The National Crime Agency (NCA) has let it be known – not for the first time - that it is considering more than a hundred possible subjects for unexplained wealth orders (UWO’s).
It has also made it quite clear that many of those assets that are being assessed to see if they are suitable for a UWO have some sort of a Russian connection.
It has to be said that even the Russian angle has been mentioned before by the NCA. Similar comments to the ones the NCA made recently were voiced by the agency last summer. Since then, just one individual has had the dubious distinction of being the target of a successful UWO. In fact that person – the wife of a jailed Azerbaijani banker – had the first two UWO’s brought against her.
That is why it is still difficult to assess whether UWOs will be a worthwhile weapon against the large amounts of corrupt money in the UK or simply an ill-fated, poorly thought-out attempt to try and stop those who make huge gains from the proceeds of crime.
Criminal Finances Act 2017
UWOs only came into effect in January 2018, following the passing of the Criminal Finances Act 2017; Section 1 of which heavily amended the Proceeds of Crime Act 2002 (POCA) to introduce them. But UWOs could potentially have teeth: they can apply to 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 or someone with a connection to such a person. And what is significant is that the burden of proof is on that individual to prove that they acquired their wealth legally.
UWOs can be used by the NCA, the Serious Fraud Office (SFO), HM Revenue and Customs (HMRC), Crown Prosecution Service (CPS) and Financial Conduct Authority (FCA). These agencies can all make without notice applications for UWOs in the High Court, regarding assets valued at more than £50,000, if there are reasonable grounds to suspect that the person owning them does not appear to earn enough to have obtained them.
Under a UWO, an individual or organisation must explain how they acquired the asset. Failure to provide an adequate explanation or providing unsatisfactory evidence can lead to the asset being considered “recoverable property” for the purposes of a civil recovery order under POCA. An individual can also be prosecuted for providing misleading or untrue information; which can mean a fine and a maximum prison sentence of two years.
Challenges to UWO Applications
With UWOs able to be applied for on a without notice basis, the intended target of one is not present for the application to court and cannot argue against the order. Yet this situation can provide scope for a later challenge to the validity of a UWO – a challenge based on whether the authorities have disclosed everything to the judge when applying for the UWO. Alternatively, a challenge can be based on the authorities’ inability to show that the target fits the criteria for a UWO.
What has to be considered is that while UWOs are a new concept, they are an extension of existing civil recovery proceedings. And what must also be remembered is that civil recovery is a specialised legal area that demands expertise and experience. Such expertise and experience is only available from a very small, select group of legal firms.
Anyone targeted by a UWO must seek legal representation from such specialist experts if they are to challenge successfully the assumptions that the authorities are making when seeking a UWO. The UWO may be regarded by the authorities as a new weapon in their attempts to strip individuals of what they believe to be the proceeds of crime – and they certainly give the authorities an advantage. But as a firm that has been the first to take civil recovery cases to the likes of the European Court of Human Rights and the Supreme Court, we know that a properly-constructed legal challenge can and will stop a UWO in its tracks.
The Burden of Proof
There is little doubt that shifting the burden of proof onto an individual - to force them to demonstrate that they acquired their assets legally - has the benefit for investigators of putting those that they target on the spot. Previously, the authorities had to prove an asset was bought with the proceeds of crime. Now a suspect must show that is not the case.
That is why many are heralding UWOs as a vital in stemming the flow of laundered money into the UK. That flow has been estimated in the past as being between £36 billion and £90 billion a year. But the NCA now believes such figures are a “significant underestimate’’.
In the Foreign Affairs Committee’s May 2018 publication “Moscow’s Gold: Russian Corruption in the UK’’, the NCA stated that hundreds of billions of pounds of international criminal money is laundered through UK-owned banks each year. The Committee states in the publication that “The use of London as a base for the corrupt assets of Kremlin-connected individuals is now clearly linked to a wider Russian strategy and has implications for our national security.’’
UWOs, therefore, are faced with a major task: stopping the flood of illegally-gained wealth into the UK. Much will probably depend on how wisely the authorities target those whose wealth they seek to attack via UWOs. A run of success will see UWOs viewed as the way forward. A series of what would probably be high-profile failures and UWOs could be viewed as a legal white elephant rather than a silver bullet.
The authorities will need to have reasonable grounds to suspect that a person’s lawful income is not enough to buy the asset in question. While the burden of proof with a UWO is on the individual, it remains to be seen how successful such an Order can be for the authorities if their intended target finds it relatively straightforward to produce rational explanations for their wealth – and back them up with evidence and legal argument.
The right legal representation combined with comprehensive, well-kept and up-to-date records will make it difficult for even the most zealous authority to succeed in stripping an individual of their assets with the help of a UWO.
What is already clear is that UWOs, used intelligently, could possibly be an efficient way of seizing ill-gotten gains. But if the authorities do not choose their targets carefully they may find that a robust, tactical challenge to their attempts to seize any assets will flounder.
The noises from the NCA tend to indicate that more UWOs are in the pipeline. But that certainly does not mean that anyone facing one has little or no option but to concede defeat. UWOs do, in theory, make it easier for the powers that be to obtain what they believe are the proceeds of crime. But that theory can and will be challenged in the very near future.