Unexplained Wealth Orders
What are Unexplained Wealth Orders?
Unexplained Wealth Orders (UWO) came into force in January 2018 to help authorities identify and seize property suspected to have been bought by laundered criminal funds.
UWOs grant new civil powers to UK law enforcement agencies to help them identify, investigate, and seize property suspected to represent the proceeds of criminal activity.
A UWO places the burden on the individual, rather than the enforcement agency, to prove how they have accumulated their wealth and to raise evidence to verify the sources of the wealth.
Why are Unexplained Wealth Orders needed?
It is often difficult for agencies to prove how individuals obtain their wealth when they are based overseas or where ownership of the assets is very complex. Under these circumstances, it is evidentially onerous to arrest and charge the individuals with a criminal offence.
When are they issued?
A UWO can be issued by the High Court where an individual is ‘reasonably suspected’ of involvement or connected to a person involved in serious crime. It obliges the individual to explain how property was obtained.
In other words, are there are reasonable grounds to suspect that the individual’s lawfully obtained income would be insufficient to fund the purchase of the property?
Who can apply for one?
In addition to the High Court, an order can also be applied for by the:
- National Crime Agency
- Crown Prosecution Service
- Financial Conduct Authority
- Serious Fraud Office
What is the process for obtaining a UWO?
The prosecuting agency will have to:
- Show a reasonable belief that the respondent owns the asset;
- Apply to the High Court specifying the property in question (subject to a £50k minimum value);
- Satisfy the court that there are reasonable grounds to suspect a respondent’s lawful income is insufficient enough to obtain the property; and
- Satisfy the court that the respondent is either:
- a non-EEA Politically Exposed Person (PEP) OR
- there are reasonable grounds to suspect they are/have been involved in serious crime (or are connected to someone who is)
What happens if an Unexplained Wealth Order is granted?
If an order is granted, it is then the responsibility of the respondent to explain the nature and extent of their interest in the relevant asset and the legal basis upon which it was obtained.
Failure to do so to the satisfaction of the enforcement agency, or failure to respond, could lead to the following:
- The asset will be presumed to be recoverable and recovery proceedings will be instigated;
- If deemed appropriate, an interim freezing order maybe be brought to prevent the respondent from disposing of the assets; and
- A criminal investigation may be launched into the nature of the ownership of the asset
If the respondent is believed to have knowingly made a false or misleading statement, a criminal conviction could be brought with a corresponding sentence of two years imprisonment, a fine, or both.
What impact will they have?
Although welcomed by the UK’s law enforcement agencies, there are concerns from the legal community.
- The wide scope of the criteria required to obtain a UWO leaves the orders open to interpretation;
- The reversal of the burden of proof from the investigating authority to the owner of the asset could affect a person’s right to a fair trial; and
- Assets can be seized under the Proceeds of Crime Act without a criminal conviction (or even a criminal trial) having taken place
Can an Unexplained Wealth Order be challenged?
There are circumstances in which UWOs can be challenged:
- Were the officers open and transparent with the judge in their application?
- Have the statutory criteria been met?
- Is the individual correctly described as a ‘politically exposed person’ or is the connection with the alleged criminal activity sufficiently strong? and
- To what extent is the individual obliged to comply with the order?
The Economic Crime (Transparency and Enforcement) Act 2022
The changes that the Act makes to UWO can be summarised as follows:
- Creation of a new category of person who can receive a UWO. This will now include “responsible officers” of the entity that owns the property. If the named respondent of an UWO is not an individual (i.e., a company) the UWO may now also name the responsible officer who must provide the necessary information. The purpose of this amendment is to try and navigate the use of “complex structures” that seek to hide the true owner of property. A “responsible officer” includes a director, manager or partner of a partnership, both in or outside the UK.
- Creation of a new alternative test for granting an UWO. Prior to the Act, when granting an UWO a court had to be satisfied that “there are reasonable grounds for suspecting that the known sources of the respondent’s lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property.” The Act provides for a further ground, being that “there are reasonable grounds for suspecting that the property has been obtained through unlawful conduct”.
- When applying to the court for a UWO, the relevant enforcement authority may apply at the same time for an interim freezing order which would prohibit the person receiving the UWO from selling it.
- Limiting the liability of enforcement authorities to pay costs in legal proceedings relating to UWOs (or interim freezing orders).