10,000 for each prosecution. According to the same research, addicts commit more than 1,000 crimes a month, and each one who becomes HIV-positive costs the taxpayer £75,000 for treatment. Running all this through its calculator, NCIS concluded that removing just £20,000 from the criminal economy would save as much as £500,000 in costs to the community. “Perhaps as importantly for the future wellbeing of society,” said Payback Time, “preventing overt criminals from living off the proceeds of crime can deter impressionable young people from entering or expanding their involvement in criminality.”

It’s an almighty challenge. A survey by YouGov in early 2004 showed that one in seven people (one in five in the North and Scotland) knew of at least one person who made their living from crime. “It clearly appears to many,” said Payback Time, “that crime definitely does pay and the authorities seem almost powerless to intervene.”

One problem was the sluggish response of the police and others, and their seeming reluctance either to refer cases to the ARA or take action of their own. About 700 organisations in England, Wales and Northern Ireland have the authority to bring prosecutions and pursue confiscation orders. These include 44 police forces, HM Revenue & Customs, the Department for Work and Pensions, the Crown Prosecution Service, the Serious Organised Crime Agency, the Environment Agency, the Marine and Fisheries Agency, 170 trading-standards offices and 467 local authorities. And yet, 18 months after Poca came into force, most of these had not even picked up the phone. “Despite national enthusiasm for the principle of asset recovery,” said Payback Time, “the actual provisions of the act remain a mystery to many at executive level within criminal-justice agencies, and in particular the police.” Of the 43 forces in England and Wales, 21 had yet to bring a money-laundering case, and 75% of the referred cases had been brought by just six forces. Poca was having an effect all right, but not the effect that Blunkett had promised. “Money and criminals are slipping through the net,” said Payback Time, “and confidence in the criminal justice system is eroded.”

Occasionally the ARA goes after low-value property if it has been associated with a notorious criminal episode. Jewellery stolen by Dr Harold Shipman and unclaimed by the victims’ families fetched only £1,700 at auction. The ARA was determined that ghoulish souvenir hunters should not ramp up the price; none of the items recovered was identified as being connected with the Shipman case.

Since the very beginning, the most energetic pursuer of seizures and forfeitures, far ahead of all the rest, has been the Met. Its enthusiasm remains undimmed. “Asset recovery,” says its spokesman, “can act as a deterrent to acquisitive criminals… because the increased risk that their criminal money will be seized begins to outweigh the potential monetary gains.” This is a bold claim. If Poca really is a deterrent, and crime really doesn’t pay, then should we not see the evidence of it in crime surveys? Burglars, robbers and fraudsters should be lining up at the Jobcentre and registering for honest work. And yet…

There is little encouragement for this view in the crime figures. These of course would be prime exhibits in any trial of “damn lies and statistics”. Every year the party in power uses them to “prove” the efficacy of its tough line on law and order, while the opposition “proves” the opposite. Burglary down! Robbery up! The British Crime Survey (BCS), which measures victims’ actual experience of crime rather than the numbers of offences reported to police, shows a significant reduction in total crime – 56% – since the criminal peak year of 1996, but attributes this to an upswing in the economy rather than to the deterrent effects of legislation. It must be remembered also that many of the crimes recorded by the BCS are minor – in the 1980s, for example, the most common offence was theft of milk bottles from doorsteps. Increased car ownership and a growing population mean that the average risk of becoming a crime victim has reduced slightly since the BCS began in 1981, but the overall numbers of vehicle-related thefts (1.75m in England and Wales) and burglaries (749,000 in 1981-2; 733,000 in 2005-6) remain substantially the same. The inescapable conclusion is that, for all the brave talk and high-noon appointments with vengeance, Poca and its administrators have had about as much effect on criminal behaviour as global warming and the price of cocoa.

