On 31st January 2018, the Criminal Finances Act 2017 introduced new provisions in an attempt to tackle money laundering, corruption, tax evasion and terrorist financing in the UK. One of the new provisions was the introduction of Unexplained Wealth Orders, which were introduced to close the loopholes being exploited in order to hide the proceeds of crime. These Unexplained Wealth Orders require individuals to explain the nature and extent of their interest in specified property and how they obtained the property, as well as any other information in relation to the property as required by the order. Here we look when they can be used and what the consequences are.
When Can an Unexplained Wealth Order (UWO) Be Used?
A UWO is a civil power that requires a person to provide information about particular assets and how they were obtained or paid for. It is not a power in itself to recover assets and is not to be used in isolation- it is a preliminary step in either civil recovery or criminal proceedings to be used alongside the other powers available in the Proceeds of Crime Act 2002. A UWO changes the playing field since it allows investigators to require information even where they do not necessarily suspect that the asset is a proceed of crime or that the person is guilty of an offence.
The powers of the court under a UWO are very broad. The provisions are retrospective and can be applied to property that was obtained before 31st January 2018. The person that is the subject of the order does not need to be the sole owner of the relevant property. The person and or relevant property also does not have to be situated in the UK, though it is likely there will need to be some link to the UK. Property is defined very broadly to include all property such as money, things in action and other intangible or incorporeal property.
Requiring a person to disclose details about “unexplained wealth” is a new concept introduced by the Act. Before this, assets could only be frozen where there was evidence that they were proceeds of crime or a benefit from crime. A UWO changes when a person has to explain what interest they have in a property and how they obtained it. A UWO can be ordered by the High Court where a case satisfies certain tests. The first situation arises where the holder of the property is a politician or office from outside the European Economic Area (EEA) or a Politically Exposed Person (PEP). Where the relevant person is a PEP from outside the EEA, then there is no requirement for suspicion of serious crime.
The second scenario occurs where the person is reasonably suspected of being involved in (or connected to a person involved in) serious crime (for example corruption, fraud and money laundering). Connected parties include spouses and close relatives.
In both cases, the value of the relevant asset has to be over £50,0000. The investigator must also suspect that the lawful income of the relevant person would be insufficient to obtain this asset.
What Is the Effect of a UWO?
Where information is provided under a UWO, then a decision is made on how to use the material. It can be referred to other organisations for consideration of a criminal or civil action. The information can be invaluable in a criminal investigation, although it cannot generally be used against the person that provided it in subsequent criminal proceedings. The enforcement agency can decide what further investigations or enforcement steps are required following the information received.
Where the person does not provide any information following a UWO, this will reverse the burden of proof in any civil recovery proceedings to freeze and recover assets representing proceeds of crime. The person then would have to prove that the property is not a proceed of crime, as opposed to the state having to prove that it is.
If a person makes a statement under a UWO that they know to be false or materially misleading (or are reckless in making that statement), then they will have committed an offence. They can be convicted on indictment to imprisonment of up to two years and/or a fine or imprisonment up to 12 months and/or a fine on summary conviction.
Points of Interest
Only relevant enforcement agencies can apply for a UWO. If other enforcement agencies or prosecutors require the use of a UWO, they must make a referral to the relevant enforcement community. To make a referral there has to be a suspicion that the person’s legitimate income in their possession is insufficient for them to have been able to obtain the relevant property (which must be worth over £50,000). The enforcement agency will then decide whether or not to make a UWO application based on this information. All organisations involved in the process (including the enforcement agencies) need to consider their legal powers to share the information. This applies when they wish to either refer information to another agency or to consider taking criminal or civil action following the receipt of information from a UWO. Where there is an interim freezing order in place over property, this needs to be disclosed to any agency that has information referred to it under a UWO.
Contact Our Specialist Business and Financial Crime Defence Solicitors, London
When your assets are threatened by enforcement agencies, it's vital to act quickly and seek specialist legal advice as soon as possible. The powers they have at their disposal are draconian and widely drawn. Our expert Serious Fraud team has over 40 years' experience successfully defending clients against fraud and financial crime allegations. We are also ranked in Chambers and the Legal 500 for the high quality of our fraud work, and our expert solicitors are described as 'precise', 'steely determined' and 'always mindful of securing the best outcome'.
Our specialist financial crime & fraud solicitors, based in the heart of London, therefore have extensive experience of preparing successful defences to fraud prosecutions, including corporate fraud, whether these are brought by the Crown or a statutory body such as the FCA or the Department of Business Innovation and Skills.
We have extensive experience of advising clients affected by the Proceeds of Crime Act 2002. For more information, please contact us on 020 3811 6784 or use our online form.
