Proceeds of Crime – The Difference Between Account Freezing Orders And Restraint Orders

In recent years, law enforcement agencies in England have increasingly relied on financial restrictions to disrupt criminal enterprises and recover assets gained through criminal activity. Two of the most commonly used mechanisms under the Proceeds of Crime Act 2002 (POCA) are Account Freezing Orders (AFOs) and Restraint Orders. While they share the overarching aim of targeting proceeds of crime, they differ significantly in their purpose, scope, and procedural requirements.

What is an Account Freezing Order (AFO)?

An Account Freezing Order (AFO) is a tool available to enforcement agencies to prevent the dissipation of funds suspected to be the proceeds of crime. Introduced under section 303Z of POCA, AFOs allow agencies such as the National Crime Agency (NCA), the police, or HM Revenue and Customs (HMRC) to freeze funds held in bank or building society accounts.

Key Features of an AFO

1. Threshold for Application
   An AFO can be sought where there are reasonable grounds to suspect that funds in an account are recoverable property or intended for use in unlawful conduct. This threshold is lower than that required for Restraint Orders, making AFOs a practical tool in the early stages of an investigation.
2. Application Process
   Applications are made to a Magistrates’ Court. The applicant must provide evidence to support their suspicion, which could include transaction histories, unusual account activity, or links to criminal enterprises.
3. Scope and Duration
   AFOs apply specifically to the funds within a single account. They can last for an initial period of up to two years, during which time the enforcing authority can pursue further investigations or seek forfeiture of the frozen funds under section 303Z14 of POCA.
4. Challenges to an AFO
   The account holder can apply to vary or discharge the order. The court may consider whether the suspicion was reasonable or whether the freezing of funds causes undue hardship to the account holder.

Practical Use of AFOs

AFOs are particularly effective in targeting small-scale financial transactions and accounts with limited sums. Their streamlined application process allows law enforcement to act quickly, reducing the risk of funds being withdrawn or transferred abroad.

What is a Restraint Order?

A Restraint Order is a broader and more stringent measure under POCA, primarily used in criminal proceedings. Found in sections 40 to 47 of the Act, Restraint Orders are designed to preserve assets that may be confiscated following a criminal conviction.

Key Features of a Restraint Order

1. Purpose
   Restraint Orders are preventative, ensuring that assets remain available for confiscation at the conclusion of a criminal case. They can cover a wide range of property, including bank accounts, real estate, vehicles, and other valuable items.
2. Application Process
   A Restraint Order can be sought in the Crown Court either before or after criminal charges have been brought. The applicant must show that there is a criminal investigation or proceedings underway and that there is reasonable cause to believe the defendant has benefited from criminal conduct.
3. Scope and Duration
   Unlike AFOs, Restraint Orders are not limited to a specific account. They can freeze multiple assets, including funds, tangible property, and even third-party interests, where those assets are believed to be linked to the defendant.
4. Variation or Discharge
   Individuals subject to a Restraint Order can apply to vary or discharge the order. For instance, the court may permit access to frozen funds for reasonable living expenses or legal costs, subject to strict controls.

Practical Use of Restraint Orders

Restraint Orders are typically used in cases involving serious or organised crime. Their broader application allows authorities to tackle larger criminal enterprises and ensure that significant assets are not dissipated before confiscation proceedings are concluded.

Key Differences Between AFOs and Restraint Orders

While both orders target proceeds of crime, they serve distinct purposes and are applied in different contexts. Below is a summary of the key differences:

Overlap Between AFOs and Restraint Orders

While AFOs and Restraint Orders are distinct, they can overlap in certain cases. For instance, an AFO may be used to freeze a bank account during the investigative phase, and a Restraint Order may later extend the freeze to include other assets once criminal proceedings commence.

Challenges and Safeguards

Both AFOs and Restraint Orders are powerful tools, but they must be exercised proportionately to avoid infringing on a person’s rights. Safeguards include:

• Judicial Oversight: Applications must be supported by evidence and approved by a court.
• Right to Challenge: Both orders can be contested by affected individuals.
• Reasonable Living Expenses: Courts may permit access to frozen assets for basic needs.

These measures balance the need for effective crime control with the protection of legitimate interests.

Concluding comments

If you have been made subject to an AFO or Restraint Order, it is crucial you seek expert legal advice. These types of orders can cause extensive disruption to your personal and professional life; therefore, it is vital to instruct a POCA Solicitor to advise you and protect your best interests.

