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18 March 2020

Account freezing orders

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By Sangeeta Bedi

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A great deal of attention is now being paid to the bank account freezing order (AFO) vested in the UK’s principal criminal law enforcement agencies by Part 1 Chapter 3 of the Criminal Finances Act 2017. Until recently the focus of UK’s white collar crime community was the powers awarded by Chapter 1 of this Part and by Part 3; unexplained wealth orders (UWOs) and the corporate offence of facilitating tax evasion respectively.  As I predicted in 2018 when all these provisions were implemented, the AFO power would gradually become as prominent and the corporate offence would soon fade away.

By far the law enforcement agency to exploit AFOs and UWOs the most has been the National Crime Agency (NCA). By comparison, for example, the response of the SFO, supposedly the UK’s principal anti-fraud and corruption law enforcer, has been pedestrian. Hitherto it has not obtained a single UWO and only one AFO. Whereas for 2019 the NCA using these two powers either froze or forfeited cash and other property well in excess of £200 million, the SFO only secured a paltry £1.2 million.

The AFO and its concomitant, account forfeiture orders, have been increasingly used by regional police forces as a means of tackling money laundering. Hitherto it seems that the major target of these powers are those who operate in the UK an unlicensed money remittance service for the UK-based diasporas of developing countries. There have however been some highly publicised AFO’s principally concerning bank accounts controlled by the families of erstwhile foreign politicians.

In relation to the law enforcement activity regarding the corporate tax offence there is little to report. As I predicted in 2018, there is a dearth of interest. The obvious agency to take the lead on investigations of this offence insofar as UK tax evasion is concerned is HMRC. When prodded by FOIA requests to reveal how it had sought to investigate relevant criminal conduct, HMRC reluctantly admitted that by February 2020 it had opened a few investigations and most mysteriously it was entertaining several “opportunities under review”. In relation to facilitating foreign tax evasion which is the responsibility of the SFO and NCA there is nothing to report.  Using the new offence to tackle evasion does not appear to be  a priority.

In relation to the NCA’s record during 2019 concerning AFO’s and UWOs there are four salient developments to be aware of. First throughout 2018 and the first half of 2019 the NCA’s focus was restricted to obtaining AFO’s. By July 2019 approximately £210 million had been frozen by the use of this power only three UWOs were obtained (it appears that no application for one failed). This is hardly an onslaught.

Second all of this trio concerned houses. Altogether the subjects of these orders have been compelled to explain how they afforded them. Seventeen houses are involved in total ranging from three London mansions collectively valued at £80 million to a more prosaic six homes in Northern Ireland valued at less than £500k each. As yet the NCA has not strayed into obliging anyone to explain how any other type of asset which they apparently own was obtained (although bank accounts can be the target of an AFO).  Probably the NCA will widen its repertoire this year.

Third until July 2019 the NCA had only ever sought a UWO on the basis that the subject was a PEP with the implication that the suspected underlying criminal conduct had all occurred overseas. Hence the notorious Ms Hajiyeva and her lavish shopping at Harrods. However, during last July the NCA obtained two UWOs concerning 14 houses where the subjects of each of these orders were alleged to be implicated in UK-based organised crime. It is a significant development that the NCA is now willing to deploy this remedy against UK citizens and their alleged criminality committed in the UK.

Finally and probably most importantly, the NCA has since mid 2019 sought to co-ordinate the AFO and UWO powers in attacking the same target. Until then these powers had not been deployed cumulatively). Such coordination can be discerned from the following two cases. Remarkably but coincidentally the targets are both called Hussain.

The first Hussain was a PEP. Proceedings commenced in December 2018, when the NCA obtained an AFO against him in respect of a £20 million credit balance. Then last May it obtained a UWO against him (plus UWOs against two of his relatives), requiring an explanation as to how the above mentioned three London mansions were funded. In August the NCA launched another sortie by obtaining a further eight AFOs in respect of an additional £120 million of credit balances connected with them. Finally in December the NCA proudly announced that its investigation of these assets and individuals had been settled on terms whereby the latter agreed to forfeit the most expensive of the three mansions, worth £50 million alone, plus the £140 million in the multiple bank accounts. A recovery of £190 million without anyone having been tried and convicted anywhere of any crime or any trial in the High Court of the NCA’s allegations. Surely a testament of the effectiveness of the AFO supplemented with a UWO.

This NCA victory however must be tempered by the fact that the settlement bears similarities to a UK deferred prosecution agreement; only one which relates to an individual. In the UK it is a shibboleth that only a company can avoid prosecution by means of a financial settlement under the aegis of a DPA. However de facto it seems the same has occurred here where allegations presumably of grand corruption or top end serious crime (£190 million is after all a huge sum) against individuals are shelved by the UK in return for them paying an expensive fine. Such a shelving of allegations facilitates impunity. The fact that this amount is apparently being returned by the UK Government to Pakistan from where it was extracted should be of little consolation. In congratulating itself in having settled civil proceedings on such apparently favourable terms, the NCA should be vigilant that it does not neglect its core mandate, which is to discover evidence of serious organized crime sufficient to prosecute and convict. It is seductive but ultimately mistaken to regard money disgorged (in NCA-speak “asset denial”) from serious criminals as a victory for justice if they otherwise remain unpunished. Even Al Capone went to prison for something.

The second Hussain case innovates on the first in that it demonstrates the NCA building its case against the target by applying information learned from an AFO or UWO to ramp up the pressure. The target is a Leeds-based businessman. The NCA opened hostilities with a UWO concerning eight properties worth £10 million demanding to know how Mr Hussain had afforded them. Then in January 2020 it obtained an AFO against a £1 million credit balance said to be connected with him. Finally, in February 2020 the NCA opened a third front against Mr Hussain in the form of a property freezing order (PFO) concerning the same eight properties the subject of his earlier UWO plus another nine. A major plank of the NCA’s application for this PFO was the contention that Mr Hussain had failed to be candid in his purported compliance with his UWO and that this was sufficient to satisfy the evidential threshold for the PFO. The UWO was thus the foundation for the PFO. The case continues.

The Criminal Finances Act 2017 is probably the most significant legislation concerning white-collar crime since the Proceeds of Crime Act 2002. The NCA has been outstanding in using both the AFO and UWO to ratchet up pressure on those suspected as benefitting from or harbouring the proceeds of crime committed anywhere.

Whilst it would be premature to learn lessons from the relatively sparse litigation concerning these two powers, the first Hussain case suggests that despite the seriousness of the alleged underlying criminality, the NCA may be willing to do a deal. The instinct to deny all wrongdoing is not necessarily the best option, and may be outweighed by a proposed settlement, particularly if there is a risk that the rot could spread the longer the NCA probe continues.

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