ANTI CORRUPTION HOTLINE UWO Unexplained Wealth Orders

The Aliyev fraud case shows that financial advisors could get caught up in criminal probes

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Unexplained Wealth Orders (UWO) have exist­ed for just over two years. Brought in by the Criminal Finances Act 2017, they were her­ald­ed as a new dawn in the British state’s abil­i­ty to crack down on mon­ey laun­der­ing, tax eva­sion and finan­cial crime.

Widely under­stood as tar­get­ing the wealthy ben­e­fi­cia­ries of state cor­rup­tion in Russia and the coun­tries of the for­mer Soviet Union, a recent case sug­gests that they may also be used against a com­plete­ly dif­fer­ent set of indi­vid­u­als: the inde­pen­dent pro­fes­sion­als who advise the wealthy. This is a sig­nif­i­cant devel­op­ment in the way UWOs are being used by law enforce­ment which any­one work­ing in an advi­so­ry role in this field would be wise to under­stand ful­ly.

On 8 April 2020, the High Court dis­charged three UWOs and relat­ed inter­im freez­ing orders relat­ing to three London prop­er­ties con­nect­ed to rel­a­tives of Kazakhstan’s for­mer dic­ta­tor Nursultan Nazarbayev. The prop­er­ties, which were worth a report­ed £80 mil­lion and includ­ed a Hampstead man­sion, were alleged by the National Crime Agency (NCA) to have been bought using pro­ceeds of crime pro­vid­ed by Mr Nazarbayev’s son, Rakhat Aliyev, a for­mer senior offi­cial in Kazakhstan’s gov­ern­ment.

According to media reports of the case, among the indi­vid­u­als required to pro­vide infor­ma­tion to the court was a solic­i­tor, named as Andrew Baker, who was said to be the pres­i­dent of two Panamanian foun­da­tions which owned two of the hous­es in ques­tion. Baker was “con­nect­ed” to Nurali Aliyev’s now deceased father, the NCA report­ed­ly alleged. He report­ed­ly respond­ed that there was no evi­dence to sug­gest that he was “any­thing oth­er than a lawyer of utmost integri­ty.”

While not unex­pect­ed (I and oth­ers spe­cial­is­ing in this type of work have been pre­dict­ing this devel­op­ment for some time), this is the first report­ed case in which a legal advi­sor has become per­son­al­ly entan­gled in a UWO.

In September 2018, Donald Toon, head of the NCA’s eco­nom­ic crime unit, warned in a news­pa­per inter­view that he would use the leg­is­la­tion to come after what he called the “pro­fes­sion­al enablers” of finan­cial crime. “Do we have con­cerns about the effec­tive­ness of… cus­tomer due dili­gence in parts of the legal pro­fes­sion and accoun­tan­cy sec­tor? Yes, we cer­tain­ly do,” Toon told the Financial Times.

At the time, many lawyers and accoun­tants bri­dled at Toon’s char­ac­ter­i­sa­tion of their work, and reject­ed his com­ments as sabre rat­tling. But the Aliyev case sug­gests that he is pre­pared to fol­low through on his threat.

UWOs are often viewed as a pun­ish­ment imposed on wealthy indi­vid­u­als, but this is inac­cu­rate. They are an inves­tiga­tive pow­er requir­ing those against whom they are issued to pro­vide details of their assets.

UWOs are often viewed as a pun­ish­ment imposed on wealthy indi­vid­u­als, but this is inac­cu­rate. They are an inves­tiga­tive pow­er requir­ing those against whom they are issued to pro­vide details of their assets.
Ben Rose
Lawyer

In order to obtain a UWO, a des­ig­nat­ed enforce­ment agency (which can, in addi­tion to the NCA, be any UK police force, the Serious Fraud Office or SFO, HMRC tax author­i­ties and so on) needs to sat­is­fy the High Court of four require­ments, that:

The per­son against whom the UWO is sought (the respon­dent) owns the prop­er­ty in ques­tion;
The prop­er­ty is worth more than £50,000;
There are rea­son­able grounds to sus­pect the respon­den­t’s law­ful­ly-obtained income is insuf­fi­cient to have paid for the prop­er­ty;
The respon­dent is either a Politically Exposed Person (PEP), a fam­i­ly mem­ber of a PEP, or “… is, or has been, involved in seri­ous crime (whether in a part of the United Kingdom or else­where).” In short, those “con­nect­ed” to PEPs and those involved in seri­ous crime.
Professional advi­sors may well find that under the terms of the Act, law enforce­ment takes the view that they are a “con­nect­ed” per­son. If so, they too, as Toon pre­dict­ed, may become the tar­get of a UWO. The con­se­quences for such an indi­vid­ual can be life-alter­ing.

Simply respond­ing to a UWO request is like­ly to be an oner­ous, time-con­sum­ing and expen­sive process which may involve review­ing an enor­mous amount of doc­u­men­ta­tion going back years – poten­tial­ly decades. There can be com­plex issues of legal pro­fes­sion­al priv­i­lege and duties of con­fi­den­tial­i­ty to deal with, oblig­a­tions to clients that con­tin­ue after the work is fin­ished.

There may also be a risk to the individual’s pro­fes­sion­al sta­tus. Professional reg­u­la­tors (such as the Sollictors Regulatory Authority, or SRA, for the solic­i­tors prac­tic­ing in England and Wales, accoun­tants bod­ies such as the Institute of Chartered Accountants in England and Wales, or ICAEW, or the Financial Conduct Authority, or FCA, for finan­cial ser­vices pro­fes­sion­als) will require reg­u­lat­ed indi­vid­u­als against whom an UWO has been made to report that fact to them. Law enforcers may decide to report them to reg­u­la­tors in any event.

The Aliyev case demon­strates that pro­fes­sion­al advi­sors may become per­son­al­ly caught up in the UWO issues sur­round­ing work they have done for their high net worth clients.
Ben Rose
Lawyer

Finally, there is the threat of crim­i­nal pros­e­cu­tion pur­suant to the civ­il UWO action – some­thing that should remain fore­most in minds of any­one engag­ing with a UWO request.

The NCA has announced that it intends to appeal the High Court’s deci­sion in the Aliyev case. Graeme Biggar, the organisation’s Director General of the National Economic Crime Centre (NECC), said: “We dis­agree with this deci­sion to dis­charge the UWOs and will be fil­ing an appeal. These hear­ings will estab­lish the case law on which future judg­ments will be based, so it is vital that we get this right. The NCA is tena­cious. We have been very clear that we will use all the leg­is­la­tion at our dis­pos­al to pur­sue sus­pect­ed illic­it finance and we will con­tin­ue to do so.”

This should be tak­en as a clear state­ment of intent that UK law enforce­ment is pre­pared to exploit the full poten­tial of these pow­er­ful new mea­sures.

The Aliyev case demon­strates that pro­fes­sion­al advi­sors may become per­son­al­ly caught up in the UWO issues sur­round­ing work they have done for their high net worth clients.

Those pro­fes­sion­als would be well-advised to take great care to pro­tect them­selves from unfound­ed alle­ga­tions of being the enablers of high-end crim­i­nal con­duct. This may involve a vari­ety of mea­sures before, dur­ing and after the trans­ac­tions have tak­en place.

Hickman & Rose
Ben RoseHickman & Rose
Ben Rose is found­ing part­ner at Hickman & Rose solic­i­tors in London.

Original source: EURONEWS

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