Proceeds of Crime: new Asset Recovery Action Plan seeks to leave “no safe space” for dirty money
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.
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.
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) 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. 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.
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 corruption” which 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.
This article first appeared in Economia on 13 February 2018.
 A PEP is defined in POCA s362B(7) as a person who is:
“(a) an individual who is, or has been, entrusted with prominent public functions by an international organisation or by a State other than the United Kingdom or another EEA State,
(b) a family member of a person within paragraph (a),
(c) known to be a close associate of a person within that paragraph, or
(d) otherwise connected with a person within that paragraph.”
 The definition of a connected person is found at s1122 of the Corporation Tax Act 2010 and captures relatives, people who control a company, and partners in a partnership, amongst others.
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