Police kept your money frozen. Can you claim compensation?
Unlawful freezing of bank accounts and police liability in Inspektor Muhammad Noorariff Shah bin Zainudin & Ors v Lim Hui Jin
A frozen bank account can leave you unable to meet everyday expenses, repay loans or keep a business running. Even after asking for your money to be released, you may find yourself waiting without a clear explanation.
The police have powers to restrain funds during an investigation. But those powers have legal limits. In Inspektor Muhammad Noorariff Shah bin Zainudin & Ors v Lim Hui Jin, the Court of Appeal upheld liability against a police officer, the Inspector-General of Police and the Government, with damages totalling RM600,000.
The case concerned both an unlawful freezing order and the failure to release money when it should have been returned.
What happened?
The matter began with a police report alleging criminal breach of trust by Lim’s mother. An investigation under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001, commonly known as AMLA, followed.
In June 2014, four of Lim’s bank accounts were frozen. A subsequent seizure order covered one account.
Lim was not charged with an AMLA offence, and no application was made within the relevant period to forfeit the money in that account. The court held that the funds should have been released on 12 September 2015.
They were not. Lim’s solicitors wrote seeking their release, and he eventually brought court proceedings. After succeeding in an earlier appeal, he received the funds on 17 August 2018. He then pursued a separate claim for damages.
Compensation for a frozen bank account: why did this claim succeed?
The Court of Appeal found that the officer who froze the accounts had failed to comply with the legal requirements applicable when the order was issued. She also breached the statutory duties concerning the release of the money.
The court found evidence of malice. Among other matters, the officer relied on a statutory provision that was not yet in force when she issued the freezing order, admitted shortcomings in her investigation, and recommended against releasing the funds when the request was referred to her.
Those findings mattered because AMLA provides protections for actions taken in good faith. On the evidence, the officer could not rely on those protections.
The court found both an abuse of public power, legally described as misfeasance in public office, and a breach of statutory duty. It increased general damages to RM500,000 and maintained RM100,000 in exemplary damages. High Court costs of RM50,000 and interest were also ordered.
The responsible officer, the Inspector-General of Police and the Government were jointly and severally liable. The claims against another investigating officer and an unnamed Deputy Public Prosecutor were dismissed. Responsibility had to be established against the correct parties.
What should you do about a frozen bank account?
First, establish why the account is restricted. Ask the bank for written confirmation of the authority behind the restriction and seek copies or particulars of the relevant orders. A freezing order, a seizure order and forfeiture proceedings are different steps. The dates and legal basis of each matter.
Second, keep the correspondence and evidence of the consequences. Bank notices, requests for release, replies, loan documents and records of missed payments can help explain both what happened and how it affected you. In Lim’s case, the court considered evidence that he had to borrow money and sell a jointly owned property to sustain his livelihood.
Third, distinguish recovering access to the funds from claiming compensation. Lim obtained the release of his money before pursuing damages. A compensation claim requires its own legal and evidential basis; it does not follow automatically whenever an account has been frozen.
If the restriction continues without a clear explanation, a legal review should identify the current order, whether its requirements remain satisfied, and the appropriate route to seek release. Where there is evidence of unlawful conduct and resulting loss, a separate damages claim may also warrant consideration. The applicable time limits and the identity of the responsible officers should be checked early.
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