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Legal Minds

7 February 2018 / by / in

Unexplained Wealth Orders – Will it be a drama?

Those of a sceptical disposition may think that it is more than just a coincidence that as the Russian organised crime drama McMafia approaches its denouement, the government has implemented the legislation that allows for the making of unexplained wealth orders (UWOs). The show’s Sunday evening BBC 1 slot has guaranteed it millions of viewers, despite some fairly bland characters and wooden acting, and raised awareness in relation to the issue of illegally obtained wealth. It is estimated £50 billion is laundered through the UK each year, so the government needs to be seen to be taking proactive steps to address the issue. UWOs are introduced, with effect from 31 January 2018 under the Criminal Finances Act 2017, which amends the Proceeds of Crime Act 2002 (POCA).

UWOs require an individual suspected of serious crime to explain the source of any asset worth over £50,000.00, if it is considered by one of the UK’s law enforcement agencies, such as the National Crime Agency (NCA), the Serious Fraud Office or HMRC, that the person could not have afforded the property legitimately. The law also extends to ‘politically exposed persons’ (PEPs), who are people who have been entrusted with a prominent public function and are deemed to be at higher risk of corruption due to their position and influence. The court has the power to make an interim freezing order, preventing any dealing with property, if it is satisfied that there is a risk that a suspect will dispose of an asset before complying with the terms of an order. UWOs may require targets to provide statements to set out the nature and extent of their interest in a property, explain how the property was obtained and how funds were obtained to pay for it. The legislation applies not only to individuals but also to trusts and foreign corporations.

If it appears the known sources of a party’s legitimate income appear insufficient for that party to have been able to acquire the property, the High Court may make an order. The legislation includes joint interests in property, such as those of married couples, where the asset may have been placed in the wife’s name and may relate to criminal conduct committed outside the UK.

The new law is retrospective so it does not matter when the property was acquired. Failure of a suspect to comply with an order to give an explanation as to how an asset was acquired may result in the property becoming subject to seizure. Likewise, providing false or misleading explanations is an offence which may result in imprisonment. Failure to provide an explanation as to the source of wealth creates an assumption that the asset is the proceeds of unlawful conduct, this assumption can be rebutted if during the proceedings a judge is satisfied that property was obtained lawfully.

We must wait and see if UWOs will redress the woeful attempts to claw back ill-gotten gains from criminals using post-conviction confiscation orders under POCA. To date only a tiny percentage of the financial benefit obtained by convicted fraudsters finds its way back to the state. However, if McMafia bears any resemblance to reality, the success of UWO’s may rely more on the desire for revenge within the world of organised crime than the efforts of the NCA. What better way to settle scores (even if the money goes to the UK authorities) than instructing lawyers and private investigators to prepare a dossier on a rival with a view to handing over the material to the NCA or another designated law enforcement agency.

It is thought that the NCA will be bringing a number of tests cases in the near future. Only then will we know whether the reality of organised crime is less glamorous than the fiction.

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Roland qualified as a solicitor in 2004 and was awarded higher rights of audience in 2008. Roland is an experienced business crime and regulatory lawyer. He has been involved in some of the UK’s highest profile investigations and prosecutions brought by the Serious Fraud Office (SFO) and Crown Prosecution Service (CPS). He also advises individuals and companies facing Financial Conduct Authority (FCA) regulatory investigations and proceedings.