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A break with tradition – FCA enjoys successful test of new freezing and forfeiture powers

  • United Kingdom
  • Fraud and financial crime

26-04-2022

The UK Financial Conduct Authority (“FCA”) has secured an Account Forfeiture Order (“AFO”) against QPay Europe Limited (“QPay”) for QPay to forfeit up to £2,000,000 held in its name following proceedings brought by the FCA under the Proceeds of Crime Act 2002 (“POCA”) in the Westminster Magistrates’ Court.  

The FCA’s concerns were initially raised following an application (since withdrawn) by QPay to become an FCA-regulated firm in March 2020. QPay received monies from a software firm, Fintech International Q Software WLL, allegedly as an investment. However, the FCA observed that QPay moved this money repeatedly to different bank accounts in several countries and none of the transactions appeared to it to be related to legitimate business.

The monies were subsequently frozen as a result of seven Account Freezing Orders obtained in October and December 2020 by the FCA, using its powers under POCA. The FCA claimed the monies held by QPay were the proceeds of illegal activity connected to criminal proceedings in the USA, which concerned an alleged conspiracy to commit wire fraud totalling $150 million against entities including banks, credit card companies and other financial service providers (further details can be found here and it should be noted that the FCA was not alleging that QPay was involved in the conspiracy). In October 2021 the FCA made its application for the monies to be made forfeit. These will be paid to the UK government.

Commentary

This appears to be the first time the FCA has used these powers, which are already well used by other agencies with powers of criminal investigation and prosecution.

The FCA is clearly keen to signal its ability and readiness to use Account Freezing and Forfeiture Orders to seize funds in a quick and efficient manner. It is not necessary for any criminal proceedings to be taking place or even for the recipient of the order to be alleged to have been involved in any underlying criminal conduct (as in this case, in which the FCA has been careful to emphasise that it does not allege that QPay has been involved in conduct that is the subject of proceedings in the US). These Orders can be sought as part of standalone summary proceedings in the Magistrates’ Court, with the need only to establish to the civil standard (i.e. ‘on the balance of probabilities’) that there are reasonable grounds to suspect that particular property has been obtained through unlawful conduct or is intended for use in unlawful conduct. As such, seeking such orders is a much lower risk and less resource-intensive exercise than pursuing criminal investigations and prosecutions, which ultimately require the FCA to establish alleged wrongdoing beyond a reasonable doubt.

The FCA has shown it is not averse to using its powers of criminal investigation and prosecution (including in relation to money laundering offences) where it considers that conduct is sufficiently egregious and where it wishes to invoke a deterrent effect. Since pursuing its right to do so all the way to the Supreme Court in R v Rollins [2010] UKSC 39, it has made good use of these powers in numerous cases. However, its decision to use asset freezing and forfeiture orders in this instance, particularly in the context of a firm seeking authorisation, seems to indicate a more pragmatic approach towards disrupting suspected money laundering and removing the proceeds of suspected criminal conduct, rather than using the traditional criminal route. In this case, if there was a strong case to demonstrate a suspicion of substantive money laundering (whether such as concealing, transferring or simply possessing criminal proceeds), the FCA might previously have marked the seriousness of such conduct by pursuing a criminal prosecution. Looking to the future, it will be interesting to establish whether this case heralds the start of a wider trend away from criminal enforcement, as a short cut to restoring suspected proceeds to the treasury, and dispensing with the trial and confiscation stages, and together with it all the additional uncertainty that the criminal enforcement route injects.  Easier to obtain, quicker to use, less of a drain on resources, and harder for targets to resist, it’s hardly surprising that the FCA has joined the list of law enforcement agencies making use of these wide new powers. We should expect to see many more such orders as the FCA adds this valuable tool to its repertoire.