Unexplained Wealth Orders – the reputation risks

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The global civil society organisation Transparency International has identified a startling £4.4bn of property in the UK that it suspects was sourced from illicit wealth.

The Government has long been fighting a rear guard action against the flow of laundered money into the country and in January 2018, introduced a new civil investigatory tool, Unexplained Wealth Orders (UWOs) to aid asset disclosure.

An UWO can be obtained by the National Crime Agency, the SFO, the CPS, HMRC or the Financial Conduct Authority with the permission of the High Court.

It may be used against individuals, companies or trustees.

It requires owners of assets worth more than £50,000, who are reasonably suspected of involvement or connection to a serious crime to explain the source of these funds.

If the owners cannot show that the assets were acquired legally and in good faith, on only a balance of probabilities test, the property can be seized and anyone making false or misleading statements in connection with an UWO can be fined and jailed for up to two years.

Such recovery powers are also extended to cover “politically exposed persons”, although they have to be from non-EU countries.

There are legitimate concerns about these orders which can link the subject to serious criminal activity yet only call for a civil standard of proof test to be passed.

An individual or company’s reputation can be horribly damaged and public perception negatively altered even by association with an UWO in the media or another public forum. Despite this, applications can be made without giving notice to the subject, not allowing for the application to be challenged at the High Court.

The burden of proof is now reversed and for the first time, authorities do not have to prove the assets are the proceeds of crime. Worryingly an assumption of criminal activity is sufficient, and it is the responsibility of the subject of an UWO to prove otherwise.

It is also reasonable to surmise that an UWO will be accompanied by a freezing order on the asset and possibly even their bank accounts which again they will be unable to challenge at first instance.

The term draconian is overused but perhaps in this matter it is justified. These orders constitute interference, legitimate though it may be, in private property rights and if an UWO is not answered in a sufficient manner, it will result in an effective seizure of assets by the state.

Some nationalities will have more cause than others to suspect they will be targeted as well. UWOs have become something of a buzzword in Westminster recently and are increasingly being portrayed in the media as part of a reckoning against a deepening oligarchical influence over the West.

According to Transparency International, a quarter of all Tier 1 investment visas granted by the UK between 2008 and 2015, were to Russians, amounting to investments in this country of around £729m.

It is clear that the National Crime Agency wants to move quickly and there is a little doubt that people from the CIS region will be a focus. Only a month after the introduction of UWOs, the agency announced two test cases: a politician from the CIS region with two prime UK properties.

These test cases are have just begun, and it is still to be determined just how useful an UWO will be at tracing ill-gotten gains but those faced with an UWO must act quickly to protect their reputation.

They must be able to effectively communicate their challenge to a UWO and any freezing order that comes with it and ensure their perspective and defence is fairly represented in the media and to their stakeholders.

This will be made much harder by them being up against an authority determined to claim scalps quickly and publicly.

Still, it must be welcomed if UWOs reduce the appeal of the UK as a money-laundering destination by enabling authorities to target those who launder money through prime real estate. This year will show if these orders are deployed fairly and with good reason.

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