Unexplained Wealth Orders
The UK National Crime Agency last week announced that it had been granted the power to enforce an Unexplained Wealth Order (UWO) worth £22 million and freeze two properties of a person identified as the ultimate owner and an “Asian politician”. Having come into force on the 31st of January, 2018, the swift use of UWOs indicates the authorities’ willingness to stem the flow of illicit wealth and tackle money laundering through British prime real estate.
Foreign jurisdictions have often been seen as safe havens for corrupt wealth. Whilst some countries have actively enticed such wealth through policies and lax banking regulations, others have become complicit in corruption through inaction and have allowed the world’s corrupt elite to stow their ill-gotten gains within their jurisdictions.
The United Kingdom has been one such country. Lack of stringent controls over the flow of money coming into the UK for decades has allowed the political elite of several countries to hide their wealth without scrutiny.
UWOs are the latest effort of the UK government in an effort to curb such corruption and bring an end to the image of the UK as a safe haven for corrupt wealth.
How It Works
Upon the application of law enforcement agencies, a UWO is issued by the High Court, asking for an explanation of the sources of an individual’s wealth.
The High Court issues the order where the following three tests are to be met:
- The individual is a non-EEA Politically Exposed Person, connected to such a person, or suspected of involvement in a serious crime.
- There is a clear inconsistency in the individual’s apparent income and visible assets.
- Assets concerned are of a value greater than £50,000.
These new measures have retrospective effect and apply regardless of whether the property or the individuals themselves are present in the UK. Enforcement agencies are, however, unlikely to proceed in extra-territorial cases where a nexus to the UK is lacking. Even where a nexus exists, authorities will need to be mindful that such measures do not intrude on an individual’s rights to privacy, rights to property or rights of fair trial under the European Convention on Human Rights (ECHR).
Consequences of a UWO
The UWO is an investigative tool but it shifts the burden of proof on the individual by requiring him or her to explain ownership of assets through lawful means.
Failure to adequately respond to a UWO does not in itself forfeit the property. Separate civil recovery proceedings still need to be undertaken to recover assets.
Failure to respond to a UWO without a “reasonable excuse”, however, does trigger the presumption that the asset is recoverable under the Proceeds of Crime Act 2002. The standard regime under the 2002 Act can then be utilized to seize the asset.
False or misleading responses and statements are offences liable to attract imprisonment of up to 2 years depending on materiality and any such statements made in response to a UWO are inadmissible, unless they are being used in confiscation proceedings, prosecution for making false statements, or other prosecutions where the individual makes inconsistent statements.
As with any new legislation, the effectiveness of UWOs will be determined with the passage of time. However, several concerns regarding UWOs can be raised, the prime one being the reversal of burden of proof. Such a reversal may, in certain circumstances, infringe on the rights of property, privacy and fair trial. The level of proof required is also, as yet, undetermined.
There are also concerns of third-party investors or purchasers getting caught up in the net where they acquire assets from a personal equity plan (PEP) or person who later becomes subject to a UWO. Of course, the new buyer is protected where he or she paid a fair price, in good faith and without notice of any wrongdoing. There are, however, many reasons where an asset is sold under value, and not all of these reasons are criminal. Nevertheless, where the buyer acquires an asset from a PEP or in suspicious circumstances, due diligence becomes essential.
Transparency International has identified several billion pounds worth of suspected property in the United Kingdom and in particular highlighted 5 properties which they ask authorities to take a closer look at. Amongst them are also Nawaz Sharif’s Avenfield flats.
The British enforcement authorities are keen to try out the new powers they have been pushing for. Political will in implementation and foreign cooperation are hurdles yet to be surmounted, but UWOs do hold the potential to reduce the appeal of the UK as a destination where the corrupt elite can feather their nests.
The views expressed in this article are those of the author and do not necessarily represent the views of CourtingTheLaw.com or any organization with which he might be associated.