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Bank Acct frozen...bank not explaining

A friend of mine [honestly] went into bank to take out a large amt of cash that he had ordered [his business deals in a lot of cash purchases].

The bank wouldn't give him the money [the money was in the acct] and would only say 'we currently can't process your transaction'; when he pushed them they gave him a letter saying exactly the same thing. Basically his acct has been frozen and he can't find out why.

His solicitor seems to think that if it was the police they would have had to serve a notice on himabout it??

Is there something whereby the bank has reported him as potential money laundering and there is a 48 period for HMRC to make an assessment??? Or is it more likely that he has actually been on HMRC radar and they have frozen it??

He's a legitimate trader with about 25 Eastern European workers all about to go home tomorrow for xmas and he can't pay them!!! Similarly he has a lot of local suppliers that he can't pay??

His solicitor has faxed a letter to the bank expalining the effects...but is there a way he can find out for definite why it has been frozen????

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20th Dec 2012 13:56

Regular orders for large cash withdrawals?

It doesn't sound like the norm, so would probably stand out like a sore thumb to the bank, and therefore a SOCA report may well be the cause and they cannot handle a 'suspect' transaction without permission from SOCA.

David Winch is the guy for a proper explanation.

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20th Dec 2012 14:42

Money laundering suspicion?

If the bank have a suspicion that the customer may be engaged in "money laundering" (which has a very wide definition - basically if any monies in the account have been derived, directly or indirectly, from crime of any description then the customer will be engaged in money laundering) then the local branch will have filed a report internally with the bank's Money Laundering Reporting Officer and frozen the account.

The MLRO will then (if he agrees that there is a suspicion) file a report with SOCA.  The account will remain frozen until the earliest of (i) SOCA reply with consent to unfreeze the account, (ii) seven working days expire commencing with the day after the day the report was filed with SOCA and SOCA have not responded to the report, or (iii) the bank satisfies itself that it no longer has grounds for its suspicion.

The bank will not tell its customer that it has filed a report of a suspicion of money laundering because that could amount to 'tipping off'.

So the customer will simply be fobbed off with the "we can't do it at present" line and no further explanation.

In practice SOCA normally respond to reports within 3 working days (often within a day or two) so keep checking with the bank whether the problem has been resolved.

The bank MIGHT confirm to the customer's solicitor that they are awaiting a response from SOCA.

It MIGHT help to give the bank a full explanation of the activity on the bank account and the legitimate reasons for drawing large amounts of cash.  The bank might then decide they are no longer suspicious and unfreeze the account.

But the risk is that no-one at the bank will want to unfreeze the account until a response is received from SOCA.

David

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20th Dec 2012 16:41

Thanks

At least he's now got an idea of the timescale....

 

 

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23rd Dec 2012 16:50

David...couple of follow up questions...

1. If after the 7 days the money still isn't released, does that mean SOCA have asked the bank to hold it??

2. If so, what happens next?? Do SOCA contact him or how can he contact SOCA to try to get it released or does it juts disappear into a great big HMRC Guantanamo bay type of void, where he can't find out whats happening?

He's more than confident he can prove it's origins and the business etc so what can he do to expedite this process?? [i've got a feeling that the answer is 'nothing, we're talking about big briother here']

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23rd Dec 2012 19:12

After 7 working days

If SOCA have not replied after 7 working days, or if SOCA have consented to the bank releasing the money, then the money will be released (or certainly should be!).

If the 7 working days have expired and the money is not released that indicates that SOCA have refused consent. (Don't forget a 'working day' excludes Saturdays, Sundays and Bank Holidays - so 7 working days is longer than a week!)

That means we enter what is known as the 'moratorium period'.  The moratorium period is a period of 31 (calendar) days starting with the day on which the bank received notice of SOCA's refusal of consent.

In effect the account remains frozen until the end of the moratorium period.

After that - unless something else happens in the meantime - the money is released to the customer.

But I would strongly advise the client to get legal advice from his solicitor urgently if the bank have not released the money after the 7 working days - for the reasons discussed below.

