Unexplained Wealth Orders – can you prove the legitimate provenance of all of your significant assets?
The Unexplained Wealth Order (UWO) has been available to law enforcement since February 2018. UWOs are intended to bolster the Proceeds of Crime regime, by making it easier for law enforcement agencies to seize assets suspected of representing criminal property.
For more on how UWOs work see our related blogs:
At the end of February 2018, the NCA announced that it secured its first two UWOs to enable it to investigate assets totalling £22m that are believed to “ultimately be owned by a politically exposed person (PEP)”. In addition to the UWOs, interim freezing orders (IFOs) were granted meaning that the assets cannot be sold, transferred or dissipated while subject to the order (IFO).
The NCA has therefore demonstrated its willingness to use this new tool, dubbed by the press as the “McMafia” law and lauded as a means of stemming the tide of “dirty money” coming into the U.K.
A challenge to a UWO in the High Court in July 2018 was widely covered in the media: "Harrods big spender fights to keep mansion” (BBC News). Not named at the time, a Mrs A argued before the High Court that she was unable to respond to the NCA’s UWO because she was reliant on her husband, Mr A, to explain the source of his wealth, which was used to acquire the assets targeted by the order. In an intriguing twist, however, Mr A was imprisoned at the time (following a fraud conviction) in an unnamed country and was unable to communicate with the outside world. In response, the NCA argued that Mr A’s business associates ought to be able to provide the information it required. See our related blog Media focus on first 'McMafia law' challenge.
In October 2018, the High Court dismissed Mrs A’s challenge: “In all the circumstance it was, and remains, appropriate for the order to have be made. The statutory criteria for making the order have been met". The court also lifted reporting restrictions and Mrs A was revealed to be Zamira Hajiyeva, the wife of the former chairman of a state-owned bank in Azerbaijan who was imprisoned on fraud charges.
Though the original UWOs in this case were related to real estate, the NCA went on to seize £400,000 of jewellery from an auction house as part of the same investigation. In January 2019 it went on to seize yet more jewellery - see our related blog: Diamonds are (not) forever: NCA keeps up pressure on unexplained wealth
The developments in this case make clear the NCA’s undimmed desire to get to the bottom of unexplained wealth.
National Crime Agency (NCA) Director Donald Toon stated in April last year that the NCA was considering UWOs as an investigative tool in “100s of cases”. Bolstered by the outcome of their first few, we may expect to see many more come down the line in 2019.
As to the other law enforcement agencies, it remains to be seen whether the SFO will make use of the new powers. Former SFO Director David Green said, when UWOs came into force, that the SFO would not use them unless it had “the right case”.
New SFO Director Lisa Osofsky has identified the recovery of proceeds of crime as a priority and has increased the resourcing of the SFO’s Proceeds of Crime & International Assistance Division. Her “maiden speech” underlined the problems encountered by law enforcement in this field, “particularly acute in SFO cases”, where sophisticated criminals go to great lengths to distance themselves from the assets they control.
Pressure is also brought to bear on the UK Government from external sources, for example Transparency International. TI’s Corruption Index for 2018 saw the UK lose its position in the Top 10 nations for combatting corruption for 2018. Unwelcome developments such as this – made more acute by Britain’s need to promote itself as an attractive location for blue chip investment post-Brexit – are likely to focus minds in government and law enforcement on how best to demonstrate the UK’s commitment to clean business.
The potentially dire consequences for those respondents targeted by a UWO means that this remains a key area for development over the coming months and years. HNWIs, PEPs and their advisors should keep a close watching brief and seek specialist legal advice if they have any concerns that they might be of interest to the NCA, SFO or other agencies with the power to obtain a UWO.
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