During the course of criminal investigation or criminal proceedings, restraint orders can be used as a way of freezing assets that can later be confiscated.
A Restraint order is an order under the Proceeds of Crime Act 2002 made by a Crown Court Judge, normally at the request of the police or other investigating or prosecuting authority which effectively ‘freezes’ the assets of an individual or a company.
A restraint order is typically designed to ‘freeze’ all the assets of the individual(s) and company (ies) to whom it is directed, including assets legitimately acquired and even including assets outside the UK.
A restraint order can be made any time after a criminal investigation has commenced into suspected criminal conduct from which an individual or company is believed to have benefited.
The applicant for the restraint order must show that he has reasonable cause to believe that a benefit has been obtained from criminal conduct, s40 POCA 2002. A restraint order should be made only if there is a risk that assets will be dissipated in the absence of such an order.
The likelihood of a restraint order being applied for is determined by the prosecuting authority as to whether it will be in the public interest to make an application:
* Where the investigation is not likely to be compromised to a significant extent
* Where there are reasonable grounds to suspect that the defendant has benefited from criminal conduct; and
* There is a real prospect that substantial resalable assets will be dissipated, unless a restraint order is granted.
The judge may only grant a restraint order pursuant to section 41 of the Proceeds of Crime Act where any of the five conditions set out in section 40 is met.
1. Criminal investigation and benefit
2. Criminal proceedings and benefit
3. Confiscation proceedings
4. Recalculation of benefit exceeds the relevant amount
5. Availability of funds to satisfy a confiscation order
How is a restraint order made?
Normally made by a Crown Court judge on an application by the police/Crown Prosecution Officer or other authority. Before the making of the restraint order the judge will be provided with a witness statement from the applicant for the order.
The subject of the restraint order will not have an opportunity to challenge the making of the order at this stage and will not be informed of the application until after the restraint order has been made.
As a result of the subject(s) of the restraint order will normally be unaware of the application until he/she they are served with a copy of the restraint order- by which time it will already be in force.
An individual or company may be the subject of a restraint order if he/she/ it is an alleged offender who is believed to have benefited from an offence or is a person who has received assets from an alleged offender.
Effect of restraint order
The restraint order will prevent the assets of the subject(s) being dissipated by preventing the sale or transfer of those assets and by ‘freezing’ the subject’s bank accounts. Technically the restraint order prohibits each subject from ‘dealing with’ his assets.
Challenging a restraint order
The subject of a restraint order can apply to have the order discharged (cancelled) or amended. The application will be heard by a Crown Court Judge who will hear submissions both from the applicant for the original order and the subject(s) of that order.
A subject of a restraint order will apply to have the terms relaxed e.g. to allow a higher level of living expenses or to allow monies to be used to pay specific expenses (such as mortgage payments) or to remove one or more of the subjects from the scope of the order.
The purpose of the restraint order
To preserve the assets of the subject so that they remain available to meet any confiscation order which the Crown Court may make after the alleged offender has been charged, tried and convicted of an offence s69 of POCA 2002.
Who can be the subject of a restraint order?
An individual or a company may be the subject of a restraint order if he/ she/ it is an alleged offender who is believed to have benefited from an offence or is a person who has received assets from an alleged offender.
Requirement of a restraint order
A restraint order includes clauses requiring subject(s) of the order to disclose further information to the authorities concerning their assets.
This information can then be used to assist in ensuring the effectiveness of the restraint in preventing the dissipation of assets and to assist the prosecution in confiscation proceedings following the conviction of the alleged offender(s). The information cannot be used by the prosecution in the course of alleged offender’s criminal trial.
The preconditions to the making of an application for a restraint order
A restraint order can be made following an application by a prosecutor or an accredited financial advisor. Where the application is made by an accredited financial investigator, it must be authorised by:
* A police officer not below the rank of Superintendent
* An officer of HM Revenue and Customs of similar rank; or
* An accredited financial investigator designated by the Secretary of State
The amount of assets or property that can be restrained will be dependent on the likely amount of the confiscation order.
General restraint – where the prosecutor is asking the court to decide whether the defendant has a criminal lifestyle and has benefited from general criminal conduct. The court may grant an order where the defendant will be restrained from dealing with all of his assets.
Specific Restraint –Where no criminal lifestyle is suggested by the prosecutor and the extent of the proceedings is to determine whether the defendant has benefited from his particular criminal conduct, a defendant will be restrained from dealing with specific assets which together total in value the amount of his benefit from particular criminal conduct.
Where the amount the defendant has benefited from particular criminal conduct exceeds the value of his assets it will be appropriate to restrain the defendant from dealing with all of his assets.
Joint assets in restraint proceedings – any person who holds assets jointly with the defendant may be specifically restrained from dealing with those jointly held assets.
Realisable property for restraint proceedings: realisable property is defined as any free ‘property’ held by the defendant and any free property held by the recipient of a ‘tainted gift’. The term property covers all property wherever it located and includes real or personal property, money, or
other intangible or incorporeal property or a thing in action. A person holds property if he holds interest in it.
Companies have their own legal personality separate and distinct from their owners, and therefore they do not fall within the definition of realisable property.
Tainted Gifts – where a suspect or defendant disposes of or transfers property to another person for a considerably lower value than the property is worth, it will be tainted if it was made at any time after the commission of the offence in question.
Where a court determines that a defendant has a criminal lifestyle, any gift made by the defendant within a six year period prior to the commencement of proceedings is caught by the proceedings. In addition, any gift made at any time is caught, if the gift:
(i) Was obtained by the defendant as a result of or in connection with general criminal conduct
(ii) Or represents property obtained as a result or in connection with general criminal conduct.
Consequences of breaching restraint order
A person who breaches a restraint order may be held to be in a Contempt of Court (this is civil contempt which can result in imprisonment according to the case R v O’Brien (2014) UKSC 23.
When does the restraint order come to an end?
A restraint order will continue in force until it is lifted by the Crown Court. This could be on an application by the subject of the order, or where proceedings are not brought within a reasonable time as a consequence of a criminal investigation which has not resulted in anyone being charged, or on the acquittal of the allege offender, or on the satisfaction of any confiscation order made by the Crown Court following the alleged offender’s conviction.
At SJ Law we can assist you in trying to achieve the best possible solution with regards to confiscation proceedings. Our aim is to get you the best result.