Account Freezing Orders and Account Forfeiture Orders (together known as AFOs) make it easier and quicker for law enforcement agencies to seize money connected to criminality.
They enable law enforcement agencies first to freeze, then seek forfeiture of, illicit funds held by criminals who abuse the banking system to store and transfer the proceeds of their crime.
As civil law measures which target money in an account, rather than the individual who allegedly controls it, no criminal conviction is necessary for them to be made.
All of which means that, for law enforcement, AFOs are quick and simple to obtain. They have, as such, proved very popular since their introduction into law in the Criminal Finances Act 2017.
As the name suggests, an Account Freezing Order freezes a named UK-based bank or building society account preventing any money in the account from being withdrawn. The account can remain frozen for up to two years. Forfeiture may follow if either an Account Forfeiture Notice is issued by the enforcement agency and no objection is taken, or the court grants a Forfeiture Order.
AFOs are granted by a Magistrates’ Court which needs only be persuaded that the applicant has reasonable grounds for suspecting that money held in the account in question is either recoverable unlawfully obtained property or is recoverable property intended for use in unlawful conduct.
Importantly, it is the money in the account which is the focus of the AFO application. The account holder does not themselves need to be under suspicion. Nor does any criminal offence have to have been proved at the time of the application. The AFO applicant needs only to show reasonable grounds to suspect the money may have resulted from criminal behaviour, or that it may – in the future – be used in such behaviour.
The AFO application can also be made ‘ex-parte’ (ie. without prior notice to the account holder) if the court agrees that doing this may prejudice the future forfeiture of the funds. This means that the first an account holder may know of any freezing order is once the money has already been frozen.
Once an Account Freezing Order is granted, the applying authority has the length of the order to pursue its investigation. At the end of this period (or earlier if it wishes), the authority can either accept that the test for forfeiture is not made out and apply to set aside the Account Freezing Order, or it can seek forfeiture.
Forfeiture happens in one of two ways. The first route is simplest. The enforcement authority gives at least 30 days’ notice to the subject of the freezing order (and anyone else identified as being affected by the order) of its intention to enforce forfeiture. Then, if no objection is made, the money in the account is forfeited. If there is an objection, an application can made to the Magistrates’ Court for a Forfeiture Order.
The second route is to apply directly to the Magistrates’ Court. To successfully make a forfeiture order the court must be satisfied (to the civil ‘on the balance of probabilities’ standard) that the money is either recoverable property obtained through unlawful conduct or is intended for use in unlawful conduct.
Anyone who receives an AFO application is advised to think strategically about how best to respond. While there may, at first, appear to be relatively few options for any AFO recipient, this is not always the case.
It is, for example, possible to apply to the court to vary the terms of the Account Freezing Order. The court has wide discretion to vary or make exclusions from a freezing order, including to enable the carrying on of a trade or business, to meet reasonable living expenses, or to meet legal expenses. It is important to note, however, such making such application is likely to require full disclosure of financial circumstances by the applicant.
Equally, a recipient may seek to negotiate with the enforcement agency for variation of an Account Freezing Order by agreement.
It is also possible to persuade a court to set the AFO aside altogether. However, given these applications’ relatively low evidential bar, an AFO recipient may be better advised to treat their account’s freezing as inevitable and focus resources on preparing to resist any later forfeiture application.
Importantly, anyone served with an Account Freezing Order is not required to explain the source of the funds in the account. They may well decide to keep their evidential powder dry until the applicant seeks forfeiture.
The focus of litigation in most AFO orders will be on forfeiture. As such, a respondent’s main task is likely to be gathering evidence to demonstrate that the monies in question were not obtained through unlawful conduct.
However, AFO respondents may also want to consider whether to make representations to the applicant in advance of the final determination either to persuade the agency that the application is misguided, or to negotiate an outcome.
In all such cases, respondents should pay close attention to the potential impact of their engagement in AFO litigation on any current or potential parallel criminal investigations.
AFOs can be highly disruptive. Responding effectively requires expert, strategic and practical advice. Hickman & Rose’s financial team has significant experience in dealing with AFOs, as well as with the range of other freezing and restraint orders that are increasingly deployed in cases that involve allegations of money laundering and the proceeds of crime. The team are also well versed in negotiating the tactical considerations that come into play when there is a criminal investigation running alongside the AFO.
24 Feb 2020
Ross Dixon has written an article for the FCPA Blog on the rapidly growing use of Account Freezing Orders (AFOs).
Three years since they came into existence, a total of 670 AFOs have been granted…