Account Freezing Orders: What Are They and What Can You Do If Your Account Is Frozen?

Account Freezing Orders (AFO) are an increasingly used tool by law enforcement agencies. They can be unsettling and have serious consequences for the operation of your personal and business life. But there are steps that can be taken to challenge an AFO or reduce its impact. It is important to understand what they are, how they operate and what you can do when an application is made.

What is an Account Freezing Order?

An Account Freezing Orders are made by the Magistrates’ Court under the Proceeds of Crime Act 2002 (POCA).

Law enforcement agencies – including the police and HMRC – can apply to freeze money in a bank or building society account. The Court must be satisfied there are reasonable grounds to suspect that the funds are :

• recoverable property obtained through unlawful conduct; or
• Are intended for use in unlawful conduct.

These Orders can be made in circumstances where there is no criminal conviction. In many cases where AFOs are made, no criminal proceedings are ever brought.

The purpose of an AFO is simply to protect and preserve the funds while authorities investigate the origin of the money. The account holder will be prevented from withdrawing or transferring funds and making payments from the funds held.

How would I know if I am subject to an Account Freezing Order?

An Order can be made without you even being present. It may be that the first you know that an AFO is contemplated is when you are unable to operate your account. Often, an account holder is told by the bank that their account has been suspended but the bank will not disclose the reasons. A short time later they are informed of the application.

If an AFO has been granted, the relevant authority should serve the court documents on you, setting out the details of the order and any future hearing dates.

What test does the court apply when making an Account Freezing Order?

Those subject to AFO applications are often surprised by the relatively low bar for obtaining such Orders. The Magistrates Court must be satisfied that there are reasonable grounds for suspecting the money held in the account is:

• recoverable property (that is, property obtained through unlawful conduct); or
• intended for use in unlawful conduct.

The authority needs only to show that there are reasonable grounds for suspecting that the money can be traced to unlawful conduct. They don’t have to show a direct link to a specific criminal offence, nor do they need to show the account holders knowledge or dishonesty. At this stage the Court is not deciding on your criminal responsibility, only whether there is sufficient suspicion to justify freezing the funds while investigations continue. This test means that Orders can sometimes be made on very limited information.

How Do I Fund My Representation?

Unfortunately, criminal legal aid is not available for proceedings involving Account Freezing Orders. If a person or business is made subject to an Account Freezing Order they can apply to the Magistrates Court for funds to be released from the frozen account to fund their representation in challenging the order during the proceedings and to receive legal advice to secure the release of the account by the authorities. The court has the power to grant an exclusion to the order for the funding of reasonable legal expenses under S303Z5 of the Proceeds of Crime Act. It has to be satisfied that there is no other source of funding available save for the funds in the frozen accounts to fund the legal expenses. A statement of assets is usually required to confirm this.

It is important to note that any application to the court will likely be strongly resisted by the authority applying for the Account Freezing Order. It will wish to prevent any of the frozen funds being spent on legal costs.

In making the application, the court has to be provided with a detailed breakdown of the work and costs involved at each stage of the case in challenging the order. There are specific regulations which govern the rates which can be charged by your legal team and these can vary according to the complexity of the case,

If the court refuses an application for release of funds then alternative funding for legal advice and representation will be required.

Hodge Jones & Allen accept instruction on direct funding basis and can advise you on making applications to the court for the release of funds for legal expenses.

What do I need to show to successfully challenge an Account Freezing Order?

Successfully challenging an Order or demonstrating to the relevant authority that they should agree to its discharge before any final court hearing usually involves demonstrating the legitimate source and purpose of the funds. The relevant authority and the Court will want to see a clear, evidenced explanation for transactions, justifying how the funds came to be in your account and their intended use.

Evidence might include:

• Bank statements.
• Business records.
• Contracts and invoices.
• Tax returns.
• Property transaction documents.
• Evidence of gifts, inheritances or loans.
• Witness statements from 3rd parties to corroborate the explanation for the source funding to an account.

What if there is also a criminal investigation?

Whilst AFOs are not necessarily accompanied by a criminal case, they often are. Sometimes an application may be made around the time of arrest or first interview. Often, the linked criminal investigation is into allegations of fraud, money laundering or public revenue offences. In these circumstances, the issue of whether and how to respond to the AFO proceedings becomes a little more complicated. To challenge an application you need to be able to provide a clear explanation, preferably supported by evidence. If there is a criminal investigation at the same time, there is a difficult balancing exercise to manage.

On the one hand, providing evidence and explanations may help demonstrate that the funds are legitimate and assist in challenging the Account Freezing Order. But on the other hand, information provided in the course of the AFO proceedings could potentially assist investigators in building a criminal case against you or undermine the defence you will want to raise in the future.

It is vital to consider your approach to the Account Freezing Order against the wider aim of defending or diverting a criminal case. In some circumstances, a detailed explanation supported by evidence, will be the best approach and will ensure the release of funds. In others, the priority will be protecting yourself from inadvertently strengthening a criminal case against you.

Can the restrictions imposed by an Account Freezing Order be changed?

The court has power to exclude certain sums from the operation of the Account Freezing Order, allowing you access to that money for necessary expenditure.

Examples of expenditure which may be allowed include:

• Ordinary living expenses.
• Business operating expenses.
• Employee wages.
• Mortgage or rent payments.
• Professional and legal costs.

How long can an Account Freezing Order last?

An Account Freezing Order can remain in place while investigations are conducted for up to 2 years. During that time, the investigating authority may seek further evidence, request information from the account holder, or apply for forfeiture of the funds.

What happens after the investigation?

The authority may conclude its investigation and find there is no basis for the continued freeze on the account. Or you may successfully challenge the Order on the basis that the authority has not fulfilled the test for detention.

However, it may be that at the conclusion of its investigation, the authority seeks to forfeit (that is, confiscate) some or all of the money in the account. Funds are forfeited if the Court is convinced – on the balance of probability– that the funds are the proceeds of unlawful conduct

Why is it important to instruct a solicitor quickly?

It is vital to receive swift and effective advice in these cases. You need someone who can prepare evidence, engage with investigators and represent you in court proceedings. You will want to instruct an experienced financial crime defence solicitor who can look beyond the AFO and advise on possible wider risks posed by the investigation. You will want your solicitor to be able to ensure that any steps taken in the AFO proceedings do not inadvertently damage your position in any related criminal investigation.

Need Advice About an Account Freezing Order?

If your personal or business account has been frozen, obtaining specialist advice as soon as possible is essential. Our Financial Crime and Regulatory Team has extensive experience acting for individuals, professionals and businesses facing Account Freezing Orders, Account Forfeiture proceedings and wider Proceeds of Crime Act investigations.

If you need legal advice, you can call our specialist Financial Crime and Regulatory solicitors on 0330 822 3451 or request a callback. If you require urgent representation out of our office hours, please call our 24/7 Emergency Line: 0808 274 8226.