Account Freezing Orders

The Magistrates' Court can make an order freezing any UK bank or building society account it reasonably suspects is funded by the proceeds of crime.

These are civil orders granted by the Magistrates' Court and the civil burden of proof applies - e.g. they can be granted if the court considers, on the balance of probabilities, that the funds are ill-gotten gains (referred to as "recoverable property") or intended for use in any unlawful conduct. Freezing the account allows the authorities time to investigate without having to worry about the funds disappearing into the ether.

By a quirk of geography I have considered around a dozen of these applications over the last six months. I have to say, I find following the financial paper trail absolutely fascinating. The largest value account held in excess of £6 million, which was suspected to be the proceeds of an elaborate tax fraud.

In today's article I am going to summarise the key legislation relating to account freezing orders in the Magistrates' Court, namely sections 303Z1 to 303Z8 of the Proceeds of Crime Act 2002.

Application for an account freezing order:

Section 303Z1 outlines the circumstances in which an application for an account freezing order can be made. It also provides some key definitions used throughout the chapter.

An enforcement officer can apply for an order if they have reasonable grounds for suspecting that funds held within the account:

(a) is recoverable property; or

(b) is intended by any person for use in unlawful conduct.

The order prevents the person operating the account from making any withdrawals or payments from it.

An enforcement officer is defined as either an officer of Revenue and Customs, a constable, a Serious Fraud Office officer, or an accredited financial investigator as defined within section 453 of the Act.

The relevant court is defined as a Magistrates' Court in England, Wales or Northern Ireland; a Sheriff Court in Scotland.

Restrictions on the making of an application:

Section 303Z2 places a few restrictions on the application process detailed in section 303Z1.

An application cannot be made in relation to an account which the enforcement officer suspects contains less than the minimum amount stated in section 303Z8 (currently £1,000).

An application cannot be made by a Serious Fraud Office officer or accredited financial investigator in relation to an account held in a Scottish bank or building society.

An application cannot be made unless the enforcement officer making it is a senior officer or is authorised by a senior officer. The section further defines the term senior officer.

Making an account freezing order:

Section 303Z3 states the circumstances in which the relevant court can make an account freezing order.

The relevant court may make an order if it is satisfied that there are reasonable grounds to believe that funds within the account, whether the full balance or part thereof:

(a) is recoverable property; or

(b) is intended by any person for use in unlawful conduct.

An account freezing order ceases to have effect on the date specified within the order, which cannot be more than 2 years after the date on which the order was made or varied in accordance with section 303Z4.

An account freezing order must provide to give notice to persons affected by the order.

Variation and setting aside of an account freezing order:

Section 303Z4 states that the relevant court may, at any time, vary or set aside an account freezing order on application by an enforcement officer or any person affected by the order.

In the case of an application under this section by an enforcement officer, that officer must be a senior officer or authorised by a senior officer.

Before varying or setting aside an account freezing order, the relevant court must give an opportunity for the parties or anyone affected by the order to make representations.

Exclusions:

Section 303Z5 states that an order can be varied to include exclusions on the prohibition to make withdrawals or payments from the account subject to the order.

Such exclusions could include, for example, allowing the person operating the account to make such withdrawals or payments necessary to: 

(a) meet their reasonable living expenses; or

(b) carry on with any trade, business, profession or occupation; or

(c) pay for reasonable legal expenses incurred in relation to the account freezing order.

If the relevant court grants such a variation, it can impose conditions upon it.

Restriction on proceedings and remedies:

Section 303Z6 states that in relation to an account freezing order that has been made or applied for, the relevant court may either stay proceedings or allow them to continue on any terms it thinks fit.

Bank:

Section 303Z7 further defines the term "bank".

Minimum amount:

Section 303Z8 further defines the term "minimum amount".

It states that the Secretary of State, having consulted the Scottish Ministers and Department of Justice, may by regulation amend the minimum amount.