Wine as an investment – the wine merchant’s risk
Media reports today focus on the first challenge to the Unexplained Wealth Order with headlines such as: “Harrods big spender fights to keep mansion” (BBC News), referring to the case before the High Court on 25th July where “Mrs A” sought to discharge an Unexplained Wealth Order (UWO) obtained by the NCA against her husband, “Mr A”, in respect of two UK properties with a combined value of £22 million. The NCA alleges that Mr and Mrs A obtained their wealth through foreign corruption.
First ratified in the Criminal Finances Act of April last year, UWOs have been in force since February 2018. Several authorities are permitted 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).
The orders were introduced with the aim of making it easier for law enforcement agencies to seize assets suspected of representing criminal property, bolstering the regime under the Proceeds of Crime Act 2002 (POCA).
UWOs do not require a criminal conviction, but instead impose a reverse burden of proof on a person suspected of involvement in, or association with, serious criminality: the subject of a UWO must explain the origin of assets that appear to be disproportionate to their known income.
The applicant must satisfy the court that there are reasonable grounds for suspecting the respondent has had insufficient time or available resources to acquire the property in question. Once granted, the order requires the respondent to provide a statement setting out the nature and extent of their interest in the property in respect of which the order is made, and explaining how the respondent obtained the property. Failure to provide a response gives rise to a presumption that the property is recoverable, a presumption that is likely to be determinative in subsequent civil recovery action. It is a criminal offence to make false or misleading statements in response to a UWO.
A UWO can be made against politically exposed persons “PEPS” or individuals where there are reasonable grounds for suspecting that they are, or have been, involved in serious crime in the UK or elsewhere.
UWOs can be issued against individuals but also other structures that hold property such as companies and trusts. Media reports have cited 'fishy millionaires', the wealth of corrupt overseas politicians and the properties of oligarchs as the intended targets.
In the case reported today, Mrs A argues that she is unable to respond to the NCA’s UWO because she is reliant on Mr A to explain the source of his suspected wealth. In an intriguing twist, however, he is currently imprisoned (following a fraud conviction) in an unnamed country and is unable to communicate with the outside world. For its part, the NCA argues that Mr A’s business associates ought to be able to provide the information it seeks.
In addition to the first two UWOs secured in February, NCA Economic Crime Director Donald Toon informed reporters back in April that he expected five more UWO to be issued in the coming months and that “there were about another 100 cases his officers were working on”.
The NCA’s appetite to apply for UWOs, and the dire consequences for those respondents either unable to provide a satisfactory explanation, means that this is likely to be a developing area of law over the coming months and years. HNWIs, PEPs and their advisors should keep a close watching brief.
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