"They are a really outstanding firm - their POCA and asset forfeiture work is absolutely first-class."
Chambers and Partners, 2019
The introduction of Account Freezing and Forfeiture Orders (under the Criminal Finances Act 2017) has significantly boosted the powers of law enforcement agencies’ to disrupt and seize funds efficiently and expeditiously, without requiring a prosecution or criminal conviction.
We are seeing a dramatic increase in their deployment as part of the drive to tackle illicit finance and the suspected proceeds of crime.
We regularly advise HNW individuals, PEPs and their family members or close business associates targeted by such orders. The sums involved can be substantial and swift action is usually advisable to ensure an order is challenged and the money in question is not ultimately forfeited as part of a wider investigation.
FREQUENTLY ASKED QUESTIONS RELATING TO ACCOUNT FREEZING AND FORFEITURE
What is an Account Freezing Order?
An Account Freezing Order (AFO) freezes specified funds in a bank or building society account by preventing any account holder, signatory or beneficiary of the account from making withdrawals or payments for a maximum period of two years. It is a civil order made by a magistrates’ court where there are reasonable grounds to suspect all or part of the funds in the account are “recoverable property”: either the proceeds of crime or intended for use in unlawful conduct. An AFO can be granted in respect of any bank or building society account, whether it belongs to an individual or a business, with a credit balance of at least £1,000 (or its sterling equivalent) and failure to comply with the terms of the order may result in proceedings for contempt of court.
An AFO allows law enforcement authorities such as the police, the SFO and the NCA to investigate the origins and destinations of money paid in and out of the account in order to determine if the funds should be forfeited (permanently retained by the Treasury) or if a wider criminal investigation should be initiated. An application for an AFO will often be triggered by a report made by the account provider to the NCA where it becomes suspicious of how an account is being used (a Suspicious Activity Report or SAR).
How is an Account Freezing Order obtained?
The relevant law enforcement agency submits a written application to the magistrates’ court and a date for the hearing will be set. At the hearing, the court will consider whether the grounds for granting the order have been met. At this first stage it is a low threshold – merely a “reasonable suspicion” on the part of the applicant agency that the funds in the account are recoverable property - and applications are routinely granted. Copies of the order are then served on all identifiable parties affected by it; the account holders, the account provider and those with beneficial interests in the funds.
Can an Account Freezing Order be granted without notice to the affected parties?
In most cases the affected parties will be unaware of the steps being taken until after the AFO has been granted and their accounts frozen. This is because the court will agree to an ex parte or without notice application at the request of the law enforcement authority if satisfied that putting the parties on notice would prejudice any subsequent application to forfeit the funds (in other words there is a risk the funds would be dissipated). In cases where the affected parties are already aware of an investigation it may be possible to make representations to the applicant agency to pre-empt a without notice application.
Will the court allow any living or business expenses to be paid out of the frozen account?
The court may vary an AFO (either when it makes the order or on later application by either the applicant agency or an affected party) to allow exclusions to the prohibition on making withdrawals and payments from the account. Such exclusions may allow for reasonable living expenses or to carry on any trade, business, profession or occupation. When considering whether to vary an AFO or to make exclusions, the court must be mindful that the primary purpose of the AFO regime is to preserve funds for future forfeiture proceedings. Courts will therefore be careful to ensure the funds are not dissipated unnecessarily and so any application to vary an AFO must be supported by compelling evidence demonstrating there is no other way the expenses can be met. Clear lines of communication with the law enforcement authority in this regard will also be crucial.
Will the court allow for payment of legal expenses out of the frozen account?
The court may also vary an AFO to allow for the payment of reasonable legal expenses in respect of the AFO proceedings. An application for such a variation will be essential in many cases because there is no public funding available for cases of this type.
Can an Account Freezing Order be challenged after it has been made?
Any person affected by an AFO can apply to the court at any time for the order to be varied or set aside. This includes not only the account holder(s) but also third parties with an interest in the funds that are frozen. The court may exercise its discretion to set aside an AFO as it sees fit. It may be possible to demonstrate that the information provided by the law enforcement authority in its initial application – particularly if it was made without notice to the affected parties - was incorrect or incomplete and that there are no reasonable grounds for suspecting the funds are recoverable. However, persuading any court of this is a difficult task and for there to be any prospect of success an application must be supported by detailed and cogent evidence about the provenance and intended use of the frozen funds.
Notice of an application to vary or set aside an AFO must be provided to all parties to the original order who will be given an opportunity to make representations themselves.
