Account Freezing Order (AFO)

Did authorities freeze your UK bank account? Have you received notice of hearing for AFO application? Do you know what happened and what are the legal consequences?

On 28th February 2019, The UK’s National Crime Agency froze 95 Barclays’ bank accounts, mainly held by Chinese students studying in the United Kingdom. These accounts contain an estimate of £3.6 million that is suspected to be from proceeds of crime or intended to be used for criminal purposes. Accounts will be frozen for 9 months for the purpose of subsequent money laundering investigations conducted by the National Economic Crime Centre’s officer. In 2019/2020, AFOs were up to 166 cases.

Why did the authorities freeze my account?

A lot of Chinese student received letters from enforcement authorities, such as the City of London Police and the HM Revenue & Customs, confirming there was an Account Freezing Order (AFO) application against their bank accounts and a hearing was scheduled. Subsequently, these bank accounts would be frozen for nine months. These bank account users have one similarity: they frequently used Private Foreign Currency Exchange Service to exchange for pounds.

As the People’s Republic of China’s authorities implement regulations to limit the exchange of foreign currency from Renminbi, Chinese students are tempted to use Private Foreign Currency Exchange Service to exchange pounds. Chinese students perceive these private currency exchange service more convenient to use and it offers a slightly better exchange rate as incentives than banks’ service. Why not?

Private Currency Exchange Service is well-known and frequently used by the Chinese communities in the UK. These currency exchange service companies operate by sourcing Chinese customers on communications platforms such as Wechat and Alipay. The currency exchange service providers register an account on such communication platform and appear as a Universities’ alumni or some status that sounds credible in the group chat to attract Chinese customers. Chinese customers who want to use the private exchange service will simply have to contact the person they ‘met’ on the communication platform and agree with their exchange rate, the transaction can subsequently be performed. The entire private currency exchange process will take less than one day to complete while traditional currency exchange through banks may take up to 5 working days.

However, Chinese students may not know that in the United Kingdom, strict anti-money laundering regulations are enforced on banks and institutions that perform banking activities. Any large transactions and money transfers will be subject to tracing and declaration of those source of funds.

Private Foreign Currency Exchange is regulated in the United Kingdom. By violating regulations through using these Private Foreign Currency Exchange service, you might have to bear the legal consequences, often not known to you at the outset.

The New Legislation - Criminal Finance Act 2017

Since 31 January 2018, new enforcement power was introduced into the Proceeds of Crime Act 2002 by Criminal Finance Act 2017, it allows authorities to apply to Magistrates’ Court to freeze the monies in “suspicious” bank accounts or building societies account until the source of the funds can be established. Funds were either alleged to be derived from, or intended for use in, unlawful activities.

The frequent use of Private Foreign Currency Exchange services is considered one of the activities that will make Chinese Students’ bank account looks suspicious.

This is because in each transaction, the currency exchange service provider will separate the total amount of pounds into several tranches before sending. The service provider will deposit each tranche of the transaction by cash into the customer’s bank account from different bank branches all over the United Kingdom. By sending in tranches and in different branches, the service provider can avoid being suspicious when paying large amount of cash into a single account in a single branch.

When the NECC notice that there are no links between the location where cash are deposited and where the bank account holder is based, they classify this as a money laundering technique called ‘smurfing’. This constitutes a reasonable ground to suspect the source of those funds are illegitimate. Therefore, the NECC officer will subsequently apply to the Magistrates’ Court to freeze the bank account of these Chinese students for further investigations.

What are the legal consequences?

While the NECC is conducting the money laundering investigations, the account holder must cooperate with the authorities and give evidence with explanations. If the account holder fails to give evidence, the account holder may have to bear the legal consequence and sentence for money laundering. Not only the frozen funds will be forfeited, the criminal record may also affect any current and subsequent student visas in the UK.

What should I do next?

When you receive the notice of AFO applications sent by the authorities, we recommend that you seek legal advice at your earliest opportunity. The two cases set out examples of why you need to seek legal advice.

Case one:

The client’s UK bank accounts became subject to AFO. Amount frozen was over £100,000. We were instructed to communicate on the client behalf with the NCA and then help piece together the reasons for so many cash deposits to her bank accounts from different locations. Following a rigorous investigation and discussions with our client. Our ability to speak and write to our client in mandarin was crucial to her understanding what was required to explain what the transactions were. Despite good evidence to show the transactions were all accounted for, the NCA would not agree to unfreeze the bank accounts and the matter proceeded to court hearing again. Following witness evidence given by our client and a prepared bundle of documents filed with the court, the Judge refused the NCA’s request to extend the AFO and accepted our client’s funds and transactions were good. AFO discharged.

