Account Freezing Orders
As the name suggests, an Account Freezing Order (AFO) is an interim injunction that prevents a party from dissipating their assets for a period of time by freezing a bank or building society account. In doing so, the value of a respondent’s assets can be preserved until a judgement can be enforced.
AFOs are not to be confused with Account Forfeiture Orders (which is when money in an account is actually transferred and forfeited from the account holder), and whilst both were introduced by the same section 16 of the Criminal Finances Act 2017 (the CFA), which had the effect of adding in new sections of the Proceeds of Crime Act 2002 (POCA), it should be noted that forfeiture does not necessarily follow a freezing order.
The CFA (which amended Part 5 of POCA) was introduced by the UK government to allow for quicker, easier, and more cost effective seizure of illicit funds, thereby ameliorating perceived shortcomings in the ability of law enforcement agencies to tackle economic crime. The first successful AFO was granted in early 2019.
The procedure for obtaining an AFO is governed by the Magistrates’ Court (Freezing and Forfeiture of Funds in Bank and Building Society) Rules 2017. AFO’s are usually made on an ex parte basis, meaning the respondent to the application will not be made aware that an AFO has been sought until the order is granted.
The law enforcement agency will apply to the Magistrates’ Court for an AFO, which if granted, will usually be for a period of three to six months. An AFO can be granted for a maximum period of two years at which point it will expire, but during this time the parties can make application(s) to vary or set aside the AFO. Within this period the law enforcement agency may also apply for an Account Forfeiture Order.
Turning to section 303Z3 POCA, in order to grant an AFO the Magistrates’ Court must determine that:
- the relevant court may make the order if satisfied that there are reasonable grounds for suspecting that money held in the account (whether all or part of the credit balance of the account)
- is recoverable property, or
- is intended by any person for use in unlawful conduct.
AFOs are civil orders, being processed and applied for through the criminal courts, and therefore, rather unusually, they are subject to the civil standard of proof. A Magistrates’ Court will need to determine whether on the “balance of probabilities”, not “beyond reasonable doubt”, that there are reasonable grounds for suspicion.
An AFO can only be granted against a bank account where the value of the account is more than the “minimum amount”, which is stipulated in section 303Z8 as £1,000.
The straightforward nature of the application, the low evidential bar, as well as the relatively small monetary threshold, means AFOs are a relatively popular remedy for law enforcement agencies, and are often granted.
Unexplained Wealth Orders
Like AFOs and Account Forfeiture Orders, Unexplained Wealth Orders (UWO) were also introduced by the CFA adding in new sections to POCA. Unlike AFOs, however, UWOs are considerably rarer. For example, by 2022 (four years after they had been made available), only nine orders had been issued, relating to just four cases, and none had been obtained since 2019.
Moreover, applications must be made to the High Court, not the Magistrates’ Court, and the minimum value of the property is a far greater sum.
However, in March 2002 the UK Government fast-tracked the passage of the Economic Crime (Transparency and Enforcement) Act 2022 (ECA). The purpose of ECA was to crack down of foreign elites abusing the United Kingdom’s open economy and to tackle the wider issues of economic crime. Such a desire was clearly galvanised by the Russian invasion of Ukraine.
Part 2 of ECA significantly reformed the UWO regime to better support law enforcement investigations. It is expected that this will make UWOs easier to obtain, enforce and monitor. Where UWO’s are similar to AFOs is in the fact that both are mechanisms designed to confiscate the proceeds of crime by using civil, rather than criminal powers.
In order to obtain an UWO, a law enforcement agency can make an application which must specify the property in respect of which the order is sought, as well as the person for whom the enforcement agency thinks holds the property.
The first part of the statutory test is found in section 362B(2) POCA. In order to grant a UWO, the High Court must be satisfied that:
(a) The respondent holds the property, and
- The value of the property is greater than £50,000
Section 362B continues:
(3) …there are reasonable grounds for suspecting that the known sources of the respondent’s lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property.
Again, the burden of proof is worth noting. Finally, from the same section of POCA:
(4) The High court must be satisfied that –
(a) The respondent is a politically exposed person, or
(b) There are reasonable grounds for suspecting that –
(i) The respondent is, or has been, involved in serious crime (whether in a part of the UK or elsewhere); or
(ii) A person connected with the respondent is, or has been, so involved.
The definition of ‘politically exposed person’ (PEP) is detailed at section 362B(7) POCA as “an individual who is, or has been, entrusted with prominent public functions by an international organisation or by a state other than the UK...”, or, “a family member of that individual”, or “someone known to be a close associate of that individual”.
As can be seen from the above, section 362B(2) is fairly complex, with multiple elements that have to be considered. To aid interpretation, it is a good idea to consider the first UWO imposed in the UK, granted in 2018.
Zamira Hajiyeva was the wife of Jahangir Hajiyeva, an Azerbaijani banker jailed in his home country in 2016 after being accused of defrauding the state-owned bank he ran of up to £2.2bn.
The property in question was a five-bedroom house in Knightsbridge which was valued at £11.5m; Jahangir Hajiyeva’s official salary of the bank between 2001 and 2008 was a maximum of £54,000. As such, a UWO was granted. In Hajiyeva v NCA, the Court of Appeal rejected the appeal against this UWO.
If granted, the UWO itself is a requirement that a respondent set out the nature and extent of their interest in the property, explain how they obtained the property, and, crucially, how any costs incurred in obtaining the property were met.
The respondent is then given a period of time with which to comply with all these requirements. During this time the court may make an interim freezing order in respect of the property, should it be deemed necessary. Where the respondent fails to make a satisfactory response, without reasonable excuse, the property is presumed to be recoverable.
How we can help
Financial crime partner Frances Murray has a wealth of experience in financial crime and is uniquely placed to support clients’ that are the subject of Account Freezing Orders or Unexplained Wealth Orders.