Unexplained Wealth Orders – what are they and how do they work?
Introduced over three years ago, Unexplained Wealth Orders were intended to help tackle the problem of money laundering.
Unexplained Wealth Orders (“UWOs”) were introduced over three years ago and were heralded as being another important investigatory tool in the fight against crime for enforcement authorities.
Their use was intended to help tackle the problem of money laundering which was perceived as endemic within certain high net worth individuals, often with foreign and political connections, based in this jurisdiction, whose wealth appears to outstrip their legitimate income.
Created by the Criminal Finances Act 2017 on 31 January 2018, a UWO is a “civil power and an investigation tool” which puts the onus on those served with an order to provide information of lawful ownership of their property, real or personable, and how it was obtained.
This new power was deemed necessary to bolster investigations as enforcement authorities have had some difficulty in gaining success in civil recovery orders under the Proceeds of Crime Act 2002 (“POCA”), particularly where the enforcement authorities have little information about sources of wealth of targeted individuals.
UWOs were seen as one of a number of new powers that would bring a sea change in the area of crime enforcement. However, they have their limitations, as recent cases have shown.
The following enforcement authorities can apply for an UWO:
- National Crime Agency (“NCA”);
- Her Majesty’s Revenue and Customs;
- The Financial Conduct Authority;
- The Serious Fraud Office; and
- The Director of Public Prosecutions (“DPP”).
These parties can apply to the High Court, on notice or without, seeking an order requiring “an individual or company to provide specific documents or information to establish if the asset(s) in question have been legitimately obtained”.
To obtain such an order, the enforcement authority needs to show the following:
- there is a reasonable cause to believe that the respondent holds money, real or personal property;
- that the money, real or personal property is worth £50,000 or more;
- the respondent’s known income is not enough to have been able to obtain that property; and
- the respondent is:
- a “politically exposed person” (“PEP”), a family member of a PEP or close associate of a PEP; or
- is involved in serious crime; or
- is someone connected with either type of person.
The UWO puts an obligation on the respondent to disclose their interest in the asset and explain how they were able to pay for it. The onus is on the respondent to prove that the property has been legitimately obtained.
The intention is to try to establish if the asset has been obtained legitimately by the respondent. Following such disclosure, substantive evidential arguments and forfeiture of the property are then determined in subsequent civil recovery proceedings under POCA.
This power has some force not least because of the sanctions for non-compliance. For example, if the respondent fails to comply with an UWO within the time permitted then the property is deemed to be recoverable.
So on the face of it this power is a potent one. So what of its use?
The NCA has been at the forefront of its use and has encountered mixed results in its application. It has only been used a handful of times, with notable success in, for example, the case of R v Hajiyeva, in which the wife of a jailed Azerbaijani banker convicted of a £100 million fraud was alleged to have spent £16 million in Harrods and whose applications to discharge two UWOs against property worth £22 million, one a large house in Knightsbridge and the other a golf club in Berkshire, were refused by the Supreme Court in January 2021.
However, the NCA suffered a significant setback in April 2020 in the case of NCA v Baker, in which the NCA was refused permission to review the decision of the High Court not to impose a UWO against properties beneficially owned by the ex-wife and son of Rakhat Aliyev, a politician from Kazakhstan. In this case the court highlighted the relatively limited scope of UWOs as an investigative tool in order to obtain details of who is the owner of property and how it was obtained.
UWOs have previously been used sparingly and in a limited set of circumstances with an international element linked to alleged foreign corruption.
However, a recent case may have changed matters somewhat with the NCA’s pursuit of Mansoor Hussain, which concerned the obtaining of an UWO on the grounds of Mr Hussain being connected to domestic serious organised crime. It was also the first UWO that led to the actual recovery of the alleged proceeds of crime.
The NCA ultimately reached an agreement with Mr Hussain whereby he was obliged to forfeit £9 million in property.
These cases show that the use of UWOs as an investigatory tool continues to be used sparingly, and cases do turn on their own facts, but recent successes have meant that the enforcement authorities, in particular the NCA, will be more prepared to use them in a broader context than before. UWOs may yet turn out to meet their billing as an “important investigatory tool in the fight against crime”.
For more guidance on financial crime and compliance, speak to our financial crime solicitors.