Account Freezing Orders

2021 – 2022 saw a substantial increase in the value of assets seized and recovered through Cash Seizures, Account Freezing Orders and Listed Asset Seizures. In the year 2021 – 2022 there was a 76% increase from the previous year in the amount of assets (£191 million) recovered by law enforcement agencies.  The power for law enforcement agencies to apply for Account Freezing Orders was introduced under the Criminal Finance Act 2017.  Until recently the UK has generally been slow to employ these powers. We have however seen over the last few years as confirmed by government statistics, a sharp increase in the amount of Account Freezing Orders being applied for and made.

The value of proceeds of crime recovered from Confiscation Orders, Forfeiture Orders and Civil Recovery Orders receipts from financial year 2016 to 2017 until financial year 2021 to 2022 in England and Wales, Northern Ireland jurisdictions and those which have no recorded jurisdiction[1]

You may be thinking that it is unlikely that you or your company would be subject to an Account Freezing Order. Unfortunately, in our experience that is not the case.

For example, we recently acted for 2 Chinese nationals residing in the UK in respect of an Account Freezing Order application brought by HMRC. HMRC were seeking to freeze 6 bank accounts in total, which held approximately £150,000 for a period of 6 months so that they could carry out further investigations.

Our clients’ lives would have been drastically altered if they were unable to access any of their funds for 6 months, being unable to pay rents, travel to work and pay for day-to-day amenities.

At the hearing we were able to persuade the court to reduce the amount of time the accounts were frozen to 1 month only. Further we were successful in dismissing one of the applications, meaning that an account with several thousand pounds remained unfrozen which our clients could use to live their lives with minimal disruption whilst HMRC carried out their investigations.

In our experience the first step towards successfully dismissing an Account Freezing Order application is to act without delay. The enforcement body will often look to have the hearing listed by the court shortly after making the application. It is therefore vital in our opinion that you make representation to the court as soon as possible.

What exactly is an Account Freezing Order? (AFO)

An AFO, is a civil order made in the Magistrates court prohibiting the withdrawal or payment from a bank account or building society by the operator of the account. The operator is generally the person or company named on the account.

The detailed provisions for applying for an AFO are set out in the Proceeds of Crime Act 2002.

The application can be brought by an officer of HMRC, a constable, a Serious Fraud Office officer, or an accredited financial investigator.

The circumstances in which an application would be made is where the officer has reasonable grounds for suspecting that money held in an account is recoverable property (generally being property obtained through unlawful conduct) or is intended by any person for use in unlawful conduct.

The officer is able to apply for the relevant account/s to be frozen for a up to 2 years. The officer can also apply to vary an AFO. So for example, if an AFO was initially granted for 6 months, an officer may apply prior to the end of the 6 months to vary the order, specifically to extend it for a number of months (up to 2 years).

It is important to note that the court may make exclusions regarding the prohibition on making withdrawals or payments from the account to which the AFO applies. The exclusions may include provisions allowing the individual to meet their reasonable living expenses or to carry on any trade, business, profession or occupation. An exclusion may also be made for a person to meet their reasonable legal expenses.

Unfortunately, the reality is that even in some cases where exclusions have been allowed, it can be a tedious and slow process for funds to actually be released from the relevant frozen accounts and as such our solicitors attempt to dismiss the AFO application in the first instance.

It is also to be noted that any AFO application must be for a minimum amount of £1,000.

What if the AFO is granted?

If the AFO is granted it is very likely that the officer will use the ordered prohibition time to carry out further investigations. At the end of the period the officer will either allow the AFO to come to an end and thus the prohibition is immediately lifted, or the officer may apply to forfeit the money held in the frozen account.

If an application to forfeit the money held in the account/s is granted, this essentially means that the money will be taken from a person’s account and paid into the Consolidated Fund.

It is important to note that if money held in the frozen account is not forfeited the individual subjected to the AFO can make an application to the court for compensation. The court must be satisfied that the individual has suffered loss as a result of the AFO and that the circumstances are exceptional.

Overview

AFO applications are on the rise therefore it is extremely important that if you receive an application you deal with it swiftly. The turn around time between the application and the hearing is often short, so there is no time to delay. Simply letting an AFO be granted could see your bank accounts frozen for a period of 2 years. The Dispute Resolution team at TV Edwards LLP, are experts in dealing with AFO applications and are able to provide quick and tailored advice and assistance. Should you require assistance regarding an AFO or Forfeiture application please do not hesitate to contact us on 0203 440 8123 or at enquiries@tvedwards.com

[1] 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#main-headlines

*This article was co-authored with Nii-Amaa Ollennu.