The point of the 'moratorium period' is that SOCA (or HMRC or some other authority) have an opportunity in the meantime to apply to the courts for an order which will restrain (meaning 'freeze') the account (and normally all his other assets as well) until further notice.  Such an application could be made, for example, where a criminal investigation has been started (even if only very recently) into a criminal offence from which the account holder (or someone close to him - such as a spouse, or relative, or company with which he is connected) may have benefited.  See ss 40-42 PoCA 2002.

An application for a restraint order is made 'ex parte'.  That means the investigator or prosecutor makes the application to the court in private and the person who is to be the subject of the restraint order is not told about the application until after the order has been made (and has come into effect).

The subject will then receive a copy of the restraint order made by the court (and so will the bank).  At that stage the subject can make application to the court (with a copy to whoever obtained the restraint order) for a further hearing at which the subject asks the court to revoke or modify the restraint order. (Of course the client will need his solicitor's help in making an application to the court.)

Obviously in relation to a legitimate business the subject will be asking the court to (at least) modify the order so that legitimate business activities can continue.  At that hearing the other side will no doubt put their reasons for keeping the restraint order in full force (for example that it is to prevent the subject removing the suspected proceeds of crime).

So, if the seven working days have expired in your client's case and the bank still won't release the money then your client should get legal advice from his solicitor who (hopefully) will be familiar with the legislation and with the practical operation of restraint orders.

In that event the client should be expecting to be served (quite soon) with a restraint order (with supporting documents setting out what the suspicion is) and should then immediately apply to the court to have the restraint order lifted or modified under s42(3).  The client will no doubt want the restraint removed entirely - but the court is unlikely to be in a hurry to do that (in case the client actually is one of 'the bad guys').

So the client also needs to have a 'Plan B' to ask for some relaxation of the restraint order.  He needs to ask himself what is the minimum relaxation he needs to continue in business.  How much per week or per month would he need to be able to withdraw from the account?  Can the client back that up with records, for example, showing how much (demonstrably) legitimate expenditure he has incurred over, say, the past 3 months?  Would he be able to prepare, say, a weekly (or monthly) list of payments he wishes to make and have the investigator or prosecutor approve the list each week (or month) in advance and permit him to make those payments from the account?  If not, is there some other way things could be made to work so that the account can be used and the investigator / prosecutor can be satisfied that proceeds of crime are not being squirrelled away?

A restraint order, once in place, continues in force until the court makes an order lifting it.  A restraint order can continue in force for years while investigations - perhaps followed by a prosecution - continue.  So just folding his arms and waiting it out is unlikely to be an attractive option for the client.

By the way, the solution is NOT to open an account with another bank (because a restraint order normally applies to ALL the bank accounts and assets of the subject - including bank accounts he hasn't opened yet) NOR would it be a good idea to put monies through someone else's bank account to avoid the problem (because if the client is caught doing that he looks very much like one of 'the bad guys' and the person whose account he uses could himself become a suspected money launderer).

I hope that helps.  In a nutshell - the client needs to get good legal advice from a solicitor.

David

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23rd Dec 2012 20:10

Thank you very much David.

Again the power of the internet and the complete generosity of its inhabitants amazes me!!!

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23rd Dec 2012 20:38

Well . . .

 . . . on the one hand it's Christmas innit, and on the other if at some stage in the future your client needs a forensic accountant who knows something about the Proceeds of Crime Act 2002 and proceedings in the Crown Court you might be able to recommend somebody ;-)

David

Accounting Evidence Ltd

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23rd Dec 2012 21:40

My client

I got a new client a few years ago who had decided to form TWO companies but only open ONE bank account. He made about £125k of payments out of one company bank account that related to the second company. He'd been putting his own money into the bank account to fund the payments. When I found out I explained that he shouldn't be doing it and I explained that he should talk to his bank and asked them to lend the money for a few seconds so the money could be passed around to pay off the debt from one company to the other via him. The bank didn't want to do that because they said it was "suspicious". I think it was beyond their comprehension! Eventually, I mean years later, he started to do what I suggested as an alternative - make a payment from one company to him and then he pays the other company and the other company pays the first company. Then repeat until all debts are netted off as far as possible. After he had done about £50k worth of transactions the bank stopped them due to "suspicious" activity! It would appear that banks, etc. are totally incapable of judging criminal activity and sensible activity even when given several years notice.

