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Restraint and Property Freezing Orders

Author: Nicola Sharp  13 May 2021
2 min read

Posted in: Freezing Order.

Nicola Sharp of Rahman Ravelli details a case that shows how prosecutors can continue to exert powers over assets after a criminal investigation.

The case of S v J [2021] 5 WLUK 47 is a useful illustration of a prosecuting body’s powers for dealing with alleged criminally-gained property/assets following adjoining criminal investigations. 

In S v J, the SFO’s application to discharge a restraint order was granted by the court. The original restraint order was granted in 2004 following a criminal advance fee fraud investigation. These underlying proceedings concluded in October 2020 and, therefore, the SFO applied to discharge the restraint order and sought an alternative method (in the form of a property freezing order) to control the risk of dissipation of assets. 

Background

The restraint order related to a British-Lebanese national referred to as J in these proceedings. J was the owner of a bank account and also a director of a bank, being the second respondent. He left the UK in 2001 and was the subject of a UK arrest warrant. It was thought that he was in Lebanon. The bank’s banking licence was revoked and, in addition, the US Treasury classed the bank as a specially designated global terrorist. This was based on allegations that the bank had knowingly allowed banking activities of a political party which had a paramilitary wing. As a result, the bank went into liquidation. 

The SFO commenced an investigation. This identified J as being a key player in a vast criminal enterprise, where a number of victims worldwide were defrauded through advance fee fraud.

The restraint order prohibited J from removing, disposing of, dealing with or diminishing the value of any of his assets up to £4 million, including funds in certain bank accounts. The restraint order was amended by consent in May 2012, and the bank was joined as a third party to the restraint proceedings. 

The Law

The proceedings to which the restraint order related concluded in 2020. The restraint order that effectively held J’s assets should, therefore, have been discharged pursuant to s.77 (6)(b) of the Criminal Justice Act 1988.   

In order to continue the retention of the assets and the restrictions placed upon J - rather than have use of the monies return to being at the discretion of the respondents - the SFO submitted an application for a property freezing order. However, for a property freezing order to be granted the SFO needed to show that the property was “recoverable”, as per s.245A(5) of the Proceeds of Crime Act. 

Recoverable property is a term which includes property that was obtained through unlawful conduct, property which represents the original property or property which replaces the original property. The case of Nuttall & Anor v National Crime Agency  [2016] WLR(D) 422 highlighted the fact that a key consideration for property freezing orders is whether there was a risk of dissipation of the assets. 

The Judgment

In S v J, the SFO was able to demonstrate that it believed that:

  1. the property was or included recoverable property, and
  2. there was a risk that if the order was not granted, the assets would be dissipated. 

The court granted both the discharge of the restraint order and the application for the property freezing order. 

Conclusion

While the outcome of the underlying proceedings is unclear, this case demonstrates how the SFO and other prosecuting bodies are able to use the legal means they have at their disposal in order to continue to exert powers over individuals and/or companies after an investigation has been concluded - where those concerned are potentially conducting fraudulent or criminal behaviour; particularly where it relates to money laundering or terrorist financing. 

The court exercising its discretionary powers to continue the restrictions placed upon an individual highlights how the legislation is used to control the proceeds of crime.

Nicola Sharp C 09983

Nicola Sharp

Partner

nicola.sharp@rahmanravelli.co.uk
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Nicola is known for her fraud, civil recovery and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.

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