It has been six years since Account Freezing Orders first came into law. In a blog, Business Crime associate Safiatou Jallow analyses how AFOs are working, and sets out the steps anyone hit by one can take to best defend their interests.
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January 2023 marks six years since Account Freezing Orders (AFOs) came into effect under the Criminal Finances Act 2017. These orders allow the state to freeze money in bank and building society accounts it considers to be criminally tainted, and then apply for this money to be forfeited.
AFOs are quick and relatively easy for enforcement agencies to obtain. They are, as a result, popular. The financial year 2021/22 saw the SFO, HMRC, NCA and the country’s police forces together issue a total of 1,100 AFOs.
Often the first time the holder of a bank account knows it has been hit by an AFO is when they try to use their bank card and find they cannot access their money. There then follows the difficult experience of trying to establish what has happened, while simultaneously trying to secure access to funds necessary for a normal life.
But all is by no mean lost for the holders of AFO-targeted accounts. There are various techniques by which AFOs and their associated forfeiture orders can be successfully challenged. There are also innovative ways in which targeted account holders can achieve strategic victories in the face of what may, at first, seem overwhelming odds.
What is an Account Freezing Order?
The Criminal Finances Act 2017 (‘The Act’), amending the Proceeds of Crime Act 2002, introduced Account Freezing Orders into law. The Act gives Magistrates’ courts the power to order funds of more than £1,000 in a bank or building society account to be frozen for up to two years.
To approve the order, the court must be satisfied that there are reasonable grounds for suspecting the money held within the targeted account is recoverable property (i.e., the proceeds of crime) or intended for use in unlawful conduct.
AFOs are a civil law procedure concerned only with the money in the relevant account(s). As such the Magistrates court must only be convinced of the applying authorities’ claims to the civil standard of proof (the balance of probabilities) rather than the more stringent criminal standard (beyond reasonable doubt).
An AFO is granted for a set period, during which an enforcement officer should undertake an investigation to establish whether there is enough evidence to support their initial suspicion.
Before this period has expired, the enforcement officer can either accept that there is not enough evidence to satisfy the test for forfeiture (and apply for the AFO to be set aside), or they can seek forfeiture of the funds.
Forfeiture is made in one of two ways: either a notice of forfeiture is given to the interested parties, to which they must make an objection within 30 days; or the officer applies directly to the Magistrates’ court to make a forfeiture order.
How do the enforcement agencies use AFOs in practice?
As the above outline explains, the bar for obtaining an AFO is low. The application process is straightforward. It is easy for enforcement officers to satisfy the court of their ‘reasonable suspicion’. Applying for an AFO is inexpensive.
We should be unsurprised, therefore, that AFOs have proved popular with enforcement agencies over the past five years.
The government’s most recent asset recovery bulletin shows the total number of AFOs ordered by Magistrates Courts has increased every year since their introduction (apart from a very slight decrease between 2020/21 and 2021/22). [1]
But while these statistics show that a total of £132m was frozen under AFOs during the financial year 21/22, the total amount forfeited over the same period was significantly less than this at £115m. This position is repeated in previous years: the amounts that have been forfeited being consistently below the amounts that are frozen.
Clearly, enforcement agencies are not having it all their way. Individuals who have seen their bank accounts frozen by AFOs are getting them unfrozen, or achieving strategic wins by which they hold onto much of the money they were previously set to lose.
There is a great deal that someone whose bank account has been subjected to an AFO can do to secure their ongoing financial health.
What is the appropriate response to an AFO?
While it can be the case that the holder of a targeted bank account is informed of the proposed AFO in advance, this is not always the case. In practice, account holders rarely receive advance notice of the AFO. Often the first time they become aware of it may be when they can no longer access their account.
There is an established procedure for contesting an AFO. But anyone considering contesting must consider the trade-offs inherent in doing so. There are the legal costs of contesting the application. But perhaps more importantly there is the fact that information provided to explain the legitimate provenance of money in the frozen account will not exist in isolation.
It is important for anyone hit by an AFO to recognise that information that is provided in response to the AFO may be used against them – or a person connected to them – in subsequent criminal proceedings.
On top of this, AFO applications are generally made in open court which means the grounds contesting an AFO, any opposition to this, and any underlying documentation referred to, will all be heard in open court and therefore can be reported on by the media.
Individuals must consider whether the information provided to prove funds in an account are legitimate may be used against them later, and also whether they are comfortable with the information they provide entering the public domain.
What tactics can be used in response to an AFO?
For anyone whose bank or building society account is subjected to an AFO, one tactic may be to sit tight at the beginning. If the account holder can afford to do this in the short term, there may be gains in the medium to longer term by waiting to find out more about the existence (or absence) of evidence supporting the AFO and the basis of how the case is being brought.
For instance, in a recent case in which we successfully challenged an AFO, when we gathered evidence about the basis of the making of an AFO we could demonstrate that the law enforcement agency had wrongly stated in applying for the order that money in the account was transferred in breach of certain EU freezing requirements.
Obtaining the AFO is only the first step for an enforcement agency. It will need to go on to decide whether or not to make a forfeiture application. An individual may use this time to assess the enforcement agency’s grounds of suspicion and consider whether the best strategy may be to wait to see if the eventual forfeiture application is made.
If the agency is unable to gather sufficient evidence to confirm its suspicion then the AFO will either be set aside, or the agency will present more evidence in their forfeiture application which can then be dealt with.
Another tactic is to make representations to the enforcement agency which set out inaccuracies in their grounds of suspicion. These representations may need to be bolstered by the voluntary provision of documents and witness statements. These submissions should deal with specific points and should seek to persuade an agency that their suspicions are unfounded and they should apply to set aside the AFO.
In cases where several bank accounts have been frozen, an individual may consider making representations regarding some accounts, but not others. The ambition here would be forfeit the money in some accounts, but not others. Depending on the circumstances, this type of negotiation may allow the individual to: a) hold on to most of the money in the targeted accounts, b) avoid the cost of and trouble of contesting several AFOs, and c) retain their privacy.
What to do if served with an AFO application?
Anyone who finds themselves in the unfortunate scenario of having an AFO on their account is in an unenviable situation. But while being notified that your account is the subject of an AFO is a distressing experience, it is not irredeemable.
With the right legal advice it is possible to successfully contest both AFOs and their associated forfeiture orders. But there are also options beyond this. The account holder could try to negotiate a settlement using without prejudice communications which cannot be revealed in open court. In another recent case, after we discovered the basis of the case against our client, we conducted a without prejudice negotiation which resulted in the forfeiture of only £48,000 of the near £900,000 frozen. In this way – and depending on the circumstances – it may be possible to achieve strategically beneficial solutions by which account holders are able to retain their money and reputations.
Hickman & Rose’s business crime and regulatory law teams have significant experience working with AFOs and have successfully applied against forfeiture and for accounts to be unfrozen. In our experience, the key to achieving this is to understand the unique way in which the AFO process operates, and to think strategically from the very start.
[1] See sections 6.1 and 6.2 here: https://www.gov.uk/government/statistics/asset-recovery-statistical-bulletin-financial-years-ending-2017-to-2022/asset-recovery-statistical-bulletin-financial-years-ending-2017-to-2022
