Unexplained Wealth Orders

On 17 January, the Serious Fraud Office (SFO) secured its first Unexplained Wealth Order, in respect of a property believed to have been purchased with the proceeds of a £100 million fraud. 

Following a lengthy period of research and consultation, the Law Commission (‘the Commission’) has published its final report and recommendations for the reform of Part 2 of the Proceeds of Crime Act 2002: the post-conviction confiscation regime (‘the report).

A new bill will be put forward to parliament tomorrow with the aim of increasing transparency of ownership of property in the UK. The introduction of this new Economic Crime (Transparency and Enforcement) Bill has been expedited following the sanctions announced last week, however the drive for change began over five years ago and that it is finally coming to fruition will be welcomed by many.

The NCA will be pleased as punch with the highly publicised outcome of their investigation into the businessman Mansoor Hussain; using several of the tools at its disposal, the agency has agreed a settlement with Mr Hussain that will see him relinquish ownership of numerous properties, assets and cash to the amount of £9,802,828. All on the basis of his alleged links to serious organised crime in the UK but without the need for any criminal proceedings.

The SFO has followed in the footsteps of the NCA and HMRC by using, for the first time, a listed asset order (‘LAO’) to recover £500,000 worth of jewellery which they were satisfied represented the proceeds of crime.

In the Home Secretary’s foreword to the National Crime Agency’s Annual Report 2019-20, she details the “NCA’s relentless mission to end the very worst criminality” and the report cites the categories of Serious and Organised Crime (SOC) that “destroy lives” including: child sexual abuse; modern slavery and human trafficking; organised immigration crime; cybercrime; fraud; money laundering; bribery and corruption; and, sanctions evasion.

In our previous blog, ‘Unexplained Wealth Orders: An overview of the regime to date’ we considered the challenges faced by the NCA in their efforts to use the relatively new statutory tool of Unexplained Wealth Orders (UWOs). Unfortunately for the NCA, one of the four cases they have focused their efforts on since its introduction has now been unequivocally lost.

Unexplained Wealth Orders (UWOs) were introduced pursuant to the Criminal Finances Act (CFA) 2017 in order to bolster the UK’s proceeds of crime regime and they have been the subject of much media attention because of the vast sums of money and high value property involved. The NCA and other law enforcement agencies have now had over two years to avail themselves of this investigatory tool and in this blog we consider the challenges that have arisen and what lessons have been learnt to date.

In a significant decision, on 8 April 2020, the High Court discharged three Unexplained Wealth Orders (UWOs) following applications by the respondents to those orders. This is the first time the High Court has acted to discharge such orders. The National Crime Agency (NCA) has already indicated its intention to appeal.

The NCA announced on 13 February that it had obtained a freezing order preventing the sale of 17 addresses as part of an on-going investigation into a Leeds businessman with suspected links to serious organised criminals.  It confirmed that the Property Freezing Order (PFO) covers properties in Leeds, Cheshire and London worth approximately £10.5 million, which are under the control of 39-year-old Mansoor Mahmood Hussain. 

The NCA announced on Monday 13 January that it has obtained an Account Freezing Order (AFO) over funds in excess of £1m related to businessman Mansoor Mahmood Hussain alleged to be connected to organised crime and in respect of whom the NCA had already secured an Unexplained Wealth Order (UWO) in July 2019. It is clear that law enforcement agencies’ appetite to deploy these draconian orders is growing.

On 12 July, the Home Office published its new Asset Recovery Action Plan (“the Plan”) to complement the National Economic Crime Plan 2019 to 2022. In it, the government expresses its clear intention to attack criminal finances still more robustly and to hit hard at the “common thread that runs through almost all offending” – money. The Plan continues: “The vast majority of criminality is driven by money, so it is vital that we are relentless in our pursuit of the illicit finances that criminals acquire to fund their criminal lifestyle and commit further crime…”

The National Crime Agency (NCA) continues to deploy Unexplained Wealth Orders (UWOs) as a means to tackle illicit finance – now, as anticipated, it has turned its focus on serious organised crime.

The National Crime Agency announced last week that it has secured three Unexplained Wealth Orders as part of its investigation into London property linked to “a politically exposed person believed to be involved in serious crime.”  We are told that the UWOs are for three residential properties in prime locations – originally bought for more than £80m and held by offshore companies.

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.

Further developments in the first (so-called) “McMafia” case (see my related blog Media focus on first 'McMafia law' challenge) were reported yesterday when the National Crime Agency (NCA) secured the seizure of a “high value Cartier diamond ring”.

Whether you can prove the legitimate provenance of all of your significant assets is a question an increasing number of people may have to start asking themselves. In the last week, the High Court has dismissed an appeal to discharge the first Unexplained Wealth Order (‘UWO’) brought by the National Crime Agency (‘NCA’). 

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.

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.

In the Government Anti-Corruption Strategy 2017-22 Unexplained Wealth Orders were cited as one of the key tools to ensure a more robust response to tackling economic crime.  “Goal 2” of the strategy is to achieve stronger law enforcement, prosecutorial and criminal justice action.