The primary purpose of Confiscation Orders is to deprive offenders of the financial benefits gained from their illegal activities. By implementing a robust mechanism to seize assets derived from crime, the Courts aim to reduce the attractiveness of criminal activity. This approach serves not only as a deterrent but also as a tool to ensure that criminals cannot reinvest the proceeds of crime into further illegal operations. In practice, Confiscation Orders seek to remove any property, funds, or valuables obtained through unlawful means, thus attempting to return offenders to the financial position they held prior to committing the crime.

Another critical aspect of Confiscation Orders is restitution. While the primary objective remains focused on reducing criminal profits, the proceeds seized may also be used to compensate victims of crime or cover the costs associated with law enforcement and prosecution efforts. This reinforces the notion that Confiscation Orders are an integral part of achieving justice.

What is meant by a criminal lifestyle?

One of the distinguishing features of POCA’s approach to confiscation is the concept of a ‘criminal lifestyle’. This classification allows for a more extensive investigation into the financial background of the offender and widens the scope of assets that may be subject to seizure. Under section 75 of the Proceeds of Crime Act 2002, specific criteria determine whether a person has a criminal lifestyle, allowing the authorities to presume that their assets and income are derived from criminal activity unless proven otherwise.

Being convicted of one of the following offences will result in the criminal lifestyle provisions being applied automatically:

• Drug trafficking.
• Money laundering.
• Slavery offences
• Directing terrorism.
• People trafficking.
• Arms trafficking.
• Counterfeiting.
• Intellectual property.
• Prostitution and child sex.
• Blackmail.

Once a person is deemed to have a criminal lifestyle, the Court may take a more comprehensive view of their finances, applying assumptions that all their assets and income are connected to criminal conduct.

These assumptions are applied during the confiscation process, potentially resulting in a more extensive seizure of property and assets than would otherwise be possible. An expert Criminal Defence Solicitor can challenge these assumptions by providing legitimate explanations and evidence demonstrating that particular assets or income sources are not connected to criminal activity. The burden of proof, therefore, partially shifts to the Defendant in these cases, as they must refute the presumptions made under the criminal lifestyle provision.

What is the process of making a POCA Confiscation Order?

The procedure for making a confiscation order under POCA is initiated following a conviction. The Crown Court must proceed to a confiscation hearing where the following two conditions are met:

• A Defendant has been convicted of an offence before the Crown Court.
• Either the Prosecutor asks the court to proceed to a confiscation hearing, or the Court believes it is appropriate.

Using the Prosecution’s statements and supporting evidence, the Court will decide your benefit from the general or particular criminal conduct. It will then decide on the ‘recoverable amount’, equal to the benefit obtained.

In many cases, the Prosecution’s assessment of the benefit obtained is significantly overstated.

If the Defendant can prove the ‘available amount’ (what can be paid) is less than the benefit from the conduct concerned, then the recoverable amount will be assessed as the available amount or a nominal amount if the amount available is nil. 

The available amount is calculated by adding the total of all your assets minus the value of your debts and the total value of any tainted gifts. All calculations are taken from the time the order is made.

Following the determination of the recoverable and available amounts, the Court will issue a Confiscation Order, stipulating the sum the offender must pay.

Failure to comply with the order can result in additional penalties, including extended prison sentences and further enforcement measures, such as the seizure of assets by bailiffs or other enforcement agents.

Defendants can appeal Confiscation Orders on various grounds, including disputes over the assessed benefit amount or challenges to the classification of a criminal lifestyle. Appeals must be substantiated with relevant evidence, and successful appeals may lead to a reduction or dismissal of the Confiscation Order.

How can a Proceeds of Crime Solicitor help in Confiscation Proceedings?

Whilst confiscation proceedings under POCA can seem daunting, there is considerable room for a robust defence, especially regarding the benefit amount. A Criminal Defence Solicitor will carefully analyse the alleged benefit using the skills of forensic accountants and aggressively challenge the amounts claimed. They will also force full disclosure from the Prosecution, the results of which often dramatically reduce the recoverable amount.

Concluding comments

For those facing POCA proceedings, specialist legal advice and representation is essential. The Court’s powers in this area are considerable; for example, it can revisit Confiscation Orders if new assets come to light after the initial proceedings.

To get immediate help and support, please call our office today on 02476 231000 or use the contact form.