My bank account was wrongly frozen: can I claim compensation? John McNamara discusses
Law enforcement can be quick to seek account freezing orders under the Proceeds of Crime Act 2002 (“POCA”). They are designed to preserve the balance of an account while the origin and intended use of the funds are investigated.
The effect of these orders can be devastating to individuals and businesses. The orders can last for many months, or even years, only to be set aside. This is often done by way of a letter from law enforcement to the respondent who is just relieved to have access to their funds again.
It is important at that stage that those individuals have careful advice as to whether they are entitled to compensation. That is a separate consideration to the recovery of legal costs.
When is compensation owed?
There are provisions for individuals and businesses subject to these orders to apply for compensation. The following needs to have occurred[1]:
- There needs to have been a freezing order made;
- No order for forfeiture has been made (either because the freezing order or forfeiture application was set aside, or the applicant was unsuccessful at the final hearing);
- The magistrates’ court are satisfied there has been a loss;
- The circumstances are exceptional.
In order to satisfy the court there has a been a loss, and the circumstances are exceptional it is likely that evidence will be required. It may be that evidence on this issue is not immediately available to an individual who has been focused on the litigation.
How long do I have to apply for compensation?
These types of proceedings are dealt with as a “hearing on complaint.”[2] Hearing on complaints are subject to a to 6 month time limit from the date the matter of complaint arising.[3] That is a strict time limit, and the time starts from the date on which the freezing or forfeiture order is set aside, or when the applicant is unsuccessful in applying for forfeiture.[4] Failing to lodge an application within the time limit will be fatal.
Respondents who have had freezing orders removed should seek advice promptly, lodge an application with evidence and be prepared to give evidence on the issue of the loss they have experienced.
John McNamara is a barrister practising in the areas of business crime, financial regulation, and asset recovery. John has been seconded to the Enforcement and Market Oversight Division of the FCA for 9 months dealing with registration applications for crypto-asset firms. He is ranked in the Legal 500 2022 for Proceeds of Crime & Asset Forfeiture.
He specialises in all aspects of financial crime, proceeds of crime and related areas. John is an experienced proceeds of crime practitioner. He is sought out by defence solicitors and law enforcement agencies for complex and high value POCA cases and is often specifically instructed for the POCA aspects of a broader criminal case. He has dealt with cases concerning international and mutual recognition issues, and has a growing practice in civil recovery encompassing all chapters of Part 5 of POCA.
References
[1] S303Z18 POCA
[2] Rule 16, The Magistrates’ Court (Account Freezing and Forfeiture of Money in Bank and Building Society Accounts) 2017; Section 51 Magistrates’ Court Act 1980
[3] Section 127 Magistrates’ Court Act 1980
[4] Davis v Leicestershire Police [2012] EWHC 3388 (Admin)