The fact is, you can threaten offenders with anything you like – stoning, flaying, thumbscrews or the rack – but it won’t be worth the price of a prison breakfast unless you can catch them. It’s not the weight of the sentence that deters them, any more than appeals to their better nature; it’s the risk of discovery. If arrest were guaranteed, there would be no crime at all. For those in possession of their wits – ie, the Messrs Big – criminality is a business calculation, a gamble, potential gain weighed against the chance of detection. The professional criminal, like any investor, works out the odds and concludes that, yup, all things considered, the timeshare scam or fake Rolex factory is a risk worth taking. At street level, of course, the drug-fuddled petty-impulse criminals with nothing to lose and desperate for a fix, are beyond any kind of reasoned calculation at all. Show them an opportunity for a crime and they’ll commit it.

The agency’s critics therefore have a point. Its claim to crime reduction rests entirely on the money and resources it makes unavailable to criminals. Last year its outgoing director, Jane Earl, celebrated the fact that “in 132 cases there are individuals or organisations who had previously kept all of their unlawfully obtained assets, worth £39.4m, who are no longer or shortly will not be in possession of them”. We need to remember, too, that although the ARA is the chief standard-bearer for Poca, it is not the only agency in the field. Others acting on their own authority – in particular the police and HM Revenue and Customs – are now also siphoning off criminal profits. In 2006-7, for example, the total amount recovered under Poca was £125.04m, of which the ARA itself accounted for just £15.9m.

But let’s remind ourselves of the total estimated value of acquisitive crime – £18 billion, or 2% of gross national product. Last month a report for the Home Office by the Matrix Knowledge Group and the London School of Economics reckoned the annual value of the illegal drugs trade alone at £7 billion-£8 billion, involving 300 big-time importers, 3,000 wholesalers and 7,000 retailers on the street, each earning on average £100,000 a year. In this context, taking out £125m hardly looks the kind of arm twist that will turn bent men straight, or make the current home secretary feel any safer walking at night in London. It may tickle the police, who like nothing better than to wipe the smiles off scarred faces in the dock, but it’s not going to leave many gang bosses wondering where their next Spanish villas are going to come from.

This is not an argument that plays well with Mick Creedon, chief constable of Derbyshire, who speaks for the Association of Chief Police Officers (Acpo). During the lifetime of Poca, he says, seizures have shot up by 300% (the Home Office says 500%), putting the UK second only to the Republic of Ireland as the world’s leading criminal asset-stripper. Criticisms of the ARA, he insists, are misplaced because delays in the legal system mean that it can take three or four years for a successful operation to show on the balance sheet. The agency was “hung out to dry” simply because government-driven hype was so lacking in realism. He likens Poca to DNA testing – a novel technique that took time to prove its worth but is now central to every criminal investigation. Following Payback Time, he says, “every force has put an action plan in place”. Policemen are learning to use their eyes – to take notice when lifestyle and income are mismatched, and to understand the new strength that Poca gives them. The result, he says, is that criminals no longer dare to live so flamboyantly – “They are driving around in five-year-old cars and taking their children out of private school” – and this on its own is a powerful deterrent.

“If you can’t benefit from your criminal assets, then what’s the point of acquiring them in the first place?” He sends me back to the Home Office/Matrix report, based on interviews with convicted drug offenders – which suggests that criminals now view confiscation orders as a threat worse than jail.

“Dealers,” it says, “viewed prison either as an occupational hazard or an unlikely risk. Asset recovery appeared more troubling…” A national wholesaler of heroin, cannabis and cocaine confessed to researchers that the drugs business was “not as appealing” as it used to be. “People who are arrested are losing everything they have – even the things they acquired through honest means.” But these of course were the feelings of a man in a cell, who had every reason to be rueful. Poca did not deter him from the offences for which he is now being punished; nor is there much sign that those still running the market are paralysed by fear. We have to ask again: where is the proof that Poca is driving down crime?

“That’s the hardest question,” says Creedon. “If you want empirical proof, it’s very hard, but for me instinctively it is the right thing to do.” It will take time but there will be a gathering momentum, an increasing recognition by law enforcers and criminals alike that their homes, cars, jewels, televisions and bank balances are ripe for harvest, and organised crime will die from a thousand cuts. It’s a hunch, perhaps, but policemen’s hunches are not always wrong, and this one is driven by a Home Office proposal which, if it becomes law, will empower the police themselves to seize “bling” (the Home Office’s own word), boats and cars as well as cash. For Alan McQuillan, the ARA’s current (and destined to be last) director, it’s a matter of common sense. “If you reduce the profit,” he says, “you reduce the incentive. It’s looking at crime as a business model.”

