Why we should be paying close attention to Unexplained Wealth Orders

Corporates are undoubt­ed­ly versed in com­ply­ing with anti-mon­ey laun­der­ing reg­u­la­tions but increas­ing­ly Unexplained Wealth Orders (UWOs) should be on our radar too. With the abil­i­ty to pierce the cor­po­rate veil and their pow­er­ful extra ter­ri­to­r­i­al reach, UWOs should be tak­en very seriously.

In short, an UWO can com­pel any polit­i­cal­ly exposed per­sons (PEP) or those sus­pect­ed of seri­ous crim­i­nal­i­ty (or those con­nect­ed to them) to reveal the source of their wealth used to pur­chase property.

At the time of writ­ing (27th March 2020) there have only been four tar­gets of an UWO; two of whom still remain anony­mous. In May 2019, UWOs were issued against an unnamed PEP relat­ing to three London prop­er­ties pur­chased for £80 mil­lion by off­shore enti­ties in Anguilla, Panama and Curacao. Last week, we learnt that the tar­get was Mr Rakhat Aliyev, now deceased, who had been a high-pro­file Kazakhstani nation­al and part of the country’s rul­ing elite. Mr Aliyev’s son now lives in one of the London prop­er­ties, a super man­sion on ‘Billionaires Row’ in Hampstead. The UWO is being dis­put­ed on the basis that the funds for the prop­er­ties came not from Mr Aliyev, but from his for­mer wife, Dariga Nazarbayeva, who is inde­pen­dent­ly wealthy and whose father was the President of Kazakhstan for over thir­ty years.

Why should corporates worry?

What is par­tic­u­lar­ly inter­est­ing in this case is the crit­i­cism that the National Crime Agency (NCA) has made of Andrew Baker, the President of the two Panamanian foun­da­tions that own one of the London prop­er­ties. The NCA said that there were rea­son­able grounds to sus­pect that Mr Baker, a British finan­cial advis­er and solic­i­tor based in Lichtenstein, assist­ed in the laun­der­ing of tens of mil­lions of pounds. Whilst it is unclear whether Mr Baker will be crim­i­nal­ly pros­e­cut­ed, both he and his foun­da­tions will like­ly be sub­ject to fur­ther scrutiny.

Additionally, a pre­vi­ous tar­get of an UWO was Mrs Hajiyeva, whose London prop­er­ty was owned by a com­pa­ny incor­po­rat­ed in the British Virgin Islands. Although in that case the com­pa­ny did not dis­pute her own­er­ship, it’s clear for these cas­es that UWOs are designed to cap­ture infor­ma­tion about off­shore funds used to pur­chase UK property.

In both PEP cas­es, the NCA have demon­strat­ed their will­ing­ness to tar­get high pro­file indi­vid­u­als and their funds, as well as their off­shore finan­cial advis­ers and ser­vice providers. Although the UWOs men­tioned have focussed on PEPs, oth­er orders have also been grant­ed on the basis of sus­pi­cion of seri­ous crim­i­nal­i­ty, such as drug deal­ing, firearm offences and asso­ci­at­ed mon­ey laun­der­ing offences. Tax eva­sion is also a seri­ous crim­i­nal offence when it comes to UWOs and so advis­ers should keep an eye on this as it is pos­si­ble that this could well become an aspect of an order.

Moving on

The author­i­ties have long been aware that the route to pre­vent­ing ‘dirty mon­ey’ being laun­dered in the UK is to dis­rupt crim­i­nals’ access to pro­fes­sion­al advis­ers who might assist them in their endeav­ours, giv­ing their trans­ac­tions the veneer of respectabil­i­ty and mask­ing the source of funds. Last week, it was clear that cen­tral to the NCA’s case – that Mr Aliyev owned the prop­er­ties in ques­tion — is the NCA’s belief that the off­shore com­pa­nies laun­dered those funds. If so, the next ques­tion will be whether the off­shore enti­ties do so know­ing­ly and/or what pro­ce­dures and checks were in place. No one wants to be the sub­ject of such scrutiny.

Original source: Financial reporter