Can money be paid into a bank account which is the subject of an Account Freezing Order?
An AFO does not prohibit payments into an affected account, but the applicant law enforcement agency may apply to the magistrates’ court to extend the scope of the AFO so that it covers any monies deposited after the order was first made.
How can the funds in a frozen account be forfeited?
Once the law enforcement agency has completed its investigation or is satisfied it has sufficient evidence linking the funds in the frozen account to criminal conduct, it may apply for all or part of the funds to be forfeited. This can be done in two ways; the issuance of an Account Forfeiture Notice or the grant of Account Forfeiture Order. Please see below for further details. Once forfeited the funds are transferred by the bank to an interest bearing account specified by the law enforcement agency and are ultimately passed to the Treasury’s Consolidated Fund.
What is an Account Forfeiture Notice?
Where it is believed that forfeiture is unlikely to be contested, a law enforcement agency may issue an Account Forfeiture Notice. The notice is served on the recipients of the original AFO explaining the intention to forfeit all or part of the funds in the frozen account on the basis that the agency is satisfied the funds are the proceeds of crime or are intended for use in unlawful conduct. The notice must set out the amount to be forfeited, the period of time in which any objection must be made (a minimum of 30 days) and the address to which any objections must be sent. If there is no objection within the time limit, the funds are automatically forfeited. This process is known as administrative forfeiture because it may be done without the need for a court hearing.
Is it possible to challenge an Account Forfeiture Notice?
An objection to an Account Forfeiture Notice should be lodged with the law enforcement agency within the time limit set out in the notice. The law enforcement agency must then apply to the court within 48 hours either to extend the period of the original AFO or to ask the court to make a Forfeiture Order.
It is possible for an affected party to apply to the magistrates’ court to set aside forfeiture retrospectively, even if no objection was raised beforehand (or within the time limit). Any such application should be made within 30 days of the expiry of the time limit for objecting to the original Account Forfeiture Notice, as above, but in exceptional circumstances the court may allow an application to be made even later. The court will then consider if a Forfeiture Order should be made or if the funds should not be forfeited at all, in which case the funds – and any interest accrued since forfeiture - will be released.
What is an Account Forfeiture Order?
Rather than issuing an Account Forfeiture Notice, the law enforcement agency can instead apply for a Forfeiture Order. All the affected parties must be notified of such an application and it will be heard in open court. For the order to be granted, the magistrates’ court must be satisfied that the funds in the account represent the proceeds of crime or are intended for use in unlawful conduct. The standard of proof remains the balance of probabilities and there is no requirement for a criminal conviction to have been obtained against any party, but the threshold for forfeiture is higher than for the making of the AFO: the court must now be satisfied the funds are in fact the proceeds of crime rather than just accepting that the applicant agency has reasonable grounds for suspicion. Well-prepared and detailed representations at this stage are vital in order to persuade the court not to order forfeiture.
Is it possible to appeal an Account Forfeiture Order?
Any party to the proceedings can appeal the court’s decision on a forfeiture application. The right of appeal is to the Crown Court and notice of an intention to appeal must be within 30 days from the date of the Forfeiture Order. The Crown Court has the discretion to make any order it considers appropriate, and if the appeal against a Forfeiture Order is successful it may order the release of all or part of the funds (plus interest).
Can the law enforcement authority appeal the decision to not grant an Account Forfeiture Order?
The law enforcement authority can appeal the decision of the court to not grant a Forfeiture Order. The appeal must be made to the Crown Court, again within 30 days of the magistrates’ court decision. As soon as the magistrates’ court declines to grant the Forfeiture Order the original AFO will cease to be effective, however the law enforcement agency may apply for the AFO to remain in place for a further 48 hours to allow time to consider whether or not to appeal. If the agency decides to appeal the decision then the AFO will remain in place pending the outcome of the appeal.
Can the court make a compensation order in respect of an Account Freezing Order?
An account holder, signatory or beneficiary to the account may apply to the court for compensation where an AFO has been granted and the funds frozen but none of the money was subsequently forfeited. The court may order compensation if it is satisfied the applicant suffered loss as a result of the AFO and that the circumstances are exceptional.
How Account Freezing Orders work
Relevant agencies, including regional police forces, the Serious Fraud Office (SFO) and the National Crime Agency (NCA), can apply to freeze bank and building society accounts where balances exceed £1,000 if the funds are suspected to be either the proceeds of criminal conduct (allegedly committed anywhere in the world) or intended for use in unlawful conduct. A magistrates’ court may grant the order whereby the account(s) in question is frozen for up to two years in order to allow an investigation to be conducted into the provenance of the money in the account.
