Yesterday, the UK’s National Crime Agency (the “NCA”) announced that it had successfully obtained two unexplained wealth orders (“UWOs”) through an application to the High Court.  These are the first UWOs issued since their introduction to UK law on 31 January 2018 under the Criminal Finances Act 2017.  Some anti-corruption commentators are hailing this as a landmark event for British law enforcement efforts against economic crime.

In this particular case, media reports indicate that these two UWOs relate to an NCA investigation regarding funds used to acquire properties in London and in the South East of England, said to be ultimately owned by an unnamed politically exposed person (“PEP”) from Central Asia.  In addition to the UWOs, the properties are subject to related interim freezing orders. Consequently, the properties cannot be sold, transferred or dissipated until further order of the Court.  

In brief, a UWO compels a person to:

  • explain the nature and extent of their interest in particular property;
  • explain how they obtained the property, especially as to funding for it; and
  • disclose any other information specified in the order as granted by the High Court.

Failure to comply with a UWO would:

  • create a presumption in the eyes of the Court that the relevant property was obtained through unlawful conduct, and that it is therefore vulnerable to civil (not criminal) recovery proceedings (under Part 5 of the Proceeds of Crime Act 2002); and
  • be a criminal offence in itself if the respondent made a false or misleading statement in their response, risking two years’ imprisonment and a fine.

The High Court can grant a UWO where:

  1. there is reasonable cause to believe a person (the respondent) holds specific, identified, property valued at or above £50,000;
  2. there are reasonable grounds to suspect that the respondent’s known sources of income are insufficient to acquire that property; and
  3. either (a) the respondent is a PEP or (b) there is reasonable suspicion that the respondent (or a person connected to him/her) is or has been involved in serious crime in the UK or abroad. 

Notably, where the respondent is a PEP from outside of the European Economic Area, or an associate of such a person, the application for a UWO does not need to show suspicion of serious criminality.

UWOs are deliberately broad in scope.  The following enforcement authorities may apply to the High Court for a UWO: the NCA, the Serious Fraud Office, HM Revenue and Customs, the Financial Conduct Authority, and the Crown Prosecution Service.  A suspect need not live in the UK, nor does the property subject to the UWO have to be in the UK.  Inevitably, UK enforcement authorities will seek increased cooperation from their counterparts overseas to freeze any suspected foreign property pending a satisfactory response to a UWO. 

In comments published yesterday, Donald Toon, the Director for Economic Crime at the NCA, stated that, “Unexplained wealth orders have the potential to significantly reduce the appeal of the UK as a destination for illicit income. They enable the UK to more effectively target the problem of money laundering through prime real estate in London and elsewhere. We are determined to use all of the powers available to us to combat the flow of illicit monies into, or through, the UK.”

Given the broad scope and onerous requirements of UWOs, respondents must take specialist legal advice at the earliest possible opportunity to prepare their necessary disclosures and, where appropriate, apply to Court for discharge of the orders.  Similarly, potential respondents should consider the risks of enforcement and assess the benefits of proactive engagement with the relevant authorities.  Again, specialist criminal law advice is required to navigate this rapidly developing area of legal risk.

Brown Rudnick has a market-leading white-collar crime practice, which is highly ranked by the Chambers & Partners UK and Legal 500 directories.  If you wish to discuss any of the issues raised by this note, please speak with your usual contact at Brown Rudnick, who will introduce you to our criminal law specialists.

 

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