The UK's National Crime Agency (NCA) has suffered its first set back while deploying an Unexplained Wealth Order (UWO), which is a relatively new and controversial enforcement tool. The case, NCA v Baker, concerned three UWOs made without notice in May 2019. Each related to properties in Hampstead, Highgate and Chelsea – all exclusive property areas in London – worth over £80 million, where the registered owner was either a Panamanian Private Interest Foundation or a Curaçaoan Private Foundation.
The UWOs were directed at Mr Andrew Baker, a solicitor specialising in trusts and international tax planning, in his role as the president of certain Panamanian foundations that were the registered owners of two of the properties and the Manrick Private Foundation and Alderton Investments Limited, the registered owners of a further property. The UWOs were granted in light of the fact the properties were allegedly acquired through laundering the proceeds of the unlawful conduct of Mr Rakhat Aliyev, a deceased Kazakhstani national. The NCA investigation had focused on him and the use of proceeds of crime to which he was alleged to be linked.
What is a UWO?
UWOs can be granted in accordance with the provisions of.362A to 362H of the Proceeds of Crime Act 2002 (POCA), and require a respondent to provide information about the nature and extent of his or her interests in a property, how the property was obtained and, if the property is held on trust, the details of the trust.
In order to obtain a UWO, the applicant must satisfy the court of four things:
- The respondent holds the property.
- The value of the property exceeds £50,000.
- The known sources of the respondent’s lawfully obtained income would have been insufficient for him/he to obtain the property.
- The respondent is involved in serious crime or is a politically exposed person (PEP) or is connected to either.
Even if an enforcement authority can satisfy all four requirements, the power is not mandatory and so the court retains a residual discretion as to whether or not it is appropriate to make an order. As a UWO requires a respondent to provide confidential material under compulsion, the provisions of Article 8 of the European Convention on Human Rights apply, and so exercise of UWO powers must be proportionate to the outcome that the UWO is designed to achieve.
Points from this case
- In addition to challenging the UWOs, the respondents chose voluntarily to provide the information that was required to be disclosed pursuant to the UWOs. While this may not be appropriate in every case, in instances where the NCA's evidence and assumptions were flawed – such as in this case – being able to correct any inaccuracies through the submission of cogent evidence may ultimately assist in mounting a successful challenge to a UWO.
- The use of complex offshore corporate structures does not, of itself, provide a basis for asserting that they are being used for money laundering.
- If the respondent is a trustee – as Mr Baker was – the requirement to provide financial information can only be deployed to the extent that the trustee can be shown to have a beneficial interest in the assets(s) subject to the UWO.
- The assertion that the respondent is a PEP or connected to a PEP must be based on clear evidence.
- The NCA is still able as a matter of law to seek to confiscate the properties using the civil recovery process provided under POCA. However, the Court's ruling on the UWO might present significant challenges if the NCA attempted to do so.
While the NCA has indicated that it will appeal the decision, the judgment does highlight that UWOs can be successfully challenged, and that courts will require the NCA to fully justify the grant of a UWO through the submission of reliable evidence.