Bank makes recoveries following account takeover frauds

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Summary

Judgment was handed down in the matter of National Crime Agency and National Westminster Bank Plc v. Odewale and Yadav [2020] EWHC 1609 (Admin) on 22 June 2020, following a four-day trial. The NCA had frozen assets (including three very valuable watches, a car licence plate and a number of bank balances (the Frozen Assets)) in the hands of Mr Odewale and/or Ms Yadav and sought a civil recovery order under the Proceeds of Crime Act 2002 (POCA). NatWest intervened in the proceedings, asserting a proprietary claim to some of the frozen assets following frauds by which funds were removed from customer accounts. To the extent that NatWest was successful, the assets were not recoverable property and were instead ordered to be returned to NatWest.

Proceeds of Crime Act

The NCA's claim was brought under Chapter 2 of Part 5 of POCA. Its claim was that the Frozen Assets were obtained by fraud and/or money laundering offences and were therefore "recoverable property". S.304(1) POCA defines recoverable property as "property obtained by unlawful conduct". S.266 POCA provides that, if the court is satisfied that any property is recoverable, it must make a recovery order which must vest the property in a trustee for civil recovery (subject to exceptions not relevant to this case). The NCA was not required to prove a specific criminal offence, but rather a particular kind, or one of a number of kinds, of unlawful conduct (s.242(2)(b) POCA).

Ms Yadav sought to rely on s.308 POCA which provides a defence for a person who receives what would otherwise be recoverable property in good faith, for value and without notice that it was recoverable.

NatWest sought relief under s.281 of POCA in respect of a portion of the Frozen Assets, claiming that it was deprived of the property by unlawful conduct and the property belonged to it.

The facts

Mr Odewale had a number of historic convictions for fraud and dishonesty-related offences. He was made the subject of a deportation order, but left the UK in 2016 prior to deportation. He gave evidence by video-link from Nigeria. Mrs Justice McGowan found that he was not a credible witness and expressed similar reservations in relation to some of the witnesses called on his behalf.

Ms Yadav is his long-term partner and has three children with him. She continues to reside in the UK. The judge found that she was also not a credible witness, noting that, when the couple's lifestyle was in question, she was vague and at times evasive. The couple owned expensive cars, luxury watches, rented expensive accommodation, purchased properties with significant deposits, sent their children to private school and frequently travelled internationally – all in spite of the fact that Mr Odewale accepted that he had not had any employment since he was released from prison in 2005.

NatWest's case related to two particular identity theft frauds committed in 2014 and 2015. Significant funds had been stolen from customer accounts and used to purchase luxury items. NatWest's case was that the part of the Frozen Assets resulted directly from the thefts. NatWest's accountholders had been reimbursed by the bank and, accordingly, NatWest claimed that it was the victim that had suffered loss as a result of the frauds.

Mr Odewale accepted that the frauds had taken place, but asserted that he had not committed them. Although he had reported no legitimate income for tax purposes since his prior conviction, Mr Odewale claimed that the Frozen Assets belonged to him following the sale of properties, trading in expensive goods and gambling profits.

Ultimately, it was determined that there was sufficient evidence to link Mr Odewale to the frauds.

Ms Yadav claimed that the assets in her name were transferred to her by Mr Odewale in payment of a loan and interest. She claimed that she did not know or suspect that any money that came to her was the proceeds of crime. It was found that the property she held could not be explained by her legitimate income and must therefore have come to her from Mr Odewale and represented the proceeds of his unlawful behaviour. The court found that Ms Yadav had not paid "for value" in respect of the assets and, therefore, had no defence under s.308 POCA.

Conclusion

Since the court was willing to accept that all of the Frozen Assets constituted property obtained by unlawful conduct, the question became whether NatWest could make out its tracing claim in respect of part of the Frozen Assets, so as to obtain an order under s.281 POCA. The court accepted that, since NatWest's customers had been reimbursed by the bank, the funds that were disbursed from the customer accounts belonged to NatWest. NatWest had suffered the loss and it was to be considered the victim of the fraud.

For these reasons, those parts of the Frozen Assets claimed by NatWest did not form recoverable property and NatWest was entitled to an order under s.281 POCA that the property should be returned to it.

NatWest therefore had an equitable proprietary claim to a very valuable watch and was entitled to an order that it be delivered up by the dealer with whom it had been frozen. Furthermore, NatWest was entitled to trace into bank accounts held with another institution so as to make further recovery.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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