Case two:

The Client’s UK bank accounts became subject to AFO. Application brought by a police authority. Amount frozen was £30,000. The allegation was that these were proceeds of crime transfers as the cash payments were made by unknown individuals at various locations in UK. The main worry for the client was her visa status and did not want a criminal record. Following detailed discussions and thorough investigation of all transactions and transfers, we were able to persuade the police authority that only part of the frozen funds could not be accounted for. With several rounds of negotiation, it was agreed that the police would not take this further if the funds that could not be accounted for were disclaimed. A written compromise was agreed, and the client was very happy with the result.

Chan Neill solicitors is a leading Law Firm in London and we have mandarin and Cantonese speaking lawyers who are experienced in the legal area and are able to guide you through this difficult period. If you have any queries of the AFO, please do not hesitate to contact: chinadesk@cnsolicitors.com.


Gazumping- What is that , is it legal and how to avoid it?

How to avoid being gazumped – an essential guide to the first time buyers

 

In simple terms, Gazumping is when a vendor has accepted an offer from a potential buyer but later sells to another buyer.

 

Although it may seem like a very ‘illegal’ thing to do, Gazumping is very much legal. The conveyancing process is a two stage legal process: exchange and completion and until contracts are exchanged, the transaction is not binding.

 

This means that either party can walk away from the transaction before contracts are exchanged with no legal implication.

 

Unfortunately, this also means that if you have been gazumped at a pre-exchange stage then you will be left to pay a legal bill for all pre-exchange work conducted by your solicitors.

 

There are many reasons that a vendor may sell his/her property to another party although your offer had been accepted, but we find the most common reasons to be:

 

1. The seller has accepted a higher offer for the property

2. The vendors solicitors are experiencing delays with your solicitors

3. You do not have your finances in hand

 

How to prevent being gazumped

 

In order to prevent being Gazumped, we suggest the following top tips to bear in mind:

 

1. Speak to the estate agent to get an idea of how popular the property is

 

If you have had viewed the property and are quite keen to purchase the property then estate agents will be able to advise you on how popular the property is and whether the buyer is likely to receive offers under or over the asking price. If the property is struggling on the market then there is a good chance that the vendor will accept an offer under the asking price and will be keen to sell this to you. If however, the property is gaining a lot of interest, then it is worth you making a competitive offer to ensure that you are not gazumped for a higher offer at a later stage.

 

2. Be transparent from the outset about your finances and timescales by which you intend to complete the purchase

 

We find that vendors become frustrated during the conveyancing process when prospective purchasers avoid confirming their finances from the outset i.e. cash purchase, mortgage or chain transaction. It is therefore very important that you let your solicitors know how you are funding the purchase from the outset so that all parties can aim for a realistic completion date.

 

If you are having trouble with finances for any reason, then it is best that you disclose this as soon as possible. In some cases, if the delay is only by a few weeks then the vendor may empathise and may be willing to extend the completion target date. If however, you do not disclose your financial hiccups and the vendor feels that you are time wasting, then it is very likely he will sell the property to another party.

 

3. Secure a mortgage offer in principal

 

If you are keen on purchasing a new property then it is worth contacting a mortgage lender to provide you with a mortgage offer in principle before property hunting, to ensure that you can book a survey in as soon as your offer to purchase has been accepted. This will show the vendor that you are serious about the purchase and it will make a good impression.

 

4. Ask for the property to be taken off the market

 

You could ask the vendor to take the property off the market as part of acceptance of your offer.

 

5. Ask your solicitors to draft a lock-in-agreement / exclusivity agreement

 

If the property you have viewed is one that you cannot bear to lose then you could ask your solicitors to draft an agreement to prevent the vendor from entertaining other offers for a fixed period of time i.e. 4 weeks. Of course, you would incur additional legal fees as this is not a standard conveyancing document, but at least this would provide you with peace of mind to have a survey booked or to secure your finances without the threat of being gazumped.

 

6. Obtain insurance

 

Some specialist insurance providers will offer insurance to cover legal, survey and mortgage lending costs should a purchase fall through. It will not prevent you from being gazumped, but it will at least help you to minimise your losses in the event unfortunate event that you are.

 

If you would like to instruct our conveyancing team for a residential or commercial sale/purchase, please do not hesitate to call our offices or email us at conveyancing@cnsolicitors.com.


Stamp Duty Land Tax Temporary Relief

From the 8th July 2020 to the 31st March 2021 inclusive, the UK government has temporarily raised the tax threshold for Stamp Duty Land Tax (SDLT) from £125,000 to £500,000 to help buyers, including first timer buyers, overseas buyers and investors, buy to let investors as well as companies in their purchase of properties in England and Northern Ireland.* 

Our property conveyancing team at Chan Neill Solicitors has summarised the temporary SDLTrelief for you in a straightforward way.  

1. SDLT is a standard tax required by the government paid by the buyer when purchasing a residential property in England and Northern Ireland*.