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23rd Dec 2012 22:35

What happened to innocent until proven guilty

I find it difficult to understand how someones money can be withheld from them before they have been convicted of any offence. Whatever the law says this is so wrong on a fundemental level.

What you are saying is that he could be totally innocent, yet his business could be destroyed, he could lose his house by being unable to pay his mortgage, in fact he could be destroyed, all on the basis of a totally wrong "suspicion" which never even makes it to court ?

How did our laws ever become so corrupt?

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By Glennzy
23rd Dec 2012 23:04

It's the only part of UK law where this applies
If memory serves me right and David Winch may correct me but the proceed of Crime act is the only part of UK law where "innocent until proven guilty" does not apply.

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24th Dec 2012 07:43

Innocent until proven guilty

The concept of "innocent until proven guilty" forms an important element in the European Convention on Human Rights (article 6(2) says "Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law").

Section 3 Human Rights Act 1998 requires statute law to be read and given effect in a way which is compatible with the Convention rights so far as it is possible to do so - effectively almost making UK statute law subject to the Convention.

But (there's always a but . . . ) the OP's friend has not been charged with a criminal offence.  So article 6(2) is not relevant to his situation.

(A slight digression, but the courts have also held that confiscation does not - normally - involve a NEW criminal allegation and so article 6(2) does not affect that either, so the statutory 'criminal lifestyle' assumptions are not an infringement of article 6(2) rights.)

This brings us on to Article 1 of the First Protocol to the Convention (referred to as 'A1P1' for convenience) which says (in part) "Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law".

So then the question is, 'Does the public interest in preventing and detecting suspected crime and in securing the recovery of the proceeds of crime provide sufficient justification for interrupting the OP's friend's 'peaceful enjoyment' of the money in his bank account?'

Well that's why a restraint order has to be made by a judge, independent of the investigator or prosecutor, and based (at least in theory) on a full and fair account from the investigator / prosecutor of the information he has (including any which suggests a restraint order is NOT required) and on which he bases his suspicions.

That is one of the reasons that a copy of the investigator / prosecutor's witness statement to the judge has to go to the subject of the order (attached to a copy of the order) when the order has been made (so if it is not full and fair the subject can challenge the restraint order based on it).

But of course if the authorities were obliged to give the subject of the order ADVANCE notice of the application to make one there would be a danger that the subject (and most of his assets) would disappear before the order could be made.

So there is a balance to be struck.  The judge is there to get the balance right between the subject's right to 'peaceful enjoyment' of his possessions and the public interest in fighting suspected crime.

For what it's worth the UK Supreme Court last month gave lower courts a sharp reminder that A1P1 does apply in confiscation proceedings and that - whatever PoCA 2002 says - courts should not be making "disproportionate" confiscation orders which infringe the A1P1 rights of a convicted defendant.  (See my blog article HERE.)

So, to be strictly accurate, "innocent until proven guilty" applies just as much to proceeds of crime cases as it does to other criminal cases. But (there's always a but . . . ) you need to think pretty carefully about exactly what it means!**

David

P.S.  Of course the evidence which an investigator / prosecutor may have at the early stages of a criminal investigation may be pretty sketchy - and the information a bank may have when deciding whether to report a suspicion to SOCA will likewise often be rather thin.  So there is a real risk of a bank making a report when, in truth, there is no underlying cause for concern.

** With apologies to Sir Humphrey Appleby!

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25th Dec 2012 01:07

No this is not the only area with 'inverse burden of proof '

There are several example in Health & Safety where you have to demonstrate compliance.

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13th Dec 2013 21:02

Message
Hi David

I've sent you a message.

Thank you

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13th Dec 2013 22:20

Personal halifax account frozen
Do the above rules reference 7 day SOCA and then maximum 31 days apply to personal current accounts as well?

My personal halifax has been frozen with no explanation and they are refusing to give time frames so would like to know the maximum time frames?

I've escalated to ombudsman as I've receive my final response letter from halifax complaints.

Any help would be super .

Thanks guys

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