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Account Freezing Orders and Account Forfeiture Orders

Account Freezing Orders and Account Forfeiture Orders can be applied for and granted under section 303Z1 and section 303Z3 of the Proceeds of Crime Act 2002 (‘POCA’) 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.
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In the pursuit of cracking down on financial crime, UK law enforcement wields a powerful tool: Account Freezing Orders (AFOs). These orders essentially freezes suspicious funds, temporarily prohibiting withdrawals and preventing their dissemination while an investigation unfolds.

Richardson Lissack has seen a sharp increase in these Orders being applied for by HMRC in relation to allegations of MTIC fraud against corporations. HMRC has changed its approach to investigating MTIC fraud, preferring to adopt a quasi-civil/ criminal investigation which usually commences with an Account Freezing Order.

Account Freezing Orders can be granted by the court for up to 2 years; where the Court is satisfied that there are reasonable grounds to suspect that the account contains ‘recoverable property’ or is intended for use in unlawful conduct. For an account to contain ‘recoverable property’ it must have been obtained via unlawful conduct. The Orders are made without notice and as such it is important to seek legal advice as soon as you become aware that your account has been frozen.

Two critical grounds pave the way for an AFO:

  1. Recovered Property: If authorities believe funds in an account represent the proceeds of crime, like drug trafficking or tax evasion, they can seek an AFO to preserve these assets for potential forfeiture.
  2. Financing Crime: Even if the origin of funds is unknown, an AFO can be imposed if there’s reasonable suspicion they’ll be used to fund future criminal activity, like terrorism or organised crime.

Senior law enforcement officers with the requisite authority hold the key to applying for an Account Freezing Order. These applications are typically made ex parte, meaning without notifying the account holder, to prevent potential dissipation of funds.

Impacts of an AFO

Landing on the receiving end of an AFO can be unsettling. Access to frozen funds can cripple daily life, hindering essential purchases and potentially impacting employment and personal relationships. Moreover, the stigma of association with an AFO, even without a criminal conviction, can be damaging to reputation and creditworthiness.

However, it’s crucial to remember that an AFO is a civil order, not a criminal charge. It doesn’t imply guilt, and you retain certain rights:

  • Challenging the Order: You can contest the AFO in court, arguing against the grounds for its imposition. Legal representation is highly recommended in navigating this complex process.
  • Limited Exemptions: Essential payments for basic living expenses, rent, and legal fees might be permitted upon application.
  • Review and Renewal: AFOs have a maximum initial duration of six months, but can be renewed for up to two years in total. The court reviews the order periodically to assess its continued necessity.

Legal Framework of AFOs

The legal basis for AFOs rests on the Criminal Finances Act 2017, a cornerstone legislation in tackling illicit financial activity. This Act empowers authorised enforcement agencies, including the National Crime Agency and HMRC, to utilise AFOs.

The application process and legal grounds for AFOs are subject to strict scrutiny by the courts. Judges must be convinced of the reasonable suspicion of recoverable property or intended criminal use of funds before granting an order.

Furthermore, safeguards are in place to prevent abuse. The Act mandates disclosure to the account holder within a specific timeframe after the order is granted. Additionally, provisions exist for compensation if an AFO is later deemed unfounded.

Application to set aside

Applications can be made by the corporation (‘Respondent’) pursuant to section 303Z4 of the Proceeds of Crime Act 2002.  Applications are made by the Respondents legal team to set aside the Order.  If successful, the Order which was obtained by the investigatory authority is removed by the Magistrates court.

Forfeiture Orders

Applications can be made by the claimant pursuant to s.303Z14 of the Proceeds of Crime Act 2002. If successful, the claimant (the Police. SFO, HMRC) seizes the monies which are currently frozen in the bank accounts.

Appeal against decision under section 303Z14

If the Account Forfeiture Order is successfully made an appeal against that Order can be made to the Crown Court within 30 days. Therefore, it is vital to act quickly if you as an individual or as a company have been affected by a decision relating to a Forfeiture. The appeal is made pursuant to s.303Z16 of the Act.

Other Types of Freezing Orders

Another option available to investigatory authorities are Interim Freezing Orders, which are relatively new tools available following their creation by The Criminal Finances Act 2017. These types of Orders are applied for when the NCA or other investigatory bodies are pursuing an individual in relation to an Unexplained Wealth Order. These changes to the law provide the possibility for property believed to be obtained via unlawful conduct to be recovered by using civil proceedings opposed to the need to obtain a criminal conviction and then pursue a confiscation order under the Proceeds of Crime Act. For more information in respect of Unexplained Wealth Orders please click here to see our UWO page.

AFOs are undoubtedly potent tools in combating financial crime. Their swift and targeted nature helps recover ill-gotten gains and disrupt future criminal activity. However, concerns regarding their potential for misuse and disproportionate impact on individuals cannot be ignored.

Here are some of the ongoing debates surrounding AFOs:

  • Threshold of Suspicion: Determining the precise level of “reasonable suspicion” required for an AFO presents a challenge. Striking the right balance between effective crime-fighting and protecting individual rights is essential.
  • Transparency and Scrutiny: Strengthening oversight mechanisms and ensuring timely disclosure to account holders can enhance transparency and minimise potential for abuse.
  • Proportionality and Impact: The potential disruption to personal finances and livelihoods through AFOs necessitates careful consideration of their proportionality and exploring alternative options when less intrusive measures might suffice.

Remember, if you find yourself on the receiving end of an AFO, seek legal advice immediately. Understanding your rights and navigating the legal process can help you protect your interests and ensure a fair outcome.

Our expert lawyers are here to advise and assist you if your company or personal account is subject to either of the orders described above. We will protect your personal position and make every effort to reverse the freezing of bank accounts and to avoid you ultimately losing the funds within them.

Prevention is better than a cure

How Richardson Lissack can help

Our lawyers are available to assist you and provide legal advice.

Contact London 020 3753 5352 or Manchester 0161 834 7284. Alternatively you can email info@richardsonlissack.co.uk

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