A short guide to compensation following an Account Freezing Order

If an Account Freezing Order (AFO) is made, but the frozen funds investigation ultimately yielded no results and no forfeiture was ordered, it may be possible for the aggrieved recipient of the AFO to apply to the court for compensation to cover their loss that was suffered as a result of the AFO proceedings. Compensation will not be easily awarded and the application must clearly illustrate why (in the interests of justice) it should be awarded.

Application for compensation

To make an application for compensation of this nature, there must have first been an AFO in place, but there cannot have been any ensuing forfeiture of the funds by way of an Account Forfeiture Notice or Forfeiture Order; for further details on this, please refer to ‘Part 2 – A short guide to Account Forfeiture’.

In order to satisfy the court that the application for compensation should be ordered, two main criteria must be evidenced:

• the complainant has suffered a loss as a result of the AFO
• the circumstances are exceptional.

This second limb acts to stem the flow of arbitrary applications for compensation arising from any AFO proceedings that did not result in forfeiture or were set aside.

Procedure

The application is made to the Magistrates’ Court in writing and should include persuasive evidence as to the loss and exceptional circumstances.

‘Exceptional circumstances’ is undefined in the legislation (allowing greater discretion on the part of the court) but is taken to mean situations where the frozen funds investigation has been poorly handled by the enforcement agency, leading to very lengthy and unjustified delays to the overall AFO proceedings.

An application such as this (made under Chapter 3B, Part 5 of POCA) will be dealt with as a hearing on the complaint; consequently, the court will not hear the complaint if it has passed the strict six-month time limit to lodge the application. This is from the date the offence was committed, or the matter of complaint arose, i.e. when the enforcement agency’s efforts proved fruitless, such as when the AFO was set aside (following an insubstantial investigation) or when the authority was denied an application for forfeiture.

How much compensation is awarded and who will pay?

The amount of compensation to be paid is the amount the relevant court thinks reasonable having regard to the loss suffered and any other relevant circumstances. If compensation is awarded by the court, this will be paid out from the enforcement agency that initially applied for the AFO (either HRMC, Serious Fraud Office, the police or the National Crime Agency).

The relevant legislation relating to compensation of this nature is as follows:

• s303Z18 Proceeds of Crime Act 2002
• Rule 16, The Magistrates’ Court (Account Freezing and Forfeiture of Money in Bank and Building Society Accounts) 2017
• s51 and s127 Magistrates’ Court Act 1980.

Contact our regulatory law solicitors today

If you have any questions regarding any of the issues raised in this article, please do not hesitate to contact our specialist Regulatory Law team by using our online enquiry form or by calling 0330 191 5713.

The article above is Part 3 – A short guide to compensation following an Account Freezing Order.

Account Freezing Orders were explained in our previous article: Part 1 – A short guide to Account Freezing Orders.

Account Forfeiture Notices and Forfeiture Orders were explored in our previous article: ‘Part 2 – A short guide to Account Forfeiture.’