Leamington Spa Chambers

Most account holders first learn of an Account Freezing Order when a payment fails, a card is declined or the bank refuses to release funds, and only afterwards receive a copy of an order made by a Magistrates’ Court at a hearing of which they were given no notice. The purpose of this article is to explain, in general terms, what an Account Freezing Order ("AFO") is, how it comes to be made, and the steps that an account holder ought to consider taking at the outset.

What is an Account Freezing Order?

An AFO is an order made pursuant to Chapter 3B of Part 5 of the Proceeds of Crime Act 2002 ("POCA"), sections 303Z1 to 303Z19. Those provisions were inserted by section 16 of the Criminal Finances Act 2017 and came fully into force in England and Wales on the 31^st January 2018. An AFO prohibits each person by or for whom the account is operated from making withdrawals or payments from the account, subject to any exclusions that the court permits.

Part 5 of POCA is concerned with civil recovery. Proceedings for an AFO are therefore civil proceedings, brought against the money itself rather than against any individual. No criminal charge, prosecution or conviction is required before an AFO can be made, and the account holder need not be suspected of having committed any offence personally.

Which accounts can be frozen?

The power applies to money held in an account maintained with a "relevant financial institution", which is defined in section 303Z1(6) as a bank, a building society, an electronic money institution or a payment institution. The power is therefore not confined to the high street banks, and extends to many app-based and online accounts provided by electronic money and payment firms.

Cryptoassets are dealt with under separate provisions of POCA, inserted by the Economic Crime and Corporate Transparency Act 2023 and in force in England and Wales from the 26th April 2024, which are addressed in our article on banks, Suspicious Activity Reports and cryptoassets.

Who can apply?

An application may be made by an "enforcement officer", which section 303Z1(6) defines as a constable, an officer of HM Revenue and Customs, an officer of the Serious Fraud Office or an accredited financial investigator of a description specified by order. In practice, National Crime Agency officers also use the power: the Director General of the NCA, and NCA officers authorised by the Director General, fall within the definition of "senior officer" in section 303Z2(4). Immigration officers may use the power in relation to immigration and nationality related conduct, by virtue of section 24 of the UK Borders Act 2007, which applies the civil recovery provisions to an immigration officer as they apply to a constable.

By section 303Z2(2), the officer making the application must either be a "senior officer" or be authorised to make the application by a senior officer. In the case of the police, a senior officer is an officer of at least the rank of inspector. Unlike some other POCA powers, there is no exception for cases of urgency.

By section 303Z2(1), no application may be made if the money in relation to which the officer's suspicion exists is less than the "minimum amount", which section 303Z8 sets at £1,000.

What does the court have to be satisfied of?

Pursuant to section 303Z3(2), the Magistrates’ Court may make an AFO if satisfied that there are reasonable grounds for suspecting that the money held in the account, or part of it, is either:

• recoverable property, meaning, in broad terms, property obtained through unlawful conduct; or
• intended by any person for use in unlawful conduct.

"Unlawful conduct" is defined in section 241 and includes conduct in the United Kingdom which is contrary to the criminal law, and conduct abroad which is unlawful under the law of the country in which it occurs and which would also be unlawful if it had occurred in the United Kingdom.

The test at this stage is one of reasonable suspicion only. It is a relatively low threshold, and it is a different and lower test from the one which applies if the enforcement authority later seeks to have the money forfeited, at which stage the matters alleged must be proved on the balance of probabilities.

Why was the account holder not told about the hearing?

By section 303Z1(4), an application may be made without notice if notice of the application would prejudice the taking of steps to forfeit the money. Most applications are made in this way. The Divisional Court in R (Javadov) v Westminster Magistrates’ Court [2021] EWHC 2751 (Admin) held, at [51], that it will often be entirely appropriate for a without-notice application to be heard in private.

The order itself must provide for notice to be given to persons affected by it (section 303Z3(5)), which is how the account holder will usually come to learn of it. The application must be made in accordance with the Magistrates' Courts (Freezing and Forfeiture of Money in Bank and Building Society Accounts) Rules 2017, and supported by the written evidence on which the applicant relies.

Can the whole balance be frozen?

An AFO may apply to all or part of the credit balance of the account (section 303Z1(5)). Where the officer's suspicion relates only to particular payments into the account, it may be arguable that the order should be confined to that part of the balance, and that the remainder should be released.