2. SDLT applies to both freehold and leasehold properties, newbuild or existing properties, commercial or residential properties.

3. SDLT is a tiered, threshold system, where the higher the property value, the higher stamp duty you are required to pay.

4. If you or your spouse own more than one property worldwide (have a property registered under your name or your spouse’s name), you pay an additional 3% surcharge on top of the standard rates for SDLT.

Purchase of sole property (or replacement of existing main dwelling)

SDLT rate

Up to £500,000

Zero

The next £425,000 (the portion from £500,001 to £925,000)

5%

The next £575,000 (the portion from £925,001 to £1.5 million)

10%

The remaining amount (the portion above £1.5 million)

12%

Purchase of an additional property

SDLT rate

Up to £500,000

3%

The next £425,000 (the portion from £500,001 to £925,000)

8%

The next £575,000 (the portion from £925,001 to £1.5 million)

13%

The remaining amount (the portion above £1.5 million)

15%

Companies as well as individuals buying residential property worth less than £500,000 will also benefit from these changes, as will companies that buy residential property of any value where they meet the relief conditions from the corporate 15% SDLT charge.                                       

At Chan Neill Solicitors we are happy to advise our clients regarding complicated legal and tax issues, purchases, sales and re-financing of properties. We can also advise you on moving money from abroad to the United Kingdom.  For any further information please contact us at conveyancing@cnsolicitors.com

* In Scotland buyers pay the Land and Buildings Transaction Tax and in Wales buyers pay Land Transaction Tax.


New Account Freezing Order legislation: Private Foreign Currency Exchange Service and its legal impl

 

Did authorities freeze your UK bank account? Have you received notice of hearing for AFO application? Do you know what happened and what are the legal consequences?


你的银行账户被冻结了吗?你有收到冻结帐户的出庭通知书吗?你想知道发生什么事情和其潜在的法律后果吗?

On 28th February 2019, The UK’s National Crime Agency froze 95 Barclays’ bank accounts, mainly held by Chinese students studying in the United Kingdom. These accounts contain an estimate of £3.6 million that is suspected to be from proceeds of crime or intended to be used for criminal purposes. Accounts will be frozen for 9 months for the purpose of subsequent money laundering investigations conducted by the National Economic Crime Centre’s officer.

于2019年2月28日,英国国家打击犯罪调查局(NCA)冻结了95个Barclays银行账户,这些账户大多数都是由英国留学生持有,被冻结的资金总额高达360万英镑。因为调查局有理由怀疑这些留学生的银行账户的资金是用作洗黑钱,所以账户都会被法庭下令冻结9个月,以便国家经济犯罪调查中心(NECC)人员进行调查。

Why did the authorities freeze my account?

为什么我的帐户被冻结?

A lot of Chinese student received letters from enforcement authorities, such as the City of London Police and the HM Revenue & Customs, confirming there was an Account Freezing Order (AFO) application against their bank accounts and a hearing was scheduled. Subsequently, these bank accounts would be frozen for nine months. These bank account users have one similarity: they frequently used Private Foreign Currency Exchange Service to exchange for pounds.

很多中国留学生都收到地方当局(比如伦敦警察局和英国税务局)的来信,说要冻结他们的帐户9个月,还要出庭。这些中国留学生都有一个共同点,就是他们都有使用私人换汇换英镑的习惯。

As the People’s Republic of China’s authorities implement regulations to limit the exchange of foreign currency from Renminbi, Chinese students are tempted to use Private Foreign Currency Exchange Service to exchange pounds. Chinese students perceive these private currency exchange service more convenient to use and it offers a slightly better exchange rate as incentives than banks’ service. Why not?

由于中国实行外汇管制措施,每年每人只能以人民币兑换一定限额的英镑。所以留学生都会觉得,比起银行换汇,私人换汇更方便快捷,还有稍微的汇率优势,那何乐而不为呢?

Private Currency Exchange Service is well-known and frequently used by the Chinese communities in the UK. These currency exchange service companies operate by sourcing Chinese customers on communications platforms such as Wechat and Alipay. The currency exchange service providers register an account on such communication platform and appear as a Universities’ alumni or some status that sounds credible in the group chat to attract Chinese customers. Chinese customers who want to use the private exchange service will simply have to contact the person they ‘met’ on the communication platform and agree with their exchange rate, the transaction can subsequently be performed. The entire private currency exchange process will take less than one day to complete while traditional currency exchange through banks may take up to 5 working days.

私人换汇已很广泛地被留学生使用。私人换汇的供应商会在社交平台上开设账户,然后自称是校友或以其他身份出现在群组内,以吸引中国留学生使用他们的换汇服务。需要使用换汇服务的顾客只需要跟供应商联系和确认当天的英镑汇率,经双方同意后,交易便可以在一天内完成。比在银行换汇所需的五个工作天更方便快捷。

However, Chinese students may not know that in the United Kingdom, strict anti-money laundering regulations are enforced on banks and institutions that perform banking activities. Any large transactions and money transfers will be subject to tracing and declaration of those source of funds.

