Restraint orders arise out of criminal investigations. Account freezing orders are a prelude to civil forfeiture proceedings.
A restraint order anticipates a future confiscation order and accordingly deploys the language of POCA Part 2. The prosecutor (which term includes a private prosecutor) must satisfy the crown court on the balance of probabilities that there are reasonable grounds to suspect that the defendant ‘has benefited from his criminal conduct’ (as to the meaning of this phrase, see the Proceeds of Crime: Confiscation tab).
An order will usually require the defendant to provide a list of all his assets, repatriating those that are out of the jurisdiction. He will be prohibited from dealing in any way with those whose combined value is equal to his alleged benefit. Breach of the order usually results in an immediate custodial sentence.
Restraint orders are routinely obtained ex-parte. Thereafter, the defendant, or any person affected (e.g. spouse, child, business partner, creditor), may apply to the court for its discharge or variation. Appeal lies to the Court of Appeal.
In addition to showing that the defendant has benefited from identified criminal conduct, the prosecutor must also establish that there is a real risk of dissipation, in other words, that in the absence of the order, the assets will likely disappear. In this regard as in others, the prosecutor has a duty of candour to the court. It is the breach of this duty that most often leads to the discharge of the order. Prosecutors who fail fully to explain the sometimes-tortuous history, usually relevant to the risk of dissipation, may well find themselves additionally penalised in costs.
An account freezing order (see POCA Part 5 Chapter 3B) requires a magistrates’ court to be satisfied that there are reasonable grounds for suspecting that ‘money held in a bank or building society account is recoverable property or intended by any person for use in unlawful conduct’. Appeal lies to the crown court. Only enforcement officers may apply for an order (as to the meaning of ‘recoverable property’, and ‘enforcement officer’ see the Asset Forfeiture tab). The order may apply to the entirety of the monies in the account or to a specified amount. The account need not be in the name of the target of the investigation. It is increasingly common for businesses to find that monies transferred to them in payment for goods or services are the subject of an application for an order, because their customer is the subject of civil recovery proceedings.
As a matter of practice, the prosecutor or enforcement officer notifies the bank or other financial institution of the making of either order. This can prove disastrous for the defendant/respondent, even where the underlying proceedings are later discontinued, and the order withdrawn. The reason for this is because of an unanticipated consequence of the anti-money laundering legislation.
The Regulated Sector (which includes all banks and building societies) has become increasingly risk averse, no doubt in response to the burdens placed upon it by the Money Laundering Regulations 2017 and POCA, amongst others. Hence the practice of ‘de-risking’, i.e. the removal of banking services from clients whose status may pose some present or future problem for the institution.
Rather than manage the risk, the institution chooses instead abruptly to terminate the relationship. As a result, banking services can be nigh-on impossible to obtain elsewhere. Although there are no published statistics, anecdotal evidence suggests that the very existence of a restraint or account freezing order may lead to the closure of the impugned account together with all associated accounts, whether business, personal or both.