The first Unexplained Wealth Order (“UWO”) was issued at the High Court in February this year against the “fugitive wife of a fat cat banker” (“Mrs A”). The UWO was made in respect of two premises (“Properties”) worth a combined £22m, which are now frozen pending Mrs A’s explanation of how she came to afford the Properties.
It is the first time this new tool has been used by a law enforcement authority, just over a month after its introduction.
What is a UWO?
Introduced by the Criminal Finances Act 2017 in January this year, UWOs seek to overcome the challenges faced by law enforcement authorities when they identify assets during an investigation, which although they suspect are the proceeds of crime, they are unable to establish the provenance of and are therefore unable to take further action. UWOs reverse the burden so that the owner has to demonstrate the asset’s legitimacy.
The effect of a UWO
Upon an ex parte application by a legal enforcement authority (e.g. the SFO, National Crime Agency "NCA"), a High Court may issue a UWO relating to specific assets belonging to an individual, requiring that individual to account, within a specified period (“the period”), for the nature, and extent of their interest in the asset. Failure to respond without a reasonable excuse within the period creates a rebuttable presumption that the asset has been obtained by unlawful conduct and is therefore subject to civil recovery proceedings under Part 5 of the Proceeds of Crime Act 2002.
Conditions for the grant of a UWO
There are a number of conditions that must be satisfied by a law enforcement authority prior to the grant of a UWO by the High Court. The High Court must be satisfied that:
(i) the individual holds the asset(s)
(ii) the current market value is greater than £50,000
(iii) on the balance of probabilities there are reasonable grounds for suspecting that the known sources of the individual’s lawfully obtained income would have been insufficient for the purchase of the asset
(iv) the individual is a PEP (or is a family member or otherwise connected with such a person) or there are reasonable grounds for suspecting that he or a connected person is or has been involved in serious crime
Are there any sanctions for failing to respond to a UWO?
Although there is no criminal sanction for failing to respond to a UWO, it is a criminal offence if when responding to a UWO the individual makes a statement that he knows to be false or misleading or recklessly makes a statement that is false or misleading. Upon conviction, this offence is punishable by a term of imprisonment not exceeding two years and/or to a fine.
During the course of the hearing at the High Court, it emerged that the NCA had uncovered suspicious corporate structures involving a company incorporated in the BVI, and trusts in Guernsey that were used to hold the Properties, which counsel for the NCA called “an endlessly fascinating web of companies”. Concerns were also raised regarding Mrs A’s extravagant lifestyle in the UK, which although Mrs A submitted were funded from her husband’s successful overseas business, were rebutted by the NCA due to the absence of any supporting evidence.
Further details from the hearing also revealed that Mrs A’s husband is currently serving a prison sentence abroad following his conviction for fraud which Mrs A’s counsel called a “flagrantly unjust conviction”.
If Mrs A provides evidence within the period specified in the UWO that the Properties were purchased with legitimate means, and that evidence is accepted, the Properties will be unfrozen. However, the evidence of Mrs A’s husband may be vital in establishing that the Properties were purchased with legitimate funds – something that is presently not possible pending his release – thereby raising the argument that Mrs A may have a reasonable excuse for not responding to the UWO within the specified period.
Although limited details have been released from the High Court proceedings, this case has provided insight into how law enforcement authorities will use UWO’s in tackling what Transparency International called a “growing threat of corruption” in the UK.