A person may wake to find their accounts frozen and their property blocked from dealing because of an investigation not yet determined. Freezing assets is a precautionary measure of considerable effect. It does not touch liberty but paralyses the ability to manage daily life, and its effects sometimes extend to family members, partners, and those holding rights over the property. Because the measure precedes any finding of guilt, it is surrounded by safeguards and conditions that should be understood. This article explains the measure and how to challenge it under Criminal Procedure Law No. 17 of 1960 and Anti-Money Laundering Law No. 106 of 2013.
The Nature of Freezing
- Definition: a temporary precautionary measure preventing the owner from dealing with or using property while ownership remains with them.
- Purpose: preventing the removal of assets suspected of deriving from or being used in an offence, and securing any order for restitution, confiscation, or compensation.
- Distinguished from confiscation: confiscation is a penalty or measure imposed by judgment and permanently divests ownership, whereas freezing is a temporary pre-judgment measure that does not transfer ownership.
- Distinguished from attachment: attachment is a civil measure taken by a creditor to recover a debt, whereas freezing is a criminal measure taken by the investigating authority.
- Exceptional character: it affects the protected right of ownership and must therefore be reasoned, defined in scope, and temporary.
When It Is Permitted
- A pending investigation: an investigation into an offence connected with property is required, such as public funds offences, money laundering, fraud, or breach of trust.
- Sufficient indications: a report or bare suspicion does not suffice. Indications connecting the property to the offence are required.
- Connection to the offence: the property must derive from the offence, have been used in it, or be equivalent to its value. Freezing property unconnected with the facts exceeds the purpose.
- Competent authority: the order issues from the body the law designates, and other bodies may not take the measure of their own motion.
- Reasons: the order must state reasons, as reasoning is what makes review possible.
- Proportionality: freezing must not exceed what necessity requires, and freezing a person's entire wealth in a case of limited value may be excessive.
Effect on Third Parties
An aspect overlooked despite its seriousness:
- Family: the effect may extend in practice to a family dependent on the frozen account, and an application may be made to release sums for maintenance, living costs, treatment, and education.
- Joint accounts: where the account is joint, the suspect's share must be distinguished from the co-holder's, and another's share may not be frozen.
- Partners: freezing a partner's interest in a company may paralyse its entire activity, and the company or partners may challenge where the measure wrongly affects them.
- Creditors: a person holding a real right over the property such as a mortgagee may assert their right and ask that it be respected.
- Good faith purchasers: a person who bought property before the order in good faith may establish this and seek its exclusion.
Challenging the Order
- Right to challenge: the owner and every interested party may challenge a freezing order before the competent body.
- Time limits: the prescribed periods for grievance and challenge must be observed, as delay narrows the options.
- Grounds: absence of indications, no connection between the property and the offence, disproportion, the property belonging to another, or that it is property not susceptible to freezing.
- Release applications: partial release of sums for maintenance and essential obligations may be sought, a practical application frequently granted.
- Substitution: substituting adequate alternative security achieving the same purpose without paralysing the business may be sought.
- Periodic review: freezing is a temporary measure, so the continuation of its grounds should be monitored and its lifting sought as soon as they cease.
Termination and Compensation
- Filing or acquittal: where the file is closed, an order of no grounds is made, or an acquittal is given, the freeze must be lifted and the assets returned.
- Prompt return: implementation must be followed up with banks and authorities, as issuing the decision does not mean it is executed automatically.
- Losses: prolonged freezing may cause serious harm: business interruption, terminated contracts, dishonoured cheques, and damage to commercial reputation.
- Compensation: where the measure is shown to have been without basis or to have continued after its ground ceased, damages for material and moral harm may be claimed.
- Proof: document every loss: terminated contracts, foregone opportunities, default interest, and client correspondence.
Practical Guidance
- Do not attempt to move any funds once you learn of the order, as this may be characterised as removing assets and worsens the position.
- Obtain a copy of the order to establish its scope, subject matter, and date.
- Apply promptly for release of sums for maintenance and essential obligations, a practical right available to you.
- Keep your personal accounts separate from company and family accounts, as mixing widens the scope of the measure.
- Retain documentation of the source of your funds, the most important tool for establishing their lawful origin.
- Follow up the actual lifting of the freeze after a closure or acquittal rather than relying on the decision alone.
Freezing assets is a legitimate measure in its place and severe in effect when applied expansively, and the defence rests on establishing the source of the funds and the absence of any connection to the facts. Yamnak Law Firm prepares challenges to freezing orders and applications for release and substitution, and represents clients and rightholders before investigating authorities and the courts.
