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‘Dirty money?’ What exactly are Unexplained Wealth Orders?

Posted by: Gherson Immigration

Much has been written in recent weeks about the government’s supposed crack down on ‘dirty money’ and Russian ‘dirty money’ in particular. The delay to Roman Abramovich’s visa was seized upon by the media as an example of a new tougher stance being taken by the UK with regards to wealthy Russians who seek to make the UK and in particular London their home.

In January 2018 the government finally introduced the authorities’ latest weapon in the fight against so-called ‘dirty money’ – the unexplained wealth order. The new powers, introduced by way of an amendment to the Proceeds of Crime Act 2002, provide a powerful new mechanism for the UK authorities to compel individuals to provide information about the source of their wealth.

When the new law was introduced it was heralded by the media as the ‘McMafia-law’ in reference to the popular recent BBC drama focusing on Russian organised crime and its links to London.

Recent events have only sought to increase the focus on Russia and wealthy Russians in particular. For many Russians living in London it may begin to feel like something of a witch-hunt.

The Sunday Times has reported that a source at Number 10 has stated, “No one is off the table. Nothing will be advertised but you will see a step change in unexplained wealth orders”.

But what is the truth about unexplained wealth orders? How do they work and is this a Russian-only risk?

This firm has been monitoring the introduction of these new provisions for over two years and is perhaps uniquely placed to comment (unlike others) as we are currently acting in respect of the first ever unexplained wealth orders to be issued in the UK.

Unexplained wealth orders are obtained without notice, on an ex parte basis, at the High Court on application from one of several nominated agencies including the Serious Fraud Office and the National Crime Agency. The first unexplained wealth orders – which this firm is defending – were issued at the request of the National Crime Agency.

Unexplained wealth orders are issued in respect of any identifiable property in the UK which is valued at over £50,000. It is important to note that this can be a cumulative total. It does not have to be an individual item of property.

In order to obtain an unexplained wealth order the relevant authority must satisfy a High Court judge that:

  • There is property valued at more than £50,000;
  • That an individual thought to have an interest in it is either:
  • A Politically Exposed Person (or someone associated with a Politically Exposed Person); or
  • That there are reasonable grounds for suspecting that person is or has been involved in serious crime (in the UK or elsewhere) or is connected with such a person; and
  • That there are reasonable grounds for suspecting that the known sources of the individual’s lawfully obtained income would have been insufficient for the purposes of enabling them to obtain the property in question.

It goes without saying that you will note there is no requirement to be Russian. An unexplained wealth order may be issued against anyone – even a UK national.

Once issued, the High Court will likely make a parallel interim property freezing order – preventing the individual from disposing or otherwise dealing with the property.

The individual will then be served with the unexplained wealth order. The order will require them to respond to a detailed list of questions (either in person or in writing and provide whatever documents are requested of them. The timescale for preparing this response can be short.

A failure to comply with an unexplained wealth order (without reasonable excuse) will lead to a legal presumption being drawn that the property is ‘recoverable’ i.e. the ‘proceeds of crime’ for the purposes of civil recovery action under the Proceeds of Crime Act 2002. The authorities will then seek to confiscate the property.

Knowingly or recklessly providing false or misleading information in response to an Unexplained Wealth Order constitutes a criminal offence punishable by imprisonment and/or a financial penalty.

It goes without saying that these orders are onerous – in keeping with the entire ethos of the Proceeds of Crime Act they are ‘deliberately draconian’. Just a few years ago it would have been unthinkable to have a situation where – with no proof of criminal activity – let alone a charge or a conviction – an individual could be compelled under pain of criminal penalty and imprisonment to provide the authorities with detailed information as to their finances. This however, is now the reality.

Many supporters of the orders have trumpeted their arrival as a necessary evil to fight the problem of ‘dirty money’ and responded to critics of the orders with the familiar refrain, ‘if you have nothing to hide you have nothing to fear’.

Whilst one can see the simplistic logic behind that assertion, it is of course a gross oversimplification. Unexplained wealth orders may be issued against anyone believed to hold an interest in the property – perhaps a family member who had nothing to do with the purchase of the property but who retains an interest in it. They are retrospective in nature – they can be issued in respect of property that was obtained many years ago. And – to underline the point – they are mandatory. Your choice is stark – comply or accept that there will be a presumption that the property is the proceeds of crime.

Given the nature of the beast, anyone who fears that they may face an unexplained wealth order in the future may wish to consider taking advice in advance of being served with such an order to consider how they might be able to respond it were it ever to be served on them. Assembling documents and evidence of how a property was financed years before can be a particularly unforgiving task – particularly where the individual faced with the order was not involved in the original purchase.

It goes without saying that we are at a very early stage in the development of this area of law, which is likely to be heavily litigated. As the first firm to handle these orders in practice Gherson are at the forefront of that litigation. Should you wish to discuss Unexplained Wealth Orders further please do not hesitate to contact Roger Gherson of these offices.

 

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please don’t hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

©Gherson 2018

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