The Criminal Finance Act 2017 introduced a number of noticeable powers. This included Unexplained Wealth Orders ('UWO’s') (which have recently been subject of a number of challenges), Account Freezing and Forfeiture Orders ('AFFO’s'), and the power to add to the moratorium period on Suspected Activity Reports ('SAR') by 31 days, up to a total of 188 days (or maybe slightly more as the first 7 days are working days).
In this article, Barnaby explores the relationship between AFFO’s and extending SAR’s, as these two powers are interlinked. SAR’s allow an initial investigation to take place and an Account Freezing Order can then be put in place when there is reasonable suspicion. Before that, the SAR can be continued on the basis that there is an ongoing investigation. Below, Barnaby sets out the law in relation to Moratoriums, and then how this affects AFFO’s, and why Moratoriums can be challenged.
Law in relation to Moratoriums
S.335 of the Act governs how SAR’s should be dealt with. S.335 (5) sets the notice period as being 7 working days. This means that prosecutors have 7 working days from the day they receive a SAR to decide on whether the moratorium period of 31 days should be invoked.
If they decide there should be further investigation, then they can invoke the moratorium period, which allows them a further 31 days. These are 31 calendar days as opposed to working days. This is in accordance with s.335 (6). During those 38 days, the property that is the subject of the SAR cannot be accessed by its owner. There is no way to challenge this.
S.336A of the Act has been added to allow prosecutors to extend the moratorium period by a further 31 days up to a total of 186 days. This application must be made to the Crown Court for every 31-day extension. An extension can be granted under s.336A (1) if the court is satisfied that a diligent investigation is being carried out and more time is needed to conduct the investigation. The court has to find that it is reasonable in all the circumstances. This application needs to be made by a senior officer.
The extension must be applied for whilst the previous order is still running and notice must be given for the extension. The Applicant will then have, in practice, until the extension runs out for the extension to be considered. This means that by making the application for extension, in practice the order is being extended, although it can still be challenged.
S.336B (3) of the Act allows the court to exclude from any part of the hearing an interested person or anyone representing that person. The person making the application can also apply to the court under s.336B (4) for specific information to be withheld from an interested person or anyone representing that person. For this to happen, the court needs to be convinced that there are reasonable grounds for suspecting that if the specified information was disclosed one of the following would happen: evidence of an offence would be interfered with or harmed; the gathering of information about the possible commission of an offence would be interfered with; a person would be interfered with or physically injured; the recovery of property under this Act would be hindered; or national security would be put at risk.
Although the procedure is not clear, normally the information which has been disclosed and the objections are first heard by the Court. Then the applications to be excluded are normally considered by the Court. After that, a decision is handed down by the Court. This is normally a written hearing.
Reason to challenge the Moratorium
There are two main reasons to challenge an extension. First, to make sure that the basis of the challenge is sound. This can be done by responding to the allegations soundly and quickly. This cooperation and opposition has to be balanced carefully but can often lead to the investigation being dropped at an early stage if done correctly. Second, to gather information as to what the basis of the investigation is. As part of the above process of response, cooperation and opposition, the evidence that forms the basis of the case of the Applicant should become clear, which will allow the Respondent to better understand the case against them.
Relationship with an AFFO
The majority of AFFO’s come from a SAR. Before AFFO’s prosecutors had to either begin a Criminal investigation, or a Civil Recovery Investigation. This would include making either a Restraint Order or a Freezing Order. Both of these investigations are costly and resource-intensive. AFFO’s were introduced to allow for a cheaper and less resources intensive option, which is also made at a lower Court.
The legal test for an extension of a Moratorium and AFFO is different. A Moratorium requires there to be an ongoing investigation. An AFFO needs there to be reasonable suspicion. It is clear from the statute that there has to be a step up for an AFFO to be made. This is further established by the respective length of the two orders. A Moratorium needs renewing every 31 days, whereas an AFFO can be made up for 2 years. This distinction can be, and should be, used when defending an initial AFFO application to say that there is not enough for an AFFO, and the correct forum should be to hold the money by way of a SAR.
Barnaby Hone is a barrister with specialist expertise in all types of asset recovery and financial crime. He is ranked in Chambers and Partners and the Legal 500 for his knowledge within POCA, asset recovery, and forfeiture. Barnaby writes the chapters on International Asset Recovery and Terrorism Finance for Millington and Sutherland Williams on POCA.