Unexplained Wealth Orders: the government's new tool against McMafia?

The new unexplained wealth order (UWO) regime came into force on 31 January 2018, and on 1 February 2018, the government published Circular 003/2018 to, “raise awareness and a basic understanding of the unexplained wealth order…”

Then, in February 2018 the first UWO was secured by the National Crime Agency (NCA) against two UK properties (in London and the South east) thought to be valued at around  £22m. These are believed to belong to a central Asian politician  The properties were also made subject to a freezing order.

There has been much publicity about the UWO with Ben Wallace, the Minister for Economic Crime, saying that wealthy foreign criminals would feel the “full force of government” in an attempt to tackle the £90 billion of illegal funds that are thought to be laundered through the UK each year.

What is an Unexplained Wealth Order?

A UWO will be issued by the High Court and will require a person to explain:

• the nature and extent of their interest in particular property; and
• how the property was obtained, where there are reasonable grounds to suspect that the respondent’s known lawfully obtained income would be insufficient to allow the respondent to obtain the property.

A UWO is a civil power and an investigation tool; it is not by itself a power to recover assets

Who can apply for a UWO?

At present, a UWO can only be obtained by the following listed “enforcement authorities” (although other enforcement agencies can seek assistance from those bodies in obtaining a UWO):

• National Crime Agency
• HM Revenue & Customs
• Financial Conduct Authority
• Serious Fraud Office
• Crown Prosecution Service

Against who or what can a UWO be obtained?

Persons:

• any non-EU Politically Exposed Person (“PEP”) (including any person “connected” with such a PEP);
• any person, where there are “reasonable grounds” to connect them (or a person connected to them) to “Serious Crime”.

This includes both corporate bodies and natural persons.

Property

• any property (whether in the UK or elsewhere) with a value of over £50,000, where the “known sources of income” of the person would have been insufficient to obtain that property.

The process to be followed by prosecutors

A UWO is applied for, with or without notice, to the High Court. If the court is satisfied that an order should be granted, the person will be required to explain the source of the asset in question within the time period set by the court. A UWO can be supported by an interim freezing order which would prevent a person dissipating the asset before the UWO has been complied with.

If a person is unable or refuse to explain adequately the source of their wealth, the asset can then be recovered through the civil recovery regime under the Proceeds of Crime Act. This will not require a conviction and carries a lower standard of proof.

A person will commit an offence if they make a statement that is known to be false or misleading in a material way, or if they recklessly make a statement that is false or misleading in a material way. A person guilty of an offence could be imprisoned for up to two years.

Osborne Clarke comment:

There is no doubt that a UWO has the potential to be a useful tool for prosecutors. It enables assets to be confiscated without a conviction and through a process that puts the burden of proof on the person concerned to establish that the asset was obtained lawfully.

The government is certainly projecting a tough line with Mr Wallace commenting on the accuracy of the BBC TV series McMafia and stating that the government’s view is that “we know what they are up to and we are not going to let it happen anymore“.

UWO’s are, however, a civil power, which if successfully challenged could see enforcement authorities left with substantial legal bills to pay. Perhaps mindful of that, David Green QC, the outgoing Director of the SFO has struck a more cautionary note on when UWOs will be sought.

We do, though, expect to see further UWO being deployed in the relatively near future and whilst initially they may be targeted against individuals, their potential use against companies should not be overlooked.