Cash seizure and detention
Similar powers can be exercised in respect of cash: law enforcement agencies may seize cash suspected of being derived from or to be used in unlawful conduct, and must apply to the magistrates’ court within 48 hours of seizure for permission to detain it, again for up to two years.
Given the very low threshold of reasonable suspicion, these orders are relatively straightforward and easy to obtain.
Account Forfeiture Orders
At the conclusion of, or indeed at any point during, the period of cash detention or account freezing, the authorities may apply for the relevant sums to be forfeited. Although there is a higher evidence bar to be satisfied, crucially there is no requirement for a criminal conviction to have been obtained against any party (or even a criminal investigation to have been opened), and the courts routinely make forfeiture orders.
How we can help
We have extensive experience of:
- Advising on the lawfulness of any seizure or order;
- Mounting successful challenges to a detention or freezing order: this may involve making an application to set aside the order or contesting an application to extend such an order. Alternatively, it is sometimes possible to engage with the relevant investigators to persuade them that the funds are clean and that the order is unnecessary;
- Appeals against forfeiture.
We understand that the loss of access to funds can be highly disruptive and, in some cases catastrophic - financially as well as reputationally. Yet we recognise that the need for swift action should be tempered by a careful and considered strategy.
When challenging a freezing or detention order, or appealing a Forfeiture Order, the burden of proof is on the applicant and even though the civil standard – the balance of probabilities – applies, in practice it is necessary to demonstrate with compelling evidence the “clean” origins of the money. This may take some time to assemble.
It can also be important to guard against adverse implications for third parties that may arise through any challenge to an order.
Senior Associate (Barrister)
Senior Associate (Barrister)
A source describes the team as "on top of its game," thanks to being "exposed to tremendous cases."
Chambers and Partners, 2020
Commentators praise the group's "extremely professional, experienced, committed and diligent" approach."
Chambers and Partners, 2020
They have a very sophisticated high net worth practice and a real sensitivity to the kind of issues that high net worth individuals face,"
Chambers and Partners, 2019
Latest blogs & news
Account Freezing Orders (AFrOs) are a measure introduced by the Criminal Finances Act 2017 and have been available to a wide range of law enforcement agencies since February 2018.
The FCA proposes new listing guidance for cannabis-related businesses – a positive step for investors concerned about the Proceeds of Crime Act
In September 2020 the FCA published a statement regarding the listing of cannabis-related businesses (CRBs) in the UK. Since then several CRBs have been admitted to the London Stock Exchange (LSE) and appetite for investments in the medicinal cannabis industry continues to grow.
Will the CPS’ decision to update its guidance mean an increase in prosecutions for failure to disclose under section 330 of POCA 2002?
Recent guidance issued by the CPS on the offence of ‘failure to disclose’ under section 330 of the Proceeds of Crime Act 2002 (‘POCA 2002’) states that it is now “possible to charge an individual under section 330 even though there is insufficient evidence to establish that money laundering was planned or has taken place.”
To date, there have seldom been prosecutions for this offence but this guidance – effectively removing a significant element of the offence - suggests that the CPS may be looking to bring more charges in the future.
Money launderers will look for any opportunity to take advantage of organisations with weak financial controls in order to launder their ill-gotten gains. Charities, trustees, employees and volunteers who knowingly or unwittingly assist money launderers, or who fail to report suspicions, may commit a criminal offence and find themselves liable to prosecution.
HMRC monitors over 30,000 businesses to ensure their compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the regulations). Businesses which are found to have breached their regulatory obligations are at risk of civil and even criminal penalties.
On 12 November the SFO announced that it had secured an agreement from Julio Faerman to pay a total of £1,198,424.78, following a civil recovery investigation into his UK assets. These assets included a £4.25m luxury apartment in West London which the SFO suspected to have been partly purchased with funds derived from its owner’s corruption.
The Government has published a circular on extensions to the moratorium period for Suspicious Activity Reports (SARs), which acts as a restatement of the law and aims to ensure consistency in practice by law enforcement agencies in relation to the Defence Against Money Laundering (DAML) regime under section 335 of the Proceeds of Crime Act 2002 (POCA). The circular, published September 2020, sets out the responsibilities for the agencies involved in the process, and gives some indication of ways in which affected parties can play a part in the process.
