Where did you get the money to pay for it? Unexplained Wealth Orders

A long standing problem for successful criminals has been how to spend their criminal gains, without attracting attention. Some will use various methods to launder money; effectively filtering it into the financial system, disguising its origins and then reintegrating it as ’clean’ money which can be spent.

Some criminals are simply unable to resist the temptation of spending money. Very often, if pressed, they are unable to explain how they are able to live beyond their legitimate means. This will naturally attract suspicion from the authorities.

Remember the scene in Goodfellas after the Lufthansa heist. Robert De Nero’s character Jimmy Conway had warned his associates not to flash the proceeds around. Not everybody listed, with one member of his crew ‘Johnny Roast Beef’ turning up in a pink Cadillac. Cut to the scene where they are found shot dead in their car.

On 31st January 2018, regulations bring into force sections of The Criminal Finances Act 2017 dealing with unexplained wealth orders (UWOs), along with various other related provisions.

The purpose of this new order is to allow for certain people who obtain property which would ordinarily be beyond their obvious means, to be required to prove how they lawfully acquired it. This is in effect a reverse burden of proof.

Law enforcement agencies often have reasonable grounds to suspect that identified assets of such