Banking on account forfeiture — dramatic developments in the UK & Jersey

Account forfeiture

Speed read: The National Crime Agency’s recent success in the first major appeal of an account forfeiture order, coupled with the government’s 2019 Asset Recovery Plan, indicates that even greater use of Account Freezing / Forfeiture Orders (‘AFOs’) is on the horizon. In this piece, Anita Clifford considers the latest AFO developments in the United Kingdom, including new court rules governing external requests for AFOs published on 12 November 2019, and compares the recent introduction of AFOs in Jersey. In the context of suspect bank accounts, the Jersey provisions are more robust than their UK equivalent.

Use of the account freezing and forfeiture provisions in Part 5 of the Proceeds of Crime Act 2002 (‘POCA’) can be expected to increase in the wake of the National Crime Agency’s recent appeal success. On 8 November 2019, Mr Justice Gledhill, on behalf of a three-member appellate bench at Southwark Crown Court, dismissed the first major appeal of an AFO relating to £500,000 in the bank account of Vlad Luca Filat, the son of the former prime minister of the Republic of Moldova who is currently serving a period of imprisonment. In the absence of compelling evidence to support the lawful provenance of the funds, the court was satisfied that, on balance, it was the proceeds of money laundering and corruption.1 The result comes after the National Crime Agency froze eight bank accounts in a separate matter, holding a total of £100 million also said to be the proceeds of overseas corruption, on 12 August 2019.

A workhorse not a thoroughbred
It follows that of the amendments to POCA introduced by the Criminal Finances Act 2017 it is the account freezing and forfeiture provisions that appear to be the proceeds of crime workhorse. This is of little surprise when remembered that freezing and forfeiture takes place entirely in the Magistrates’ Court whereas an application for an Unexplained Wealth Order (‘UWO’), the more sparkling of the additions to POCA, requires more complex High Court proceeding with greater costs exposure. The appeal of the United Kingdom’s first UWO is also still to come, expected to be heard in December 2019. Further, a bank account that has been frozen may be forfeited in the absence of a forfeiture hearing in the Magistrates’ Court. Pursuant to section 303ZN POCA, where a senior officer, for example of the police, or the National Crime Agency is ‘satisfied’ that the money in the bank account is ‘recoverable property’ an account forfeiture notice may be issued. If there is no objection within 30 days, the money in the bank account is then forfeited. In a scenario of this kind, there is no role for the court to play despite money being forfeited in the absence of a conviction.

Separately, if a forfeiture application is made and the bank account holder does not appear at the directions hearing to contest the application, the court may decide the entire application at the directions hearing.2

A new framework also governs external requests for AFOs to be made in the United Kingdom. The Magistrates’ Courts (Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005, Part 5B) Rules 2019, which entered into force on 12 November 2019, establishes the process for the making of an account freezing and/or forfeiture order following a request made by another jurisdiction. The framework closely aligns with the existing Magistrates’ Court Rules governing AFOs.

Developments in Jersey
The United Kingdom is not alone in creating a bold structure for account forfeiture. The revamped proceeds of crime framework introduced in Jersey in the summer of 2018 goes considerably further than POCA.3 There, it is the making of a Suspicious Activity Report (‘SAR’) that opens the gate to account forfeiture. Although in the United Kingdom, in practice it will typically be a bank-driven SAR that will bring a suspicious account to the authority’s attention, the nexus between the making of SAR and subsequent civil recovery action is more explicit in Jersey. Specifically, where a request for consent to do ‘any act or to deal with property held in a bank account’ has been received by the Jersey Financial Intelligence Unit (‘FIU’) and refused, and the Attorney General considers that there are ‘reasonable grounds to believe’ that property held in the bank account is tainted an account forfeiture notice can be served by the Attorney General on the bank account holder. A forfeiture hearing will then take place. If the bank account holder does not appear, a forfeiture order may be applied for forthwith. If the bank account holder does appear, it is incumbent upon him or her to satisfy the court that the property is not tainted. Unless he or she satisfies the court that the property is licit, a forfeiture order will be made.

