The Criminal Finances Act 2017 introduced new rules for the freezing and forfeiture of bank accounts. Whilst most of the headlines have been on the new provisions for Unexplained Wealth Orders, it might prove that UWOs are rarely used and that their existence is more for symbolism.
In contrast, freezing and forfeiture are likely to involve the authorities in less effort and prove to be a more useful resource for the law enforcement agencies.
What can be frozen?
Any or all of the balance in the account held with a UK bank or building society. Certainly, accounts held with branches in the UK are covered but it is unclear presently whether accounts held with overseas branches of UK banks etc., are within the scope of the rules.
The balance in the account must be at least £1,000, or the non-sterling equivalent.
How is an account frozen?
An enforcement agency can apply to the magistrates for some, or all, of an account to be frozen. An enforcement agency will be one of the Police, the Serious Fraud Office, the National Crime Agency, or HM Revenue & Customs.
To be successful, an application must convince the magistrates that there are reasonable grounds to suspect that the contents of the account are either recoverable property or that the account-holder, or any other person, will use the money in unlawful conduct.
Recoverable property is any asset which is obtained through criminal conduct in the UK, criminal conduct overseas, or conduct which although not criminal overseas would be criminal if carried out in the UK.
Importantly, there is no need for there to be a proven crime, merely sufficient to show reasonable grounds for the suspicion. The burden of proof lies with the enforcement agency, but is not a high burden and can be satisfied by showing a degree of likelihood lower than the balance of probabilities.
The application to the magistrates needs to be authorised by a senior officer of the enforcement agency concerned, and can be made ex-parte where there is a concern, as there will be in most instances, that the monies in the account will be extracted should the account-holder be put on notice of the intention to freeze the account.
How much in the account will be frozen?
Any, or all, of the account to the extent that the enforcement agency can satisfy the magistrates that the amount is reasonably suspected to be recoverable property or could be used in unlawful conduct.
The magistrates can carve out, and decline to freeze, a reasonable amount to pay for any of: the legal fees in contesting the freezing order; living expenses; and trade expenses of the account holder.
For how long can the account be frozen?
Up to two years.
Can the account be unfrozen?
The account holder, or any other interested person, can apply to the magistrates for some, or all, of the contents of the bank or building society account to be released.
Where an account has been improperly frozen, the magistrates can order the relevant enforcement authority to compensate the account-holder for losses suffered in consequence.
When can the account be forfeited ?
If, during the freezing period of up to two years, the account holder is found guilty of a relevant criminal offence, the account can be forfeited under the confiscation laws.
Otherwise, at the end of the freezing period, the contents of the bank account can be forfeited to the enforcement agency either upon the issue of a forfeiture notice by the agency or by order of the magistrates’ court. Forfeiture is dependent on the contents of the account still satisfying the requirement of being recoverable property or the intention to be used in unlawful activity, on the balance of probabilities.
Many people incorrectly think that non-tax payment is not criminal but, broadly, any wrongdoing involving a knowing act of non-declaration or under-declaration could be argued to be a criminal offence. There are additionally, the acts of concealment, falsification of invoices etc., which are, perhaps, more obviously appreciated to be criminal in nature.
With HM Revenue & Customs being primarily an agency tasked with the assessment and collection of money, it has traditionally been the case that HMRC will eschew the instigation of prosecutions for tax evasion as an administrative convenience.
Put simply, it is cheaper overall for HMRC to collect in the tax, and interest and financial penalties, whilst incurring as little expense as possible. Notwithstanding, the more egregious and higher value cases will still be prosecuted to discourage others, with some 1,000 cases considered for criminal prosecution annually.
It is unlikely that HMRC will commence a markedly greater number of criminal prosecutions in the foreseeable future. However, the ability now merely for HMRC (and other enforcement agencies such as the NCA,, in particular) to show a lay bench that there are reasonable grounds to suspect, to a relatively low standard to proof, that the content of UK bank accounts is related to non-tax payment or other tax transgressions will now enable HMRC to engage the criminal law, and to do so at little cost.
It is too early to speculate over how the new account freezing and forfeiture rules will be invoked in the years ahead, and the degree to which these new rules will be used when compared to other collection routes available to HMRC such as the direct recovery of debts provisions introduced in 2015.
With the government in need of cash, and HMRC being ever more aggressive in their management of the UK tax system, it may prove likely that magistrates’ orders for freezing, and ultimately, forfeiture, of bank accounts will become a commonly used tool.