Account Freezing Orders

The Criminal Finances Act 2017 (‘the Act’), came into operation on 31st January 2018, and introduced additional powers to the Proceeds of Crime Act 2002 which bolstered the powers of the UK enforcement agencies. These additional powers enable UK law enforcement to freeze and recover the alleged proceeds of crime by way of procedures which take a considerable step towards moving such enforcement into the civil courts.

There are two procedural steps to be taken in respect of seizing funds held in any suspicious account:

• The freezing of its operation
• The forfeiture of the assets held within it

In recent years, the number of Suspicious Activity Reports (‘SARs’), processed by banks, building societies and other bodies has run into many thousands each year.

As a result, the law enforcement agencies have struggled to deal with SARs effectively and achieve any meaningful recovery of the substantial amount of the monies discovered in ‘suspect’ accounts.

Once a financial institution had suspended a suspicious account, the procedure for law enforcement agencies to freeze the account and to seek forfeiture of the funds was both cumbersome and uncertain. It would normally necessitate a hearing in the Crown Court to secure a Restraint Order or, if proceedings were further advanced, to secure a Confiscation Order.

Recovery through the civil courts was a slow process which was only available where the monies available for seizure exceeded ten thousand pounds.

The Act

• Section 16 of the Act enables law enforcement, if there are reasonable grounds to believe that money held in a UK bank or building society is recoverable property, to seek an Account Freezing Order (‘AFO’) upon application to a Magistrates’ Court
• Section 16 provides for the following to be inserted into the Proceeds of Crime Act 2002:

(1) This section applies if an enforcement officer has reasonable grounds for suspecting that money held in an account maintained with a bank or building society—

(a) is recoverable property, or

(b) is intended by any person for use in unlawful conduct.

(2) Where this section applies (but subject to section 303Z2) the enforcement officer may apply to the relevant court for an account freezing order in relation to the account in which the money is held.

(3) For the purposes of this Chapter—

(a) an account freezing order is an order that, subject to any exclusions (see section 303Z5), prohibits each person by or for whom the account to which the order applies is operated from making withdrawals or payments from the account;

(b) an account is operated by or for a person if the person is an account holder or a signatory or identified as a beneficiary in relation to the account.

(4) An application for an account freezing order may be made without notice if the circumstances of the case are such that notice of the application would prejudice the taking of any steps under this Chapter to forfeit money that is recoverable property or intended by any person for use in unlawful conduct.

An Account Freezing Order is a court order enabling law enforcement agencies (such as HMRC) to freeze a bank account for a period of up to two years.

A court will make such an order effectively confiscating the money in the bank account if the court is satisfied that the monies in the account represent the proceeds of crime or are intended for use in unlawful conduct.

Throughout the duration of an AFO, application may be made for an Account Forfeiture Order (‘Forfeiture Order’).

Once properly served, the recipient party has thirty days from the day after notice is effectively given to object.

Upon an objection being received, the matter will be set down for a hearing at which the court will have to decide whether:

• The money which it is sought to forfeit is recoverable property or
• Is intended to be used by any person for unlawful conduct
• The funds should be divided in the event of a claim by a legitimate joint owner of the account

Effects Of A Forfeiture Order

If granted:

• The funds may be transferred to another nominated account
• The AFO ceases to be of effect, unless there is an application to continue pending an appeal
• An Appeal may be made to the Crown Court within thirty days

If not granted or an AFO is discharged for any reason:

• The owner of the account may apply for financial compensation

A law enforcement agency (such as HMRC) may apply to a Magistrates’ Court for such an order without providing any notice of the application to the account holder. The account holder will be provided with a date to attend court subsequently to make any representations.

No. In order for the money to be forfeited the law enforcement agency must satisfy the court on a balance of probabilities that the money represents the proceeds of crime or that is intended for use in unlawful conduct. If this cannot be proven, the money must be returned to the account holder.

Yes, in certain agreed circumstances. However, in contrast no debit transactions will be permitted whilst the bank account remains frozen.

Up to two years. The initial Account Freezing Order must either be discharged within two years and the funds returned to the account holder or the law enforcement agency must make an application for the forfeiture of the money within this period of time.

Yes. The account holder is entitled to make representations to the court against the granting or extension of an Account Freezing Order. The account holder can also go to court to oppose any subsequent application for forfeiture of the money.

Since the introduction of the Account Freezing Order and Account Forfeiture Order powers, there has been a steady increase in the use of such powers by law enforcement agencies.

Our team has been involved in representing clients in a number of such cases and has a considerable record of success in defending such matters and securing the return of frozen funds.

A number of cases have involved a significant international dimension and our team is experienced in handling complex multi-jurisdictional issues.

We have also been successful in securing the release of monies from the frozen accounts to fund the ongoing legal costs of challenging either the grant of the initial Account Freezing Order or costs of contesting the Account Forfeiture application.

The team at Kangs are highly regarded and recognised nationally for its work in financial crime at all levels. Our team is ranked in the highest categories in both the leading directories, namely, the Legal 500 and Chambers UK.