Bank Accounts Frozen? Don’t Let it Go!
February 5, 2020
Proceeds of Crime Act 2002: Account Freezing Orders
In a follow up to our Unexplained Wealth Orders Article, Daniel Cundy and Naureen Shariff explore Account Freezing Orders (AFO) introduced under the criminal Finances Act 2017 (CFA 2017).
The CFA 2017 inserted sections 303Z1 – 303Z19 into the Proceeds of Crime Act 2002 (POCA 2002). Those provisions came into force in 2018 and are now being increasingly used by enforcement officers to obtain an AFO (section 303Z1 – 303Z8 POCA 2002) and subsequently Forfeiture Orders (FO) (section 303Z9 – 303Z19 POCA 2002).
AFO’s have only recently become a popular mechanism for UK law enforcement agencies to use in order to seize criminal funds. An AFO allows the freezing of bank and building society accounts with the intention of recovering the proceeds of crime through forfeiture.
AFO’s are civil in nature but are heard in the Magistrates’ Courts. It must be remembered that applications are made in rem (against the property) and not in personam (against the person).
Who can make an application?
Applications can only be made by an ‘enforcement officer’ (s.303Z1(6) POCA 2002) who is an officer of HMRC, a constable, an SFO Officer or an accredited financial investigator. Furthermore, that officer must either be a senior officer or have authority from a senior officer to make the application (s.303Z2(2) & s.303Z2(4) POCA 2002).
Applications must be made in writing and may be sent to the court before which the enforcement officer wishes to make the application (s.3(1) The Magistrates’ Courts (Freezing and Forfeiture of Money in Bank and Building Society Accounts) Rules 2017).
A copy of the written application and notification of the hearing of the application must be given by the enforcement officer to any person by or for whom the account which is the subject of the application is operated (s.3(3) The Magistrates’ Courts (Freezing and Forfeiture of Money in Bank and Building Society Accounts) Rules 2017).
The AFO can be made without notice, if notice of the application would prejudice the taking of any steps to later forfeit monies under section 303Z1(4) POCA 2002
What are the restrictions?
Applications can only be made against an account where the funds or money in that account is not less than the minimum amount. The minimum amount is currently set at £1,000.00 (s.303Z8(1) POCA 2002). The provisions allow the enforcement officer to seek all or part of the funds held in an account. There are, however, no provisions to permit the aggregation of accounts for the purposes for meeting the minimum amount and any sub-accounts subject to the application must also contain no less than the minimum amount. Each account will be subject to its own Freezing Order.
On what grounds?
The enforcement officer can only apply for an AFO if they have reasonable grounds for suspecting that money held in an account maintained with a bank or building society is (a) recoverable property or is (b) intended by any person for use in unlawful conduct (s.303Z1(1) POCA 2002).
Unlike the criminal standard of proof of ‘beyond all reasonable doubt’ the Court will only grant an Order if they are convinced, on a ‘balance of probabilities’, that the grounds are met. This is a far lower threshold and that, coupled with the fact that so far, most applications are made without notice, almost inevitably leads to the application being granted by the Court.
Can the Court impose exclusions?
If the Court grants the AFO it does not prevent payments into the account. However, they may make provisions for ‘exclusions’ (s.303Z5(1) POCA 2002). This can include ability for making withdrawals or payments from the account for the purpose of meeting living expenses or to allow a person to carry on a trade, business, profession or occupation (s.303Z5(3) POCA 2002). If the enforcement officer believes that monies being paid into an account are recoverable or intended for use in unlawful conduct, they can seek a variation to the AFO to cover this.
The Court could consider ring fencing only those monies in the account it is satisfied meets the test in s.303Z3(2) POCA 2002. For example, this would allow a Court to permit the freezing of a business account where only part of the money in that account is regarded as recoverable property, while allowing the business to continue to use the remainder of the funds. The Court has a general power to make exclusions, and this is not an exhaustive list of the exclusions that can be made.
S.303Z5(5) POCA 2002 permits exclusions for reasonable legal expenses (except in Scotland, as detailed in section 303Z5(7)) that have been incurred, or may incur, in AFO proceedings to be paid from the account.
How long does an AFO last?
The application can request an AFO last for any period of time may not exceed the period of 2 years, starting with the day on which the account freezing order is (or was) made (S.303Z3(4) POCA 2002).
Can the Order be varied or set aside?
S.303Z4(1) POCA 2002 allows for the enforcement officer or any person affected by the order to apply to vary or set the order aside. This application must be made in writing to the Court and must specify the grounds on which it is made. (s.4(1) The Magistrates’ Courts (Freezing and Forfeiture of Money in Bank and Building Society Accounts) Rules 2017).
This application can only be on notice and the Court must send a copy of the application to vary or set aside to every person to whom notice of a previous related order made under s.303Z3(2) or s.303Z4(1) POCA 2002 been given (s.4(1) The Magistrates’ Courts (Freezing and Forfeiture of Money in Bank and Building Society Accounts) Rules 2017). The Court can only fix a date for the hearing of the application, which, unless directed otherwise, will be no earlier than seven days from the date on which it is fixed, and it must notify that date to the applicant and to every person to whom a copy of the application is required to be sent to. (s.4(4) The Magistrates’ Courts (Freezing and Forfeiture of Money in Bank and Building Society Accounts) Rules 2017).
What can Blackfords do?
If you receive notice of application for an AFO being made or that an Order has been made against your personal or company accounts do not delay in seeking legal advice. Blackfords LLP were recently instructed in, and successfully resisted, such an application.