Earlier this month the NCA agreed a headline grabbing settlement to an account forfeiture application worth a reported £190 million pounds. The Respondent was Malik Ruiz Hussain, a business tycoon who owns the largest private real estate company in Asia. Other high profile NCA account freezing and forfeiture orders (AFFOs) obtained this year include around £500,000 forfeited from Vlad Filat the son of the former prime minister or Moldova and around £25,000 forfeited from the niece of the Bashar al-Assad, President of Syria. These Politically Exposed Persons are the types of individuals who last year were being warned about Unexplained Wealth Orders. It seems that the humble AFFO ought to have been the real power that they should have been warned about.
The NCA’s SARs Annual Report published in November 2019 shows that following Defence Against Money Laundering (DAML) requests restrained funds are up on last year from just under £52 million to just over £131 million. AFFOs have played a significant part in that increase.
Why have AFFOs become the go to option for law enforcement?
One reason may be the simplicity they offer. Civil recovery in the High Court is a relatively complex process requiring formal pleadings and complying with the CPR. The result is considerable legal input and costs incurred by law enforcement. Comparatively AFFOs can be made with little legal input; an officer simply swears an information setting out their grounds of suspicions regarding the relevant account. The CPR do not apply, in their place are the skeletal Magistrates’ Courts (Freezing and Forfeiture of Money in Bank and Building Society Accounts) Rules 2017.
Another reason is that AFFOs have a built in two year period to allow investigations to be carried out. AFFOs are a flexible tool which law enforcement can use before commencing an investigation. Respondents who are subject to AFFOs should be warned that these proceedings might well be the springboard to a wider criminal investigation. The majority of AFFOs come to law enforcement’s attention through SARs. This often raises questions for law enforcement, and once the thread is pulled at it can uncover wider issues requiring an explanation.
A further benefit of AFFOs is they do not require a criminal conviction or even for a criminal investigation to be in progress. This gives them an advantage over the traditional route of a restraint order, criminal investigation and conviction followed by confiscation proceedings. AFFOs as civil proceedings benefit from a lower standard of proof, and as applications in rem (proceedings against the property not the person) do not necessarily require the Applicant to demonstrate any kind of criminal intent of the individual involved. All that must be shown is that the property was obtained by or for use in unlawful conduct. This may be most beneficial when seeking forfeiture of “money mule” accounts. In real terms the failure of a Respondent to demonstrate a plausible audit trail of the frozen funds may well lead to forfeiture.
The lack of publicity which comes with AFFOs is attractive to all parties involved. The hearings in the magistrates’ court are far more discreet than criminal and High Court proceedings. Given the questions raised around the SFO’s dropping of large-scale investigations this year it may well be attractive to enforcement agencies to secure a result before seeking to publicise the case.
What is the future for AFFOs?
AFFOs are in vogue. The high-profile successes law enforcement have experienced this year will no doubt encourage further applications to follow in 2020. The fact that magistrates’ courts have been happy to import the case law that has built up around cash forfeiture provisions will also encourage officers to exercise these powers as they will be familiar with the law.
The new decade will bring an increasing number of account forfeiture final hearings, as the freezing order periods and the connected investigations come to their conclusion. It may also bring with it a new concept to these quasi-criminal cases; agreed settlements with confidentiality clauses in the way in which is seen in Hussain. The funds seized in Hussain are to be returned to Pakistan (rather than the consolidated fund which would normally receive the monies). This also raises questions about AFFOs being used more frequently where UK bank accounts hold criminal funds from overseas conduct. It would seem that the mind-set of UK law enforcement is shifting away from securing criminal convictions and more towards disrupting and seizing the funds of crime. They want to play the ball, not the man.
John McNamara is a barrister at 5 St. Andrew’s Hill. He undertakes work in Account Freezing and Forfeiture orders where he has been instructed by HMRC and individual respondents to advise on proceedings at an early stage. John is also experienced in cash forfeiture cases where he has acted for both applicants and respondents.