The Definition of what a Bank Account in AFFO’s has been expanded to include Electronic Monetary Institution’s (‘EMIs’) and Payment Institutions (‘PIs’).

One of the most common issues which arise in Account Freezing Order’s which lead to them being discharged is when the account seized is not within the statutory definition of a 'bank account.' This has now been changed.

Section 303Z5 originally defined a bank as:

(1) “Bank” means an authorised deposit-taker, other than a building society, that has its head office or a branch in the United Kingdom.

(2)In subsection (1), “authorised deposit-taker” means—

(a)a person who has permission under Part 4A of the Financial Services and Markets Act 2000 to accept deposits;

(b)a person who—

(i)is specified, or is within a class of persons specified, by an order under section 38 of that Act (exemption orders), and

(ii)accepts deposits;

(c)an EEA firm of the kind mentioned in paragraph 5(b) of Schedule 3 to that Act that has permission under paragraph 15 of that Schedule (as a result of qualifying for authorisation under paragraph 12(1) of that Schedule) to accept deposits.

(3)A reference in subsection (2) to a person or firm with permission to accept deposits does not include a person or firm with permission to do so only for the purposes of, or in the course of, an activity other than accepting deposits.

This meant that only accounts held with a registered bank in the UK or under the EEA legislation could be seized. With the rise of EMIs and PIs the legislation has missed a large number of institutions which hold money and behave like accounts. Suspicious Activity Report’s (SARs) often refer to the movement of money through these different accounts.

The purpose of the AFFO’s was to provide an easy mechanism to stop money; highlighted in SAR’s without having to go through more complicated, time-consuming and expensive procedures.  This legislative issue has led to a number of AFFO’s being discharged as they purported to freeze accounts not covered by section 303Z5.

Legislative changes

Steps have now been taken to amend the legislation. Under Sechele 12 of the Financial Services Act 2021, which received Royal Assent on  the 29 April 2021, money held in EMIs and PIs can now be subject to AFO’s. It is still to be seen if the legislation will cover all the institutions envisioned as part of the change.

These changes are retroactive as set out in s.33 (2) of FSA 2021, which states that the amendments ‘are to be treated as having come into force at the same time as the provisions they amend'. Therefore, any order currently in force against what was not a bank has now been retroactively healed.

An interesting area might be if any AFFO’s are  reapplied for after being discharged on the basis of the old provisions. It is unlikely that the money will still be in the account, but it could provide the basis for some interesting arguments.

Overall this amendment it is an important change to the legislation, which widens the scope of AFO’s, and allows them to fulfil their original purpose.

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.