The Jersey model serves as an interesting comparison to the regime in the United Kingdom. Unlike Part 5 of POCA, an account cannot be forfeited in the absence of judicial oversight. But in several ways, the Jersey provisions are markedly tougher on the respondent. In the United Kingdom, the authorities must be satisfied that the money is from unlawful conduct or intended for use in such conduct before forfeiture can be sought. Although an oxymoron, 50.1% certainty is required. In Jersey, forfeiture is sought where a lower standard is met, namely where there are ‘reasonable grounds to believe’ that money is tainted. This will be easily satisfied in circumstances where a SAR has already been made by a bank in relation to an identified account. Further still, the legislation in Jersey shifts the onus on to the respondent to satisfy the court that the funds are clean as soon as a forfeiture notice is issued. This is significant as the forfeiture notice is not required to be supported by evidence that the property is tainted. The requirements of the forfeiture notice are that it states the name of the bank account holder, specifies the details of the bank account and the property or part of the property in the bank account which in the opinion of the Attorney General is tainted, state the date and time the holder of the bank account is required to attend court to show why the property is not tainted and be served on the bank account holder and the bank itself.4

The models side-by-side
In contrast to the account forfeiture regime in Jersey, Part 5 of POCA does not contain a reverse onus. Although, as the outcome in Filat shows, a bank account holder is likely to struggle to beat forfeiture in the absence of evidence that the funds are clean, it is in principle still possible. In Wiese v UKBA [2012] All ER (D) 222 (Jun), a forfeiture order was overturned notwithstanding that the respondent did not provide any documentary evidence or give evidence on oath at the forfeiture hearing as to the provenance of the funds. Part 5 of POCA is also sufficiently wide for a respondent to attack the ‘recoverable’ or tainted nature of the property, for example by identifying deficiencies in the evidence required to be adduced by the enforcement authority in support of the forfeiture or the framing of the case of forfeiture, without having to put forward a positive case, supported by documentation, that the property is legitimate. Additionally, in a case where the respondent does choose to adduce evidence, there is no requirement that to successfully resist a forfeiture application that evidence must be sufficiently comprehensive to satisfy the court on the balance of probabilities that the funds are licit. Seen in this context, although the account provisions in the United Kingdom are robust, the Jersey equivalent is markedly more skewed towards law enforcement.

What next?
In July 2019, the Home Office’s Asset Recovery Plan noted that account freezing orders were used more than 650 times during 2018/19. Moving forward, Police and Crime Commissioners will be encouraged to make use of civil recovery powers a key component of mainstream policing. This, combined with the National Crime Agency’s recent successes which will galvanise its resolve to freeze bank accounts and a new framework for the making of AFOs following an external request, will generate even more applications in the future. This will present opportunities for further development of civil forfeiture case law and rules of court. One problem in practice is that successful appeals from the Magistrates’ Court to the Crown Court against forfeiture orders are unreported and there are few reported High Court decisions dealing with Magistrates’ Court forfeiture orders. Further, there are no rules of court to govern appeals to the Crown Court, something which can be challenging. Applications relating to account and cash forfeiture in Part 5 POCA, although unquestionably civil in nature, are heard by courts used to criminal procedure even though it is the rules of civil procedure that are more appropriate.

Beyond this, the recent enhancement of the proceeds of crime legislation in Jersey begs the question whether further additions to POCA are likely. Certainly, the Jersey account forfeiture framework, with its reverse onus and express linkage of SARs and subsequent action, is attractive from a law enforcement perspective. Any provision for a reverse onus in the United Kingdom, however, would arguably be a step too far. As a general matter, the European Court of Human Rights has not taken issue with a reverse onus to combat suspect property7 but each regime bears separate consideration. Where forfeiture in the absence of conviction is contemplated, the resolve to capture unlawfully obtained wealth must be tempered with real procedural fairness to the respondent.

 

[1] See Koos Couvee, ‘Judges Back UK Investigators in Asset Seizure Case’ published on 8 November 2019.

[2] Rule 5 of the Magistrates’ Courts (Freezing and Forfeiture of Money in Bank and Building Society Accounts) Rules 2017.

[3] Forfeiture of Assets (Civil Proceedings) (Jersey) Law 2018.

[4] Section 10 of the Forfeiture of Assets (Civil Proceedings) (Jersey) Law 2018.

[5] Page 5.

[6] For further discussion see ‘Civil cases in criminal courts’ by Jonathan Fisher QC published April 2019.

[7] Gogitidze & Ors v Georgia (Application no. 36862/05).