Frozen Without Warning: Account Freezing Orders and the Importance of Early Representation

This article was written for HMRC EIP (Enquiries, Investigations & Powers) Magazine (Feb-March 2026 Issue) by Harry Laidlaw (2 Hare Court) and Nick Scott (Partner, Keystone Law).

Introduction

Account Freezing Orders (AFO) are an increasingly common feature of financial investigations in the UK, with HMRC in particular making growing use of these powers as part of its civil and criminal enforcement activity. Often obtained without notice and at an early stage of an enquiry, an AFO can have an immediate and far-reaching impact on individuals and businesses, freezing bank accounts and restricting access to funds overnight.

This article explains what an Account Freezing Order is, when it can be made, how it can be challenged in practice, and why early legal advice is often critical to securing the release of legitimate funds.

What is an Account Freezing Order?

An Account Freezing Order is a civil power under the Proceeds of Crime Act 2002 (POCA) that allows law enforcement agencies to freeze money held in bank and similar accounts where there is a suspicion that the funds are the proceeds of crime or intended for use in unlawful conduct.

The regime is contained in Part 5, Chapter 3B of POCA (s. 303Z1 – 303Z8) and applies to accounts held within banks, building societies, electronic money institutions and payment institutions.

When can an Account Freezing Order be made?

AFOs may be made by the Magistrates’ Court on the application of an authorised enforcement officer, which includes a police constable, an officer of HM Revenue & Customs, a Serious Fraud Office officer, or an accredited financial investigator (s. 303Z1(6)).

The Court must be satisfied that there are reasonable grounds for suspecting that the money in the account is recoverable property (i.e., property that is or represents property obtained through unlawful conduct) or is intended for use in unlawful conduct (s. 303Z1(1)).

An AFO can only be sought where the account contains at least £1000 and it may last for up to two years (s. 303Z3(4) & s. 303Z8 respectively).

Procedures and safeguards

Applications for AFOs are frequently made without notice, meaning the account holder may only become aware once their account has already been frozen. However, the outcome of the application (whether it is successful or not) must be notified to interested parties (i.e. those who may be affected by the order) (s.303Z3(5)).

The Court has the power to vary or discharge an AFO on application by either the enforcement officer or any affected person. Where an order has been made without notice, the Court must reconsider the matter afresh (s.303Z4).

The Court may grant exclusions from the freeze to allow for reasonable living expenses, business costs or legal expenses, balancing fairness to the account holder against the risk of prejudicing any forfeiture proceedings (s.303Z5).

HMRC & AFOs

HMRC frequently relies on AFOs in matters where it suspects serious tax-related wrongdoing, including undeclared earnings, fraudulent VAT activity, and sophisticated corporate tax avoidance or evasion. In many cases, an AFO is used as an early investigative measure, either running in parallel with, or preceding, a criminal investigation, and is often deployed as part of a wider, multi-agency enforcement approach.

A practical defence perspective

From a defence perspective, an AFO can be acutely disruptive, both personally and professionally, often freezing legitimate income and essential day-to-day funds without warning. For that reason, early advice and decisive action are critical.

Once an interested person is notified of the order, the preparation of clear, structured written representations to the authorised enforcement officer or relevant authority (such as HMRC, the police, or the SFO) is often the most important step. Well-crafted representations can bring matters to an end without the need for contested court proceedings and should be treated as a key opportunity rather than a formality.

Those representations will commonly address:

• whether the statutory “reasonable grounds for suspicion” test is, in fact, met;
• the quality, accuracy, and completeness of the evidence relied upon in the original ex parte application;
• the need for appropriate exclusions to enable the account holder to meet living, business, and legal expenses; and
• whether the continuation of the order is proportionate, particularly in the absence of a parallel criminal investigation or where there are legitimate explanations for the source of funds.

If, following receipt of those representations, the authorised officer is satisfied that the statutory test is no longer met, they may apply to the court for the order to be varied or discharged.

Where they are not, and the original application was made without notice, the defence retains a valuable opportunity to challenge the order at a hearing before the Magistrates’ Court. As noted above, this is a fresh, de novo hearing, not a review of whether the original decision was correct.

What happens next?

An AFO is often the gateway to a wider frozen funds investigation, during which enforcement authorities may deploy further powers, including production orders and search warrants. Ultimately, the authority may apply for forfeiture of the funds.

Robust early engagement can be decisive in preventing matters from progressing to that stage.

Case Study

In early 2024, a Ukrainian national who had relocated to the UK following the outbreak of war with Russia found himself subject to an AFO in circumstances of the kind outlined above. He received notification from HMRC that several hundred thousand pounds held across two UK bank accounts had been frozen on suspicion that the funds were derived from unlawful conduct. In the preceding months, the account holder had made a number of significant cash deposits, including multiple deposits on the same day.

HMRC raised a series of detailed enquiries, including questions as to the source of the funds, the pattern of deposits, the intended use of the money, how the individual was supporting himself in the UK, and whether there was any further information relevant to the investigation.

Although HMRC may, on the face of the banking activity alone, have had reasonable grounds to suspect that the funds were recoverable property, careful investigation revealed a clear and compelling innocent explanation. Through extensive evidence gathering, it became apparent that the individual had fled Kharkiv, then on the front line of the conflict, and had taken urgent steps to move his savings out of Ukrainian banks for fear they would be lost or seized. He and his parents moved the funds first to Poland and then to the UK. The monies were derived from a number of legitimate income streams, all of which could be fully evidenced.

Following the submission of comprehensive written representations, HMRC accepted that the statutory test was no longer met and applied to the Magistrates’ Court for the AFO to be set aside. The funds were subsequently released in full.

This case demonstrates the importance of making timely, well-evidenced representations. Without specialist intervention, the account holder would likely have faced prolonged and unnecessary restriction of legitimate funds.