然而,你未必知道英国多年来对银行或其他从事金融行业的服务商的监管和法律管制都是非常严格的。任何大额交易或转款都需要资金来源的证明。

Private Foreign Currency Exchange is regulated in the United Kingdom. By violating regulations through using these Private Foreign Currency Exchange service, you might have to bear the legal consequences, often not known to you at the outset.

换汇在英国也是受法律管制的。即使在你不知情的情况下使用了这些私人换汇,你也有可能需要为此负上法律责任。


The New Legislation 新法条 - Criminal Finance Act 2017

Since 31 January 2018, new enforcement power was introduced into the Proceeds of Crime Act 2002 by Criminal Finance Act 2017, it allows authorities to apply to Magistrates’ Court to freeze the monies in “suspicious” bank accounts or building societies account until the source of the funds can be established. Funds were either alleged to be derived from, or intended for use in, unlawful activities.

自2018年1月31日起,英国立法(Criminal Finance Act 2017)授权地方当局在合理的怀疑下向裁判法院申请冻结 “有可疑的”银行账户,直至账户持有人清楚解释资金的来源合法,账户才会被解封。相反,如果账户持有人未能解释资金的来源,则存在洗黑钱的风险。

The frequent use of Private Foreign Currency Exchange services is considered one of the activities that will make Chinese Students’ bank account looks suspicious.

私人换汇是其中一个会让留学生的银行帐户变得“有可疑”的项目。

This is because in each transaction, the currency exchange service provider will separate the total amount of pounds into several tranches before sending. The service provider will deposit each tranche of the transaction by cash into the customer’s bank account from different bank branches all over the United Kingdom. By sending in tranches and in different branches, the service provider can avoid being suspicious when paying large amount of cash into a single account in a single branch.

因为私人换汇服务商会把每一次交易的金额拆分,然后再把金额以现金方式在英国不同地区的银行分行直接存入客户的账户。服务商这样做,是为了避免一次性存入大量现金时被该银行怀疑。

When the NECC notice that there are no links between the location where cash are deposited and where the bank account holder is based, they classify this as a money laundering technique called ‘smurfing’. This constitutes a reasonable ground to suspect the source of those funds are illegitimate. Therefore, the NECC officer will subsequently apply to the Magistrates’ Court to freeze the bank account of these Chinese students for further investigations.

当国家经济犯罪调查中心发现某些账户有大量现金从英国不同地区存入,而这些地区与账户持有人的所在地有出入,调查人员将有足够理由向裁判法院申请冻结相关账户,以便他们进行洗钱调查。


What are the legal consequences?

潜在的法律后果

While the NECC is conducting the money laundering investigations, the account holder must cooperate with the authorities and give evidence with explanations. If the account holder fails to give evidence, the account holder may have to bear the legal consequence and sentence for money laundering. Not only the frozen funds will be forfeited, the criminal record may also affect any current and subsequent student visas in the UK.

在国家经济犯罪调查中心进行调查时,账户持有人必需配合他们就资金来源提交证据并作出解释。如果账户持有人未能提出任何证据让地方当局释疑,除了被冻结的账户资金被没收外,账户持有人也有机会因 “洗黑钱”而负上法律责任。留下的犯罪记录也会影响你现有和未来的签证,也影响你的一生。

What should I do next?

你应该怎么做?

When you receive the notice of AFO applications sent by the authorities, we recommend that you seek legal advice at your earliest opportunity.

如果你收到银行账户被冻结的通知,我们建议你尽早寻求律师的帮助。

Chan Neill solicitors is a leading Law Firm in the City of London and we have mandarin and Cantonese speaking lawyers and legal advisors who may be able to guide you through this difficult period. Given the increase in the number of similar cases we have been dealing with recently, our Senior Partner Mr Michael Chan whom has 25 years of experience in commercial litigations, has taken a keen interest in leading the team in dealing with AFO matters and hope to ensure we can resolve the problem for the Chinese students here in the U.K. . If you have any queries of the AFO, please do not hesitate to contact: chinadesk@cnsolicitors.com.

陈刘律师事务所是伦敦有名的律所。我们有能操流利国语和广东话的律师为你提供有关冻结账户的专业法律意见。鉴于我们现时处理账户冻结的案件数量增加,我们的高级合伙人Michael Chan(在商业诉讼方面已有25年的经验)将带领我们的律师团队为你处理有关冻结账户的事宜并全力为中国留学生辩护。如果你有银行账户冻结方面的疑问,欢迎大家咨询:chinadesk@cnsolicitors.com