The Crown Court dismissed Vlad Luca Filat’s appeal against the decision to forfeit £500,000 held in three bank accounts in his name. The court held that the money derived from bribery and corruption offences committed by the appellant’s father, the former prime minister of Moldova, and was obtained by money laundering. The case was the National Crime Agency’s first contested account forfeiture application. James Fletcher, barrister at 5SAH Chambers, who appeared for the National Crime Agency, suggests that these types of applications are likely to be deployed more and more often.

What is the background to the appeal hearing which took place on 8 November 2019?

In May 2018, the Westminster Magistrates’ Court granted three account freezing orders over the balances of bank accounts pursuant to section 303Z3 of the Proceeds of Crime Act 2002 (POCA 2002). The orders permitted the National Crime Agency (NCA) time to investigate the origin and intended use of those funds on the basis that there were reasonable grounds to suspect the balances were ‘recoverable property’ (obtained by or in return for unlawful conduct) or were intended for use in unlawful conduct. In September 2018 the NCA applied for the forfeiture of the balances on the grounds that it could now be proved, on the balance of probabilities, that the sums were recoverable property or intended for use in unlawful conduct. At a hearing, in February 2019 the Westminster Magistrates’ Court granted those forfeiture orders pursuant to POCA 2002, s 303Z14. Vlad Luca Filat appealed within the 30-day statutory time limit and there was a de novo hearing of the application in the Crown Court.

How were the AFOs in the case challenged?

In the Crown Court the NCA submitted that based on all the circumstances, including that Vlad Luca Filat was a full-time student with no UK financial profile, it could be inferred that the account balances had derived from his father. It was submitted that his father’s conviction showed he had obtained a significant bribe for his involvement in the corruption offences in Moldova and, looking at the way in which the balances of the accounts had been generated, namely via international transfers from companies based in the Cayman Islands and in Turkey (in respect of which there was little information), as well as approximately £90,000 of cash paid into the account over a four day period, the money had been obtained through corruption offences and money laundering. The appellant relied upon his and family’s existing sources of legitimate wealth, his own business activities overseas, and his explanation, supported by documentary evidence, that wealthy friends had lent him the money, this being his only source of personal and business funding following his father’s conviction in Moldova.

How did the court resolve these issues?

The court heard evidence from both parties, and from Mr Filat’s business partner. Having considered the evidence, it rejected the account provided by the appellant. It determined, on the balance of probabilities, that the money had been obtained by bribery and corruption offences and money laundering.

What trend does this reflect in the use of AFOs? What are the learning points for practitioners challenging and defending these orders?

Account freezing and forfeiture orders are a powerful weapon for law enforcement. They were introduced into the POCA 2002 by the Criminal Finances Act 2017 and came into force on 31 January 2018.

The maximum period of an account freezing order is two years, after which law enforcement must decide whether to pursue forfeiture or unfreeze the account. Therefore in 2020 practitioners can expect to see a number of applications for forfeiture.

These types of applications are favoured for a number of reasons:

  • Firstly, the applications are straightforward. The initial test for a freeze is on the basis of ‘reasonable grounds to suspect’ and an application for forfeiture can be granted on the balance of probabilities. It is not necessary for there to be a direct link between the balance and the crime from which it has been obtained—the magistrates can draw inferences from the way in which the account has been operated.
  • Secondly, results in these applications can be achieved more speedily compared to other asset recovery routes. These applications take advantage of the streamlined system in the magistrates’ court which operate specific and limited rules. There are no formal pleadings and no formal disclosure. This can be contrasted with civil recovery claims in the High Court which are governed by the Civil Procedure Rules and the Civil Recovery Practice Direction.
  • Thirdly, and as a result of the above considerations, these applications are cost-effective.
  • Finally, the litigation risk to law enforcement is low because, based on existing case law, in the event of an unsuccessful account forfeiture application and unless law enforcement has behaved unreasonably, there will likely be ‘no order for costs.’

In order to successfully respond and defend these types of applications, practitioners will need to show to the court, by way of documentary evidence, the origin of money that forms the balance of the frozen account and present a credible explanation about the source and intended use of the funds.

This article was first published by Lexis PSL on 13 December 2019.