Company funds frozen in a pre-trial investigation: what can you do?

A prosecutor can temporarily restrict a company’s ownership rights to its funds in the bank even when no one in the company has yet been notified of a suspicion. The company has the right to challenge that decision of the prosecutor before the pre-trial investigation judge, and to appeal the judge’s ruling to a higher court. A restriction imposed by the prosecutor cannot last longer than six months, but the judge can extend it. As long as the company is neither a suspect nor a civil defendant, it will generally not get access to the case file. There is no settlement agreement with the prosecutor in criminal proceedings, but the law provides for release from criminal liability on reconciliation with the victim, and this ground also applies to legal persons, but only in cases of criminal misdemeanours, negligent crimes, and minor and medium-gravity intentional crimes.

The situation usually looks like this. The bank stops payments, and later the company receives the prosecutor’s decision. The investigation is running, but no one explains what is being investigated. Below is what the law allows in that situation.

Why funds can be restricted before there is any suspicion

Article 151(2) of the Code of Criminal Procedure of the Republic of Lithuania (BPK) allows the prosecutor, by decision, to temporarily restrict a legal person’s ownership rights in two cases. First, to secure possible confiscation of property, possible extended confiscation of property (in the cases provided for in Articles 72 and 72³ of the Criminal Code (BK)), or the return of criminally acquired property to its owner or lawful possessor. Second, to secure a civil claim, if there are sufficient grounds to join the company as a civil defendant. This ground does not require the status of a suspect.

Where the right to monetary deposits is restricted, all operations with them are stopped, unless the decision provides otherwise (Article 151(4) BPK). So it is worth reading exactly what the decision covers.

The decision must state the reasons for it and the ground for the restriction, the methods and extent of the restriction, its term, and how to appeal (Article 152(1) BPK). The decision is announced immediately and no later than the next working day, and a copy is served on the owner of the property (Article 152(2) BPK). If the decision cannot be announced immediately, it is deemed announced when it is entered in the register of property seizure acts (Article 152(2) BPK). So a company sometimes first learns of the restriction from the bank or the register.

Clients often ask whether all of this could have been avoided if the bank had simply asked them to explain their business. The law leaves the bank no choice here. A financial institution that knows or suspects that property was obtained from criminal activity must report it to the Financial Crime Investigation Service (Finansinių nusikaltimų tyrimo tarnyba) immediately, no later than within one working day (Article 16(1) of the Law on the Prevention of Money Laundering and Terrorist Financing of the Republic of Lithuania (PPTFPĮ)). If within 10 working days of the report being filed or the instruction being received, the bank is not required to enforce a temporary restriction of ownership rights under the BPK, the operation must be resumed (Article 16(7) PPTFPĮ). In addition, the bank is prohibited from telling the client that information about it has been passed to the Service (Article 23(3) PPTFPĮ).

How to challenge the restriction

A person whose ownership rights have been temporarily restricted has the right to appeal the prosecutor’s decision to the pre-trial investigation judge. The judge must examine the complaint no later than within seven days of receiving it (Article 151(5) BPK).

The pre-trial investigation judge’s ruling can be appealed to a higher court, and that court’s ruling is final and not open to appeal (Article 151(5) BPK). The appeal to the higher court is filed through the court that issued the ruling, within seven days of the day the ruling was received (Articles 65(1) and 440(2) BPK). The higher court must examine the appeal within seven days of receiving it, or, where no hearing is held, within seven days after the deadline for responses expires (Article 441(2) BPK).

Other procedural acts and decisions of the prosecutor, for which the Code does not provide a separate procedure, can be challenged before a higher-ranking prosecutor by a person against whom coercive procedural measures have been applied (Articles 63(1) and 64(7) BPK). If the higher-ranking prosecutor refuses the complaint, that decision can be appealed to the pre-trial investigation judge (Article 63(1) BPK). The prosecutor must examine the complaint within ten days of receiving it and the material needed (Article 64(2) BPK).

