09 Mar 2017, 33 mins ago

The Criminal Finances Bill is nearing the final stages of its journey through Parliament. Following the Panama Papers leaks in 2016, Theresa May announced proposals for an aggressive new set of anti-money laundering powers. 

The plan was described at the time by the Home Office as “the most significant change to the UK’s anti-money laundering and terrorist finance regime in over a decade”. One of the most eye-catching policies was the introduction of powers to compel individuals, on pain of criminal sanctions, to prove the source of any wealth deemed to be “unexplained”.

So-called Unexplained Wealth Orders will be available where the court is satisfied that an individual holds property worth over £100,000 and there are reasonable grounds to suspect that the individual’s lawful income would not be sufficient to purchase the property. It should be noted that this can be a cumulative total for various items of property and need not be a single item or property.

Unexplained Wealth Orders will be available and targeted at three classes of individual:

  • politically exposed persons, or
  • those suspect of being involved in serious crime; or
  • persons connected with individuals suspected of being involved in serious crime.

Whilst perhaps superficially restrictive these measures will potentially affect a large number of individuals – many of whom will be of entirely good character and may simply be family members or business associates of a primary target.

Under the new powers, the High Court will be able to make an Unexplained Wealth Orders, without prior notice to the individual concerned, on the application of a relevant enforcement authority. The court will have the power to impose an interim freezing order on the property at the same time as making the Unexplained Wealth Order. 

An Unexplained Wealth Order will require that respondent to provide a statement, in accordance with a strict short timeframe, setting out the nature of their interest in the property and explaining how they obtained the property including how any costs were met. An order may also require the respondent to provide supporting documentation.

A failure to respond to the order will result in the property being presumed to be ‘recoverable property’ for the purpose of civil recovery under Part 5 of the Proceeds of Crime Act and it will be seized. 

Furthermore, it will be a criminal offence, punishable with imprisonment, to make a statement that is knowingly or recklessly false or misleading. 

It should be noted that the target of an Unexplained Wealth Order does not need to be resident in the UK. The law will also apply to property applied before the introduction of the new powers. 

Unexplained Wealth Orders are a controversial measure, which have faced criticism when introduced in other jurisdictions. Such orders reverse the traditional burden of proof and are available even in the absence of a conviction. Many people are concerned that the authorities will utilize these orders to pursue individuals and those associated with them, including family members, on very little evidence of any wrongdoing. The fact that they are available simply on the grounds of ‘suspicion’ is worrying, particularly for individuals who have found themselves targeted with abusive allegations of wrongdoing abroad.

Gherson and Discreet Law, who already have significant experience in advising individuals who are subject to domestic and international freezing orders, are monitoring the progress of the Criminal Finances Bill closely. Anyone who has concerns about the potential impact of Unexplained Wealth Orders should not hesitate to contact a member of our team.