Why enforcement authorities favour Account Freezing Orders


#Employment #Workingworld

Hitting the headlines as they start to be put into use more frequently, Account Freezing Orders (‘AFOs’) and Unexplained Wealth Orders (‘UWOs’) were part of a set of new (‘new’ at least in lawyers’ use of the word!) powers introduced by the Criminal Finances Act 2017 aimed at assisting the authorities investigate and seize ‘dirty’ money.

What are they?

In a nutshell, AFOs are civil orders that allow enforcement authorities to freeze money in an individual’s bank account while they investigate the source of the funds and decide whether to commence forfeiture proceedings. UWOs on the other hand are used to compel an individual to explain their interest in a specific property and the source of the wealth that was used to acquire it. Failure to do so can lead to the property being seized by the authorities.

A hot topic

Dubbed ‘McMafia Orders’, UWOs caused a stir when introduced and have attracted significant media attention, which Zamira Hajiyeva’s failed appeal will continue to fuel. So far UWOs haven’t lived up to their hype in terms of the statistics, though we are waiting to see if this changes post-Hajiyeva. In fact, supposedly fewer than ten have been granted since they came into force. Although they are less attractive to a journalist chasing a headline, AFOs appear to be the enforcement agencies’ real weapon of choice out of the two and have reportedly been granted in their thousands. Indeed, 95 were obtained by the NCA in a single ‘national day of action’ last February.

A wide net and a low bar

AFOs can be obtained over any account which contains more than £1,000 by senior police officials and accredited financial investigators as well as enforcement authorities, such as the NCA. So far, they have also proved difficult to contest or vary. A major reason for this is that the threshold required to obtain an AFO is low. The enforcement agency needs only to demonstrate that there are ‘reasonable grounds to suspect’ that the money is recoverable property (proceeds of unlawful conduct) or is intended for use in unlawful conduct.

There is also widespread concern that the orders are not subject to appropriate levels of scrutiny as they are obtained in the Magistrate’s Court and often made without notice to the bank account holder. Enforcement agencies are therefore able to obtain AFOs based on relatively low levels of information and investigation. For example, AFOs can be granted on the basis of publicly available documents such as land registry documentation, due diligence provider reports and/or press articles about the individual, as well as documents available to enforcement agencies, such as visa applications. There is also anecdotal evidence that the NCA has been able to obtain such orders based on historic internet articles alleging wrongdoing by an account holder’s relative.

Frozen out?

AFOs can last for up to two years and have the potential to significantly disrupt an individual’s legitimate business, as well as posing a serious reputational risk due to the media’s voracious appetite for these types of cases (which is unlikely to change post Brexit). Furthermore, although the body applying for the order technically has the burden of proof, in practice it is the respondent that has to demonstrate the legitimacy of their funds, which can be complex, time-consuming, and expensive and, if unsuccessful, can leave the door open to forfeiture orders.

Prevention better than cure

Whilst having the right team around you to mount a robust defence is key, the best way to deal with AFOs and UWOs is to ensure that there can be no reasonable grounds of suspicion in relation to your assets in the first place. It is therefore essential to regularly review and take action (where warranted) against false, inaccurate or misleading media coverage that can form the basis for suspicion, as well as thoroughly vetting and being able to explain any complex tax and trust structures to ensure that your assets are properly explainable and accounted for.

Category: Article