An appeal to the higher court deserves careful thought. In our practice, courts are cautious when deciding on larger volumes of funds. If you have no new arguments or documents that the first judge did not see, the higher court will be assessing the same material. Also, while the appeal is being examined, the investigation file is sent to the court, so the investigation itself may slow down.

An appeal is not the only route. The restriction is lifted by a decision of the prosecutor or a ruling of the court if the measure is no longer necessary (Article 151(8) BPK). So you can make a reasoned request to the prosecutor to lift or narrow the restriction, for example when circumstances come to light that show the lawful origin of the funds.

How long the restriction lasts and whether it is reviewed

A restriction imposed by a decision of the prosecutor cannot last longer than six months. The pre-trial investigation judge can extend it, but for no longer than six months. The extension ruling can be appealed under Part X of the BPK (Article 151(6) BPK).

An important exception: in cases concerning serious or very serious crimes, certain medium-gravity crimes listed in the law, cases in which a civil claim has been filed for compensation of damage caused by the criminal act, or where the suspect has absconded, the number of extensions is unlimited (Article 151(7) BPK). In other cases this exception does not apply, so the restriction can be extended only within the limit in Article 151(6) BPK – for no longer than six months. In every case, each extension is a separate ruling of the judge, which can be appealed (Article 151(6) BPK).

The pre-trial investigation itself must be completed as quickly as possible: for a criminal misdemeanour within three months, for minor, medium-gravity and negligent crimes within six months, and for serious and very serious crimes within nine months (Article 176(1) BPK). A higher-ranking prosecutor can extend these terms because of the complexity or large scale of the case or other important circumstances (Article 176(2) BPK). A complaint about delay in the investigation can be filed by the suspect, their representative or defence counsel, if the investigation has not been completed within six months after the suspect’s first questioning (Article 215(1) BPK). A company that is not a suspect does not have this remedy.

Can the company get information about the investigation?

Pre-trial investigation data is not to be made public (Article 177(1) BPK). The law gives the right of access to pre-trial investigation data to the suspect and their defence counsel, and to the victim and their representative (Article 181(1) BPK). A person whose property has been restricted is not listed among them. The position is different if the company has been joined to the case as a civil defendant by decision (Article 111(1) BPK). It then has the rights of a civil claimant: to access the case file during the pre-trial investigation, to submit evidence and requests, and to challenge decisions insofar as they concern the civil claim (Articles 111(2) and 110(2) BPK). So, as long as the company is neither a suspect nor a civil defendant, it usually knows only what is written in the restriction decision.

The company can have an authorised representative. The authorised representative of a person whose ownership rights have been temporarily restricted is the person who provides that person with legal assistance (Article 55(1) BPK). A legal person may be represented by its manager, an authorised employee or an advocate (Article 55(2) BPK). The representative is allowed to take part in the proceedings once the pre-trial investigation officer or prosecutor adopts a decision to that effect (Article 55(3) BPK), and has the same rights as the person represented (Article 56(1) BPK). In our practice, once some time has passed since the restriction, it is worth writing to the prosecutor and asking for information, to the extent it can be given.

The position changes if a suspicion is brought against the company itself. A suspect has the right to receive information about the status of the proceedings concerning them, to know what they are suspected of, and to have access to the file (Article 21(4) BPK). The representative of a legal person exercises all the rights of a suspect (Article 388(4) BPK). The prosecutor may refuse access to all or part of the file if access could harm the success of the investigation, but that decision can be appealed to the pre-trial investigation judge within seven days of receiving a copy of it. The judge’s ruling on that appeal cannot be challenged (Article 181(1) BPK). Once the investigation is completed and the indictment is being drawn up, the prosecutor can no longer refuse access to the file (Article 181(2) BPK).

Can you cooperate and explain your business?

Yes. In our practice, a written explanation with documents is submitted to the prosecutor through the representative: how the business model works, where the funds came from, who the counterparties are. This supports a reasoned request to lift or narrow the restriction (Article 151(8) BPK). A person with the status of a suspect has an express right to submit documents relevant to the investigation and to make requests, and also the right to remain silent (Article 21(4) BPK). A company joined as a civil defendant can also submit evidence and requests (Articles 111(2) and 110(2) BPK).

