Olliers’ Matthew Claughton explains the government’s latest investigation tool in its fight against the flow of illicit monies into and throughout the UK.
“Unexplained wealth orders” (UWO) and “interim freezing orders” came into force on 31 January 2018. Essentially, a UWO is an investigation order issued by the High Court once certain criteria are met. They can apply to an individual suspected of involvement in serious crime or to a ‘politically exposed person’ (PEP).
An ‘enforcement authority’ must have reasonable grounds for suspicion that an individual, who is either a PEP or involved in serious crime, has “insufficient legitimate income for the purposes of enabling the individual to obtain specific identified property (of a value over £50,000), which can be shown to be in their possession”.
In February 2018 The National Crime Agency (NCA) was granted the first two UWOs allowing it to look into a house and offices in London and the south-east with a total value estimated at £22m.
Politically exposed person
The NCA argued that the properties are “ultimately owned” by a politically exposed person (PEP) – a person with a prominent position in public life, vulnerable to bribery and corruption. PEPs can include heads of state, government ministers, politicians, judges, ambassadors, diplomats, military officers, directors of international organisations and state-owned bodies.
Connection to ‘serious crime’
A UWO may require a person “reasonably suspected” of involvement in, or of being connected to a person involved in, serious crime to explain their interest in particular property, how the property was obtained, where there are “reasonable grounds” to suspect that the individual’s lawfully obtained income would be insufficient to allow them to obtain the property. The test for involvement with serious crime is by reference to Part 1 of the Serious Crime Act 2007. The list of offences in pretty comprehensive and includes; drug trafficking, slavery, people trafficking, firearms offences, prostitution and child sex, armed robbery etc, money laundering, fraud, offences in relation to the public revenue, bribery, counterfeiting, blackmail, computer misuse, intellectual property, environment, organised crime, financial sanctions legislation, and certain inchoate offences.
Arguably an order is relatively easy to obtain. For example, if an enforcement authority can show that figures on an individual’s income tax return are disproportionate to his ownership of a particular asset, this could give rise to reasonable suspicion of tax evasion, one of the listed “serious crimes”.
Politically exposed persons from outside the European Economic Area
A UWO can be applied to politicians or officials from outside the European Economic Area (EEA), or those associated with them i.e. politically exposed persons (PEPs). For a UWO in relation to a non-EEA PEP there is no requirement for suspicion of serious criminality.
The civil nature of UWOs
Once a UWO is granted the respondent is required provide information on specified matters which essentially require them to prove the legitimate ownership of property and the means by which it was obtained. The UWO is nothing more than an investigation tool and sits alongside other powers available to prosecuting authorities under POCA.
‘Enforcement authority’
A UWO can only be applied for by a specified “enforcement authority”, namely; the National Crime Agency, HM Revenue and Customs, the Financial Conduct Authority, the Serious Fraud Office or the Crown Prosecution Service.
Donald Toon, director for economic crime at the NCA sets out his view of UWOs
“Unexplained wealth orders have the potential to significantly reduce the appeal of the UK as a destination for illicit income, they enable the UK to more effectively target the problem of money laundering through prime real estate in London and elsewhere.
“We are determined to use all of the powers available to us to combat the flow of illicit monies into, or through, the UK.”
Former director of the SFO, David Green, stated that it would be waiting for the “right case” and believed there would not be a sudden onslaught of forced asset disclosure.
Arguably, if we are to see UWOs used on a regular basis this would have to be as a result of Crown Prosecution Service asset recovery teams embracing them.
Prosecuting authorities that do not have access to the powers can refer suitable cases to an enforcement authority.
Responding to an Unexplained Wealth Order
Care needs to be taken in responding to a UWO. Upon receipt of a response the enforcement authority will decide how best to proceed, this may include civil or criminal action, although evidence obtained under the UWO should not be used in a criminal prosecution, a concept that many will find difficult to grasp.
Failure to respond to an Unexplained Wealth Order
If the prosecuting enforcement authority opts for civil recovery then a failure to respond to the UWO may give rise to a presumption that the property is recoverable. Civil recovery takes place in the High Court (see Part 5 of POCA).
Making a deliberately false or misleading statement in response to a UWO is a criminal offence carrying a maximum sentence of two years imprisonment.
Conclusion
It remains to be seen which authorities will rely upon UWOs and also whether the focus is upon politically exposed persons or those allegedly connected to serious crime. There is however no doubt that Unexplained Wealth Orders have the potential to be a powerful weapon for enforcement authorities in the fight against the flow of illicit monies within the UK.
Matthew Claughton is the Managing Director of Olliers solicitors and specialises in defending allegations of fraud.
