Since the introduction of the Criminal Finances Act 2017, which made amendments to the Proceeds of Crime Act 2002, law enforcement agencies in the U.K have had new tools to increase their powers to seize and forfeit suspected proceeds of crime and to disrupt money laundering – without the need for prosecution or a criminal conviction.
The Criminal Finances Act introduced Unexplained Wealth Orders (UWOs), Account Freezing Orders (AFrO) and Account Forfeiture Orders (AFOs).
UWOs, also known as ‘McMafia Orders’, have not had the desired results, with only a handful of cases being successful.
It is evident, however, that AFrOs and AFOs have been utilised much more frequently, with law enforcement agencies able to prevent the dissipation of assets while they are provided with time to investigate the source and intended use of the suspected funds.
Since 2018, it is believed that more than £300 million has been frozen because of AFOs granted by the courts.
An AFO can lead to catastrophic consequences for both individuals and businesses, either from a financial and/or reputational point of view.
Once an AFO has been made, law enforcement agencies can apply for AFrOs to permanently seize any frozen assets.
An application for an AFO is made in the Magistrates’ Court under Section 303Z3(2) of the Proceeds of Crime Act 2002 and is usually made ‘ex parte’ (without notice.) This is to prevent any immediate disposal of the suspected funds.
“The low threshold and the ease of making an AFO have encouraged law enforcement agencies to utilise this method more frequently to freeze accounts.”
The applicant is usually a law enforcement agency such as the Serious Fraud Office (SFO), National Crime Agency (NCA), Financial Conduct Agency (FCA), His Majesty’s Revenue and Customs (HMRC) or the regional police.
AFOs are usually granted in the first instance before the court. This is because the threshold is very low. The applicant only needs to demonstrate that it has reasonable grounds for suspecting that the funds (held in a bank account, either in whole or in part) meet the following criteria:
• They are ‘recoverable property’
• They have been obtained through unlawful conduct
• Or, they are intended by any person for use in unlawful conduct.
The court will grant the order on the civil standard on a balance of probabilities.
The low threshold and the ease of making an AFO have encouraged law enforcement agencies to utilise this method more frequently to freeze accounts and to prevent any suspicious funds from being dissipated.
It will often be the banks or building societies themselves who make a Suspicious Activity Report (SAR) to the National Crime Agency under anti-money laundering legislation, which can often be based on simple suspicious account activity alone.
If the NCA are satisfied with the intelligence, they may then instigate an application for an AFO (or pass it on to other law enforcement agencies to do so.)
The consequences of an AFO are that the account holder, signatory or beneficiary of the account is prevented from making withdrawals or payments for a maximum of two years, as long as there is a credit balance of at least £1,000.
Failure to abide by the terms of an AFO can be dire and may result in contempt of court proceedings and or imprisonment.
Any affected person can apply to the court to vary or discharge an AFO. Variations include:
• The need to pay for reasonable living expenses
• The need to continue with any trade, business, occupation, or profession
• It may also include the need to pay legal expenses to challenge the AFO
“The need for early, swift and sound legal advice, as well as the need to deploy a careful and measured strategy is a key ingredient to success.”
The courts will be reluctant to vary or discharge the AFO without compelling and cogent evidence, however.
What is evident is that despite the increase in law enforcement agencies using AFOs, there are a vast amount of AFOs which have been discharged and cases of applicants being successful in preventing any forfeiture of these assets — and having the assets subsequently returned.
The need for early, swift and sound legal advice, as well as the need to deploy a careful and measured strategy is a key ingredient to success.
ABV Solicitors regularly represents individuals, corporations, politically exposed persons (PEPs), high-net-worth Individuals and other people affected by AFOs and AFrOs, such as business associates and family members.