North Yorkshire Police announced in October 2020 the recovery of over £300,000 by means of Account Freezing and Forfeiture Orders (AFrOs and AFoOs). The news serves as a reminder of the popularity and increasingly widespread use of this law enforcement power that was created under the Criminal Finances Act 2017.
The NCA will be pleased as punch with the highly publicised outcome of their investigation into the businessman Mansoor Hussain; using several of the tools at its disposal, the agency has agreed a settlement with Mr Hussain that will see him relinquish ownership of numerous properties, assets and cash to the amount of £9,802,828. All on the basis of his alleged links to serious organised crime in the UK but without the need for any criminal proceedings.
The SFO has followed in the footsteps of the NCA and HMRC by using, for the first time, a listed asset order (‘LAO’) to recover £500,000 worth of jewellery which they were satisfied represented the proceeds of crime.
The Government announced its intention to introduce an Economic Crime Levy in the Budget 2020. This is designed to fund government action to tackle money laundering and help deliver the reforms committed to in the Economic Crime plan 2019-2020. It has since followed up on this - on 21 July - with the launch of a consultation as to how such a levy would operate.
In the Home Secretary’s foreword to the National Crime Agency’s Annual Report 2019-20, she details the “NCA’s relentless mission to end the very worst criminality” and the report cites the categories of Serious and Organised Crime (SOC) that “destroy lives” including: child sexual abuse; modern slavery and human trafficking; organised immigration crime; cybercrime; fraud; money laundering; bribery and corruption; and, sanctions evasion.
Media reports from 24 July 2020 inform us that the City of London Police (COLP) has seized more than £2 million held in British bank accounts as a result “of profits made by an Italian mafia gang”. We are told that Westminster Magistrates’ Court ordered the forfeiture of the cash after detectives submitted evidence that it was being channelled through London in a money-laundering operation.
The rights of third parties in confiscation proceedings have been the subject of scrutiny over recent years by the courts and legislature, as detailed in our blog, ‘The rights of third parties in confiscation matters: an inhospitable landscape’. The issue was considered most recently in the case of R v Hilton  UKSC 29 in which the Supreme Court restated the law regarding when third parties may make representations to the court.
In our previous blog, ‘Unexplained Wealth Orders: An overview of the regime to date’ we considered the challenges faced by the NCA in their efforts to use the relatively new statutory tool of Unexplained Wealth Orders (UWOs). Unfortunately for the NCA, one of the four cases they have focused their efforts on since its introduction has now been unequivocally lost.
Unexplained Wealth Orders (UWOs) were introduced pursuant to the Criminal Finances Act (CFA) 2017 in order to bolster the UK’s proceeds of crime regime and they have been the subject of much media attention because of the vast sums of money and high value property involved. The NCA and other law enforcement agencies have now had over two years to avail themselves of this investigatory tool and in this blog we consider the challenges that have arisen and what lessons have been learnt to date.
In our recent blog ‘The (quiet) extension of the AML regime: an overview’ we looked at the key changes for the regulated sector, pursuant to the new Money Laundering and Terrorist Financing (Amendment) Regulations 2019 which came into force on 10 January 2020. This new legislation also extended the reach of the UK’s anti-money laundering regime to individuals or businesses who deal in the sales, purchases and storage of works of art with a value of 10,000 euros or more, regardless of the means of payment.
The Metropolitan police announced on 23 April that it had obtained a Forfeiture Order in the sum of €1.9m following a cross-border money laundering investigation. The order was obtained under provisions created by the Criminal Finances Act 2017, which allow accounts to frozen by means of Account Freezing Orders (AFOs), and ultimately to be forfeit by means of a Forfeiture Order, if a Magistrates’ Court is satisfied that the funds in the account represent the proceeds of crime or are intended for use in crime.
In a significant decision, on 8 April 2020, the High Court discharged three Unexplained Wealth Orders (UWOs) following applications by the respondents to those orders. This is the first time the High Court has acted to discharge such orders. The National Crime Agency (NCA) has already indicated its intention to appeal.
On 27 February 2020, the Gambling Commission announced that it had fined Mr Green (now owned by William Hill plc) £3 million for what it described as “systemic failings” in respect of Mr Green’s social responsibility and anti-money laundering (“AML”) controls which affected a significant number of customers across its online casinos. The fine represents the ninth gambling business to face regulatory enforcement action relating to social responsibility and AML failures since 2018.