The Ethics Of Unexplained Wealth Orders
In May 2019, the National Crime Agency (NCA) issued an Unexplained Wealth Order (UWO) (the recipient cannot be named for legal reasons). It is the second time the use of this new weapon against anti-corruption has been employed.
The suspect is a “politically exposed person” and suspected of being involved with organised crime. He has three London homes worth £80 million in total. However, due to the UWO, he can neither sell nor gift the properties until the NCA completes its investigation into how he was able to finance such purchases.
The properties are held by offshore companies.
UWOs have two distinctive characteristics:
- No criminal charges need to be laid before a High Court can grant a UWO, and
- The burden of proof is on the recipient of the Order to prove their possessions were purchased with legitimate funds.
A failure to provide a response to a UWO may give rise to a presumption that the property is recoverable under any subsequent civil recovery action.
Given the draconian consequences of a UWO, in that it prevents the recipient from dealing with named assets, it is fair to ask the question, “are they ethical?”
Explaining Unexplained Wealth Orders
A UWO is a civil action. To become subject to such an order, you must be a Politically Exposed Person, or someone involved in or connected to a person involved in serious crime. The assets in question must be valued at over £50,000.
If a person is made subject to such an order, they must provide a statement to the High Court:
- Detailing the nature and extent of their interest in the property in respect of which the order is made.
- Explaining how they obtained the property.
- If the property is held in Trust, setting out such details of that Trust.
- Providing any further explanations related to the property as requested.
At present, UWOs can be issued by the Director of Public Prosecutions, NCA, Serious Fraud Office (SFO), the Financial Conduct Authority (FCA), and Her Majesty’s Revenue and Customs (HMRC).
Arguments for the use of UWO
The UK has long had a reputation as being a haven for money-laundering. We even made a TV show about it – McMafia. A report released by Deutsche Bank in 2015 showed that since the early 1990s, £133 billion had entered the UK financial system which cannot be accounted for. Russian laundered money has always proved a problem for the country, and because it often travels through Britain’s offshore satellites such as the British Virgin Islands, Cayman, Gibraltar, Jersey and Guernsey, the exact amounts are impossible to calculate.
UWOs allow authorities to seize property and potentially halt the flow of dirty money in cases where a person has committed large acts of fraud or embezzlement overseas, but due to the use of strategic corporate veils and trusts, the chances of prosecuting them in a UK Court are non-existent.
So far, authorities have played it safe, issuing UWOs to recipients who are not likely to garner a great deal of public sympathy. But as author Walter Olsen states, the fact that HMRC has the power to issue UWOs is worrying.
Why we should be worried about UWOs?
UWOs are used in other countries but their effectiveness is debatable. In Italy, a country riddled with organised crime, a 1994 amendment to Article 12-quinquies enacted in 1992 (Law No. 356), required that anyone convicted of crimes associated with the Mafia must provide a legitimate source of their property and wealth. Failure to do so could result in imprisonment. This shifted the burden of proof to the defendant.
The Italian Constitutional Court struck down the amendment on the grounds that it was unconstitutional under Article 27 and violated the principle of the presumption of innocence.
The use of UWOs are limited at the moment, but it is perfectly possible that we will see an increase in these applications in the future. The fact that the recipient must prove their innocence appears to sit uneasily with judiciary, both in the UK and abroad. Courts approach any reversal of the burden of proof with caution. T
he Supreme Court in Ireland recently quashed the conviction of a former councillor who received €80,000 in allegedly corrupt payments from a developer. The accused shouldered the burden of disproving the allegation that the payment was corrupt, due to a lower Court’s interpretation of s.4 of the Prevention of Corruption (Amendment) Act 2001. The Supreme Court found that there had been a “clear inroad on the presumption of innocence”.
UWOs have severe consequences and normally attract significant media attention when issued. Therefore, if you have been made subject a UWO, it is imperative to seek legal advice immediately. This is not only to ensure the order was made legally, but to launch a challenge as soon as possible to protect your assets and your reputation.
If you have been made a recipient of an Unexplained Wealth Order or are subject to a fraud investigation or prosecution, our criminal law team can help. You can contact us at firstname.lastname@example.org.
Stuart Matthews is a Senior Solicitor and Partner.