PREMIER LEAGUE ACCOUNT FREEZING ORDER EXTENDED: LESSONS ON SUSPICION, DAMLS AND THE LIMITS OF THE S.308 POCA DEFENCE

In National Crime Agency v The Football Association Premier League Limited, the Westminster Magistrates’ Court decided to extend an account freezing order (“AFO”) covering approximately £10 million received by the Premier League from NFT fantasy football operator, Sorare.  The decision provides a noteworthy illustration of important issues that all businesses should be thinking about in the context of counterparty due diligence and managing risks under the Proceeds of Crime Act 2002 (“POCA”), but which are rarely publicly discussed by the courts or regulators.

Background

The ongoing proceedings concern payments made by a company, Sorare SAS, to The Football Association Premier League Limited under a November 2022 licensing agreement. Sorare obtained rights to produce and market Premier League-themed NFT fantasy football products (NFTs are non-fungible tokens). In return, Sorare agreed to make substantial royalty and minimum guarantee payments to the Premier League. By July 2024, the Premier League had received £17.5 million under the arrangement.

On 4 July 2024, Sorare informed the Premier League that it had been charged by the Gambling Commission with offences relating to the provision of allegedly unlicensed gambling facilities. The prosecution alleges that aspects of Sorare's fantasy football model amount to betting activities requiring an operating licence under the Gambling Act 2005; a failure to obtain such a licence is a criminal offence. Those criminal proceedings remain ongoing. 

Following notification of the prosecution, the Premier League took steps to ring-fence payments received from Sorare and subsequently made a defence against money laundering ("DAML") disclosure to the NCA expressing concern that it might be holding criminal property. The NCA later obtained an AFO over the account containing the ring-fenced funds. 

The NCA's Application

The NCA sought a further four-month extension of the AFO to permit the continuation of ongoing tracing enquiries, including the obtaining of banking evidence from Luxembourg. The NCA contended that there were reasonable grounds for suspecting that the frozen funds constituted “recoverable property” because they were ultimately derived from revenues generated by Sorare's allegedly unlawful gambling activities in Great Britain. 

The frozen balance represented approximately £10 million received after July 2024.  Earlier payments had already been removed from the scope of the order following a previous variation, the NCA having accepted that those earlier funds were likely protected by the operation of section 308 POCA (under which property ceases to be recoverable property if obtained by a person in good faith, for value and without notice that it was recoverable property) because they had been received before the Premier League became aware of the criminal proceedings against Sorare. 

The Premier League's Defence

The Premier League argued that there were no reasonable grounds for suspecting that the funds were recoverable property. It emphasised that it had acted lawfully throughout, had provided genuine value under the licence agreement, and had undertaken due diligence before entering into the arrangement. It further argued that the funds fell within the protection afforded by section 308 POCA. 

The Premier League also contended that the NCA had failed to establish any meaningful evidential link between funds earned from UK consumers and the monies ultimately paid under the licence agreement. 

The Court's Decision

The question for the court in deciding whether to approve the AFO extension was whether there remained reasonable grounds for suspecting that the funds were recoverable property. The court concluded that there were.

First, the court considered the Premier League's own conduct following notification of the criminal proceedings. The decision to establish a ring-fenced account, together with the contents of the DAML disclosure, demonstrated that the Premier League suspected that the funds were criminal property. The court regarded this as powerful evidence supporting the existence of reasonable grounds for suspicion sufficient to justify extending the AFO. 

Secondly, the court accepted the NCA's evidence that Sorare had continued to operate in Great Britain following the commencement of the Gambling Commission prosecution and that financial intelligence indicated a connection between payments received from UK consumers and the monies ultimately transferred to the Premier League. Although the tracing exercise remained incomplete, the court considered the available evidence sufficient at the investigative stage. 

Finally, the court rejected the argument that the section 308 defence provided a basis for discharging the AFO; a recipient who suspects that property may be criminal property cannot generally rely upon the statutory good-faith exception. In light of the Premier League's expressed concerns and DAML disclosure, the court considered it unsustainable for the Premier League to argue that it lacked the necessary notice or suspicion.

It is worth noting that, while the decision relates to funds received after the notification of the Gambling Commission’s charges against Sorare, the Premier League had been told about the prior investigation into Sorare at the time of contracting.  Judicial eyebrows were raised at the Premier League’s decision to proceed without further due diligence at that time: “In view of the millions of pounds which was at stake, and a public announcement by a gambling regulatory body that Sorare was not licenced and meant activity being completed on the site by consumers in Great Britian may be outside of the gambling regulations that a licenced operator should comply with, one might question why they did not seek their own legal opinion to protect their interests.”

Key Takeaways

• The range of conduct that can give rise to “recoverable property” is very broad and can include strict liability / ‘regulatory’ offences by a commercial counterparty.

• If a person files a DAML in relation to their knowledge or suspicion of funds from a counterparty, a subsequent attempt to resile from that knowledge/suspicion (to assert the funds are not recoverable property or, presumably, not criminal property) is unlikely to be successful. The contents of DAMLs should be accurate and considered carefully before they are filed.

• For businesses receiving funds from counterparties, particularly those operating in regulated or legally uncertain sectors, the case underlines the great importance of initial and ongoing due diligence to mitigate the risk of becoming concerned in money laundering (including the recovery by the NCA of profits of an otherwise legitimate commercial bargain).

If you would like to discuss the implications of these developments, please contact Andrew Matheson, Guy Bastable, or Sam Aldous in Burges Salmon’s Corporate Crime & Investigations team.