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What you need to know about Unexplained Wealth Orders

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Unexplained Wealth Orders (UWOs), first rat­i­fied in the Criminal Finances Act of April last year, are now in force mean­ing UK law enforce­ment agen­cies have a new tool at their dis­pos­al to help fight organ­ised crime. Media reports have cit­ed ‘fishy mil­lion­aires’, the wealth of cor­rupt over­seas politi­cians and the prop­er­ties of oli­garchs as the intend­ed tar­gets. In prac­tice how­ev­er UWOs can be applied to any asset over £50,000 where there are rea­son­able grounds for sus­pect­ing dirty mon­ey is involved. Accountants, tax advis­ers and pri­vate wealth man­agers there­fore need to under­stand how UWOs work and why their clients, inno­cent or oth­er­wise, might be at risk.

What are UWOs?

The UWO is an order requir­ing the respon­dent to pro­vide a state­ment set­ting out the nature and extent of their inter­est in a prop­er­ty and to explain how the respon­dent obtained the prop­er­ty. UWOs have been intro­duced with the aim of mak­ing it eas­i­er for assets sus­pect­ed of rep­re­sent­ing crim­i­nal prop­er­ty to be seized, bol­ster­ing the regime under the Proceeds of Crime Act 2002 (POCA). UWOs do not require a crim­i­nal con­vic­tion, the enforce­ment author­i­ties may apply for one based only on a sus­pi­cion and the bur­den of proof is reversed, lead­ing some to com­plain that UWOs are unjust.

How and when is a UWO obtained?

A UWO is an order made by the High Court. Once served upon a respon­dent, it requires them to pro­vide infor­ma­tion about how they acquired the asset(s) referred to with­in the order. Pending the response, the author­i­ties may apply for a freez­ing order over the prop­er­ty to pre­vent the respon­dent from deal­ing with or dis­pos­ing of it. If the respon­dent fails to pro­vide an expla­na­tion with­in a giv­en time­frame, or pro­vides unsat­is­fac­to­ry evi­dence, that will raise a pre­sump­tion that the asset con­sti­tutes recov­er­able prop­er­ty for the pur­pos­es of a civ­il recov­ery order under Part 5 of POCA. Making a state­ment which either reck­less­ly or know­ing­ly mis­leads in response to such an order is an offence pun­ish­able by up to two years’ impris­on­ment, a fine, or both.

Several author­i­ties are autho­rised to apply to the court for such orders, includ­ing HMRC, the National Crime Agency (NCA), the Serious Fraud Office (SFO) and the Financial Conduct Authority (FCA). UWOs can be issued against indi­vid­u­als but also oth­er struc­tures that hold prop­er­ty such as com­pa­nies and trusts.

In order to obtain a UWO, the enforce­ment author­i­ty must demon­strate that a num­ber of fac­tors exist. First, they must demon­strate a rea­son­able belief that the respon­dent holds the prop­er­ty. They must also demon­strate that the per­son is a non-EEA polit­i­cal­ly exposed per­son (PEP)[1] or that there are rea­son­able grounds to sus­pect that the respon­dent, or a per­son “con­nect­ed with” the respon­dent is, or has been, involved in seri­ous crime in the UK or else­where[2]. So a PEP (and even one of their fam­i­ly mem­bers or busi­ness part­ners) may be caught even if there is no sus­pi­cion that he or she is involved in a crim­i­nal offence, and oth­ers may be caught if some­one con­nect­ed to them is sus­pect­ed of com­mit­ting a crim­i­nal offence. This makes UWOs quite far-reach­ing.

The enforce­ment author­i­ty must also demon­strate that the prop­er­ty is worth more than £50,000, and it must be shown that there are rea­son­able grounds for sus­pect­ing that the known sources of the respondent’s income would be insuf­fi­cient for the respon­dent to obtain the prop­er­ty.

What will the likely impact be?

Transparency International, a key pro­po­nent of UWOs, has claimed that there are hun­dreds of prop­er­ties in the UK strong­ly sus­pect­ed to have been acquired with the pro­ceeds of cor­rup­tionwhich con­sti­tute “low hang­ing fruit” ready to be picked by law enforce­ment author­i­ties. But SFO Director David Green has recent­ly said that he will wait for the right case for the first UWO, sug­gest­ing the SFO at least will exer­cise cau­tion – and it is easy to see why giv­en the con­tro­ver­sies sur­round­ing these orders.

Although wel­comed by many as a use­ful addi­tion­al tool against the laun­der­ing in the UK of the pro­ceeds of grand cor­rup­tion over­seas and seri­ous crime, UWOs are poten­tial­ly very wide in scope and dra­con­ian in nature so will need to be sub­ject to care­ful scruti­ny by the courts. This is par­tic­u­lar­ly so where, although the infor­ma­tion obtained under the UWOs can­not be used against the respon­dent in sep­a­rate crim­i­nal pro­ceed­ings, it can be relied on by inves­tiga­tive agen­cies to build evi­dence against poten­tial defen­dants.

By Charlotte Wright,  Kingsley Napley

What you need to know about Unexplained Wealth Orders

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