So what are Unexplained Wealth Orders ?
Unexplained wealth orders (UWOs) were in January 2018, with the passing of the Criminal Finances Act 2017. Section 1 of this Act heavily amended the Proceeds of Crime Act 2002 (POCA) to introduce them.
A UWO requires the respondent to explain how an asset was acquired. If they do not provide an adequate explanation, or provide unsatisfactory evidence, the asset will be considered “recoverable property” for the purposes of a civil recovery order under POCA.
A UWO can be sought without any civil or criminal proceedings having begun. There is no need for the subject of a UWO to have been convicted of an offence or to have had a civil law judgement against them.
UWOs are available to the Serious Fraud Office (SFO), the National Crime Agency (NCA), HM Revenue and Customs (HMRC), the Crown Prosecution Service (CPS) and Financial Conduct Authority (FCA). The NCA is the principal agency for UWO applications. Any one of these investigating authorities can make an application for a UWO in the High Court in respect of any assets valued at more than £50,000 – if there are reasonable grounds to suspect that the individual who owns them does not have a legitimate income large enough to have obtained them.
The civil standard of proof applies to evidence that an agency relies on in support of such an application. A UWO could, therefore, be granted with much weaker evidence than would be needed to begin a criminal prosecution. In a criminal case, the authorities must decide whether there is a realistic prospect of conviction based on the evidence they have: whether the evidence is strong enough that a jury would find beyond reasonable doubt (the criminal standard of proof) that there has been a criminal act. But as the civil standard of proof applies to UWOs, the authorities only have to be satisfied that their evidence is strong enough to argue that on the balance of probabilities (the civil standard of proof) there has been a criminal act.
In considering whether to grant a UWO, a High Court judge must decide whether the person against whom a UWO is sought is either:
- a politically exposed person (PEP) who is not a citizen of the European Economic Area
- a person suspected of serious crime here or abroad
- someone who is connected to a person suspected of serious crime here or abroad.
- For the purposes of a UWO, if a person is suspected of serious crime or connected to such an individual, there is no need for a criminal investigation to have commenced.
PEPs, Criminal Suspects And Corporates
A PEP is someone who holds a prominent political function in a country other than the UK or the countries in the European Economic Area. Such a person’s relatives, close associates or anyone with a connection to them can also be classed as a PEP. Prominent political functions include heads of state, judicial figures, members of parliament, managers of state-owned businesses, senior armed forces members and deputy directors or board members of international organisations.
For a UWO to be granted against a person suspected of serious crime here or abroad – or someone connected to such a person – the court must be satisfied to the civil standard that there are reasonable grounds to suspect that the person is involved in serious crime. Serious crime includes the likes of drug trafficking, modern slavery, firearms offences, armed robbery, prostitution, child exploitation, money laundering, bribery, fraud and tax evasion.
Companies can be the subject of a UWO if they have a connection to a PEP or someone suspected of serious crime. A UWO can apply to a company registered either in the UK or abroad.
The judge must also be satisfied that there is reasonable cause to believe that person holds the property that is the subject of the UWO and that it is reasonable to assume that the person’s lawful income is insufficient for them to possess that property. If the judge then makes the order, that person – the respondent – must provide a statement explaining the nature and extent of their interest in the property that is the subject of the order. This should include how the property was obtained, the costs involved in obtaining it and any other information “as may be so specified’’, under section 362A POCA 2002.
The order will specify the time by which the person has to provide this information and section 362 (5) POCA 2002 allows for the respondent to be compelled to provide particular details and produce documents.
The order may be accompanied by an interim freezing order (IFO). This is because a UWO on its own will not lead to the assets in question being frozen or seized. It is likely that an IFO will be imposed if the court believes it is necessary. This can be done to prevent an asset being disposed of before the UWO process is complete. An IFO can also be imposed if the court believes there is a risk that any recovery order that may be imposed later will be impossible to enforce. An IFO prevents the respondent or anyone else dealing with the property in question. But an IFO can be varied to allow the frozen property to be dealt with or to allow the respondent access to legal and / or living expenses; subject to various criteria.
