Squirrell Ltd v National Westminster Bank Plc

Under Proceeds of Crime Act 2002, a bank may be required to stop operating a customer’s account where it suspects that an arrangement may facilitate the handling of criminal property. The statutory concept of suspicion is materially wider than prima facie proof. The bank must make an authorised disclosure and observe the statutory consent and moratorium periods. Anti-tip-off provisions may prevent it explaining the account restriction to its customer. The court cannot properly order the bank to act in a way that would constitute a criminal offence. Sympathy for an innocent account holder does not permit the court to override clear statutory requirements.

Squirrell Ltd applied for an order requiring National Westminster Bank plc to unblock an account containing nearly £200,000 and to disclose the reasons for the restriction. The bank had frozen the account after suspecting that transactions might involve criminal property and relied on its obligations under Part 7 of the Proceeds of Crime Act 2002. HM Customs and Excise intervened and confirmed that investigations concerning possible VAT offences were relevant. The central issues were whether section 328(1) applied despite the absence of proof that an offence had been committed, and whether the court could compel the bank to operate the account.

1. The application was dismissed. National Westminster Bank plc had acted in accordance with the statutory scheme and could not be ordered to operate the account while the statutory prohibition applied.

2. Section 328(1) of the Proceeds of Crime Act 2002 applies where a person knows or suspects that an arrangement may facilitate the acquisition, retention, use or control of criminal property. The court considered that the provision was deliberately broad.

3. At the interlocutory stage there was no evidence establishing that the account balance was criminal property. That did not determine whether section 328(1) applied. The provision could operate where the bank had the relevant suspicion, even though no offence had been proved and the bank had no obligation or expertise to investigate criminal activity.

4. The ordinary meaning of suspicion is a state of conjecture or surmise where proof is lacking. The guidance in Hussien v Chong Fook Kam [1970] AC 942 showed that suspicion is distinct from prima facie proof and may take account of matters incapable of being put in evidence. The judge did not need to decide whether the absence of the word reasonably in section 328(1) altered the position, because no challenge was made to the reasonableness of the bank’s suspicion.

5. The statutory defence in section 328(2), together with sections 335, 338 and 340, required the bank to make an authorised disclosure, refrain from dealing with the account during the relevant period, and comply with the anti-tip-off restriction. The seven-working-day period and, where applicable, the further 31-day moratorium were intended to provide the statutory protection for affected parties.

6. An order requiring the bank to unblock the account would require it to commit a criminal offence and could not be a proper exercise of the court’s discretion. Disclosure of the reasons was unnecessary after HM Customs and Excise had intervened and the reason for the restriction was known. The judge expressed no view on whether disclosure could have been ordered had Squirrell remained uninformed.

7. The seven-working-day period expired on 31 March 2005 because Good Friday and the following bank holiday were excluded. HM Customs and Excise had refused consent on 30 March, within the permitted period.

First-instance decision. No prior appellate decision is stated in the judgment.