11 May, 17

Unexplained Wealth Orders

 

The Criminal Finances Act 2017, which received Royal Assent on 27 April 2017, contains within it a number of measures aimed at enhancing powers under the existing Proceeds of Crime Act 2002 (POCA) to extract ill-gotten wealth from suspicious individuals. The focus of this article is on the introduction of unexplained wealth orders (UWOs), which complements the POCA High Court civil recovery procedure, which sits alongside confiscation (in the Crown Court) and forfeiture (in the Magistrates’ Court) in the three-pronged approach legislated for.

The Current Regime
The provisions of the Criminal Finances Act are not yet in force, and this is expected to happen in the months following the general election. So firstly, a short explanation on what the position is as it currently stands.
Certain enforcement authorities can apply to the High Court for recovery of what is termed unlawful property, which is property which can be proved to be obtained unlawfully, i.e. criminally. The enforcement authorities must prove this to the civil standard of the balance of probabilities.
Making an Unexplained Wealth Orders
Under the new law, the High Court will be able to make unexplained wealth orders against a person if there is reasonable cause to believe that the person holds the property, that the value of the property is over £50,000 and that the person is a politically exposed person (PEP) or someone who involved in serious crime, either themselves or through a connected person. There must also be reasonable grounds for suspecting that the known sources of the person’s lawful income would not be commensurate with the property in question.
How Unexplained Wealth Orders Operate
Once an order is made (applications for UWOs can be made without notice), the respondent will be asked to provide answers to the questions. They will have to detail the extent of their interest in the property and how they obtained it, as well as answering any other specific queries raised by the High Court.

Sanctions & Offences
If a UWO is not complied with, without reasonable excuse, the property in question is then presumed to be recoverable property unless the contrary can be shown. This means that, subject to certain further provisions, the respondent will lose their right to the property following recovery proceedings. There is no specific offence of failing to respond to an UWO, although it may be treated as a contempt of court.
If the respondent to the order does comply, or even just purports to comply with the UWO, then the enforcement authorities will go on to determine what enforcement or investigatory proceedings should take place.
A new criminal offence has been created of either knowingly or recklessly making a statement in response to an UWO which is materially false or misleading. The offence is triable either-way and the maximum sentence is 2 years when convicted on indictment.

A Departure in the Burden of Proof
Insofar as it requires individuals to explain the provenance of their wealth on penalty of losing it, the UWO regime is fairly radical, although not entirely unprecedented. The confiscation regime operates in the same way for those who have a criminal lifestyle (as defined in POCA), and there is the safeguard of the enforcement authority having to show that respondent or someone connected with them is involved in serious crime or is a foreign official.
The UK has a proud tradition of emphasising individual rights and liberties, which has included the ability of citizens to acquire their own wealth without fear of inquisition or sequestration.

But the uncomfortable truth is that the UK (and specifically London) has become a haven for white-collar criminals, oligarchs and others who have been keen to move their wealth here and convert it quickly to fixed assets such as prime real estate (which contributes to property price bubbles). There is a moral and political imperative to take action.

Many would welcome UWOs if they marked a genuine change in attitude (“come to London and bring your wealth, but be prepared to explain where you got it from!”), but a number of issues remain to be resolved:

1. UWOs could be a powerful tool against corrupt foreign regime individuals who bring their money to the UK to enjoy it in relative peace, or to invest it. To what extent will these individuals be able to claim immunity under international law?

2. The Government estimates that there will b e 20 UWO cases per year. This suggests that UWOs will be highly targeted, rather than becoming routine. Will the status quo remain or is the intention for them to have a secondary deterrent effect? We can consider their effectiveness in other jurisdictions; they have been popular in Ireland but less so in Australia.

3. Is it desirable to reverse the burden of proof in this way? UWOs require a respondent to prove the legitimacy of their income, and the analogy with confiscation proceedings ends when the fundamental difference is considered – that a confiscation order can only follow a criminal conviction. There is no need to prove that property which is the subject of an UWO is directly related to criminal activity. Is it lawful to reverse the burden of proof in this way, and compatible with Art.6 European Convention on Human Rights (the right to a fair trial and presumption of innocence) and Art. 1 to its First Protocol (the right to peaceful enjoyment of property)?

Leigh Webber is a solicitor-advocate in GT Stewart’s Private Client & White-Collar Crime Department.

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