Any property either inside or outside of the UK can be the subject of a UWO. The respondent can also be anywhere in the world. The definition of property includes money and all forms of tangible and intangible property. The respondent must have effective control of the property; meaning he is able to deal with it and make decisions regarding its sale or use. Property held in a corporate structure or in a trust can still be subject to a UWO.
Without Notice Applications
An investigating authority can apply for a UWO on a without notice basis. This means that an application for the UWO is made to the court without the person affected by it being notified. This places a responsibility on the applicant to make a full and frank disclosure to the court. A failure to do so could provide grounds for a legal challenge to the UWO, if it is granted.
As a UWO is an order made in respect of property rather than a person, the respondent faces the challenge of providing information to the authorities about their assets immediately – and of showing that the source of their wealth is legitimate.
Failure to do so can see their assets forfeited under Part 5 POCA. As soon as an individual or corporate realises they are the respondent in a UWO, therefore, they need to seek immediate representation by solicitors with the relevant expertise in this particular area of law.
Challenges To UWOs
As applications for a UWOs are made on a without notice basis, the intended target of the UWO is not present and, therefore, is unable to put forward reasons why they should not be made the subject of an order. Unusually, the provisions do not include a direct right for a respondent to an UWO to vary or discharge it, if it is made in England or Wales.
It is therefore essential that a corporate or high net worth individual who is the subject of a UWO appoints expert solicitors who can identify and challenge any flaws in the approach taken in the application for the Order, or the decision to grant it.
Responding To A UWO
As UWOs are a civil law device rather than a criminal law one, the authorities only require their evidence to be good enough to argue on the balance of probabilities. This is why your initial response to a UWO has to be carefully considered and carried out.
Any subject of a UWO must be quick to act. A subject of a UWO must provide a statement explaining how they legitimately acquired the assets. No response or an unsatisfactory explanation may give rise to a presumption that the property is recoverable under any subsequent civil recovery action. Civil recovery proceedings can then be commenced under Part 5 of Proceeds of Crime Act. Failure to comply with a UWO without reasonable excuse can lead to contempt of court proceedings. Providing false or misleading statements can lead to up to two years’ imprisonment.
If you are faced with a UWO, it is essential that you have the right approach from the outset, and this is why Clarke Kiernan are equipped to help. We can help in giving the right response: robust, intelligent and strategic defence of your right to those assets and, where necessary, a careful and timely coordination of all available evidence; wherever in the world it may be. Every aspect of the case that has been made needs to be assessed, questioned and challenged whenever possible.
Information Sharing Between Agencies
What must also be remembered is that when a respondent is providing information and documentation in response to a UWO, this material could then assist the authorities in conducting a criminal investigation into someone other than the respondent.
Such information could be shared between law enforcement agencies around the world: opening up the possibility that a UWO could be a means by which the authorities compel someone to provide information about another individual into whom they wish to commence a criminal investigation. This makes it imperative that anyone with a connection to a respondent to a UWO is aware of the potential for information about them being obtained by the authorities.
The potentially dire consequences for those respondents targeted by a UWO means that this remains a key area for development over the coming months and years. HNWIs, PEPs and their advisors should keep a close watching brief and seek specialist legal advice if they have any concerns that they might be of interest to the NCA, SFO or other agencies with the power to obtain a UWO.
The civil recovery regime that UWOs are part of is a highly specialised area of law involving complex High Court litigation. It is only practised effectively by a small number of lawyers and requires experience and specialist expertise. We excel in the legal field that UWOs are part of and we believe that they will become increasingly common. And this will mean that many more people will need to know precisely how to respond to them.
Our background in challenging restraint orders and freezing orders issued under POCA – to freeze a person’s assets before a legal attempt is made to confiscate them – leads us to believe that UWO’s could well see many innocent people fighting to retain their assets. Contesting any aspect of a UWO will make all the difference to an individual’s ability to retain what is rightfully theirs.