The incentive is reduced every time a local community sees a criminal family turfed out of its house or stripped of its wheels. Once Poca’s hounds have taken the scent, the pursuit is so lacking in mercy that you begin to feel almost sorry for the fugitives. If a criminal has, say, a £6m forfeiture order against him but can find only £3m-worth of assets, he’ll go to prison unless he finds the balance before a deadline set by the court. And even then the jail term does not discharge the debt – the man comes out still owing £3m and with the breath of financial investigators still burning on his neck. McQuillan recalls the case of a man whose father died. By way of condolence, the ARA seized the will and took away his inheritance.

The agency meanwhile keeps chipping away. “The business,” as it likes to call itself, has banked the proceeds of every crime imaginable – theft, prostitution, child pornography, dirty kebabs, fly-tipping, overfishing, forged passports, fake marriages, counterfeit DVDs and video games, fake designer handbags, clothes, shoes and perfumes, housing benefit, credit-card and Vat frauds, cigarette- and fuel-smuggling, extortion, people-trafficking and endless money-laundering and drug rackets. The central clearing house is the Home Office, which keeps half the proceeds and shares out the rest between the agencies involved, which are expected to use it to chase more criminals or fund good works. In 2006-7 it distributed a total of £58m, of which £15.5m went to English and Welsh police. The Leicestershire force, for example, invested its Operation Lucky windfall in hiring forensic accountants and training detectives in the techniques of financial investigation (though it wouldn’t say how many).

For the Home Office itself, criminal money is not gilt on the gingerbread but “core funding” to be put towards the routine financing of the police, the Serious Organised Crime Agency (Soca) and the five Regional Assets Recovery Teams that have been set up to target criminal property in the regions. The big ambitions for Poca have not gone away. Receipts have gone up five-fold in five years, from £25m to £125m; the target for 2008 is £250m, and in time it may even rise to the £1 billion imagined by that arch optimist Tony Blair – a target from which McQuillan doesn’t flinch. “The intention,” he says, “is to scale up.”

Scaling up, indeed, is the advertised reason for the ARA’s impending takeover by Soca in April, though friends of the ARA suspect the real reason is political – punishment by a target-obsessed administration for late delivery. After the long legal delays, however, the pipeline is flowing and Soca will inherit a going concern. Like Creedon, McQuillan believes estimates of the criminal economy are unreliable and inflated. The actual profit, as opposed to turnover, he reckons is closer to £7 billion than the £18 billion commonly quoted. “All these things have huge error margins on them,” he says. If he’s anything like right, however, a £1 billion annual clawback would at last plant a toecap where it hurts.

The benefits have already extended beyond the simple satisfaction of societal revenge, or cash for the government. Among the English public, the ARA has struggled with a “recognition factor” of only around 45%. In Northern Ireland it has been 85% – an anomaly explained by the peculiar nature of the province’s crime networks and their near umbilical conjunction with paramilitaries. Half the ARA’s victories there have been against men associated with sectarian violence, whose separation from their income is a dividend for peace as well as for the public purse. In Scotland, which has its own jurisdiction, the lawless tribes are pursued by the Crown Office’s Civil Recovery Unit. Criminals north of the border are nothing if not colourful, and pursue their trade under sobriquets that would have graced the age of Al Capone. In October last year, James “the Iceman” Stevenson (“Scotland’s No 1 gangster”), serving a 12-year sentence for money-laundering, was facing the loss of £2m, and the convicted heroin-dealer George “Dode” Buchanan was fighting to hold on to his family home, a flat and four cars. The total netted from Scottish criminals since 2003 now stands at just over £17.5m.

Who can say whether this is enough, or whether the common-sensical hunches of law enforcers eventually will be enough to tip the statisticians’ graphs? You seizes your assets. You takes your chance.

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