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Account Forfeiture Orders and suspected fraudulent COVID-19 support claims

Posted on 6 May 2022

It has been reported that in the last 11 months HMRC has seized assets worth £39 million through Account Forfeiture Orders, part of which includes funds from those suspected of making fraudulent claims under the Government's various COVID-19 support schemes. This represents more than seven times the amounts seized from the previous year and we expect this trend to continue.

Account Freezing and Account Forfeiture Orders were introduced in 2017 under the Criminal Finance Act 2017. They enable specified enforcement agencies to apply to the magistrates' court for the freezing of funds held in bank accounts and their subsequent forfeiture. Funds will be forfeited if the court is satisfied that the money in that account either was obtained or is intended for use in unlawful conduct.

HMRC has increasingly come under pressure to recoup the vast amount of money that is alleged to have been fraudulently claimed through the various COVID-19 relief schemes that the Government created to help businesses and individuals navigate the financial impact of the pandemic. In response, the Taxpayer Protection Taskforce was created to combat the fraudulent use of such schemes and has received £100 million in funding from the Government. Few investigations have been announced, however, the increased use of Account Freezing and Forfeiture Orders suggests that HMRC may be focusing on these powers to recoup the funds paid out by the Government, rather than opening criminal investigations.

The rhetoric around the alleged abuse of the COVID-19 support schemes has tended to focus on the amount of money that was lost. Under the Proceeds of Crime Act 2002, HMRC can directly recover those funds without the need for a criminal investigation and prosecution, which are lengthy and resource intensive. Account Freezing and Forfeiture Orders can be concluded relatively quickly and require the authority to prove its case so that the court is satisfied on the balance of probabilities rather than the higher criminal standard, beyond reasonable doubt. This means that Account Forfeiture Orders provide an alternative and less cumbersome route to recovering assets connected to fraudulent COVID-19 support scheme claims.

HMRC is likely to continue to make more use of orders in the coming months. Anyone facing potential Account Freezing and Forfeiture Order applications by HMRC should seek urgent specialist legal advice, as they will have to make a strong case to demonstrate that the money in issue does not represent the proceeds of fraudulent claims.

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