Talk to an advocate before you give explanations. Whatever the company submits becomes part of the investigation file.

What risks the company and its managers face

A legal person is liable only for acts for which the Special Part of the Criminal Code provides for the liability of legal persons (Article 20(1) of the Criminal Code of the Republic of Lithuania (BK)). Liability can arise only if the act was committed for the company’s benefit or in its interests by a person holding a managing position who had the right to represent it, take decisions on its behalf or control its activities (Article 20(2) BK). The company may also be liable where an employee or authorised representative committed the act for its benefit on the instruction or with the permission of such a person, or because of insufficient supervision or control (Article 20(3) BK).

A legal person can be given a fine, a restriction of its activities, or liquidation (Article 43(1) BK), and, together with the penalty, penal measures including confiscation of property (Article 43(5) BK). The liability of the company does not remove the liability of the individual who committed, organised, incited or helped to commit the act (Article 20(5) BK). Confiscable property belonging to a legal person can be confiscated even if that legal person has not been convicted, for example where, when acquiring the property, it or persons in managing positions in it knew or should and could have known that the property was an instrument, means or result of a prohibited act (Article 72(4)(5) BK).

If proceedings are brought against the company itself, the pre-trial investigation judge can, at the prosecutor’s request, temporarily suspend or restrict its activities or prohibit its reorganisation (Article 389(1) and (2) BPK).

Is there such a thing as a settlement in criminal proceedings?

The BPK does not provide for a settlement agreement with the prosecutor or the court of the kind concluded in civil proceedings. There is a different institution: release from criminal liability where the offender and the victim are reconciled. The court (during the pre-trial investigation, the pre-trial investigation judge) may release from criminal liability a person who has committed a criminal misdemeanour, a negligent crime, or a minor or medium-gravity intentional crime, if all of the following conditions are met together (Articles 38(1) and 38(2) BK):

• the person has confessed to committing the criminal act;
• the person has voluntarily compensated for or remedied the damage caused, or has agreed on compensating for or remedying it;
• the person has been reconciled with the victim or with the representative of the legal person or state institution;
• there are grounds to believe that they will not commit new criminal acts.

A dangerous recidivist cannot be released on this ground, nor can a person who has already been released as reconciled, if less than three years passed between that decision becoming final and the new act (Article 38(2) BK). This ground for release can also be applied to legal persons (Article 40¹ BK). Note: if the investigation concerns the legalisation of criminal proceeds under Article 216(1) BK, punishable by up to seven years’ imprisonment, that is a serious crime (Article 11(5) BK). The reconciliation ground is then not available, and the number of extensions of the restriction is unlimited (Article 151(7) BPK).

In a pre-trial investigation, reconciliation is a ground for terminating the investigation (Article 212(5) BPK). In that case the investigation is terminated by a decision of the pre-trial investigation judge confirming the prosecutor’s decision (Article 214(2) BPK).

Another, simplified way of ending the proceedings is a court penal order. It is available for acts for which a penalty other than only imprisonment can be imposed, and only where the offender compensates for or remedies the damage caused (if damage was caused) or undertakes to do so (Article 418(1) BPK). During the pre-trial investigation this route is available only if the accused does not object to it (Article 418(3) BPK). This is not reconciliation: a penalty is still imposed, just without a trial.

Three points matter. First, reconciliation is with the victim, not with the prosecutor. Second, a confession is required, so it is not a way to get the funds back faster if the company considers itself not guilty. Third, releasing an individual from liability does not remove the company’s liability (Article 20(5) BK), and proceedings against the company may continue separately (Article 387(3)(2) BPK).

How to start

Send us the prosecutor’s decision on the temporary restriction of ownership rights and, if there already is one, the pre-trial investigation judge’s ruling. We will assess the grounds and deadlines for an appeal and prepare the complaint or an explanation to the prosecutor.

Phone +370 5 212 1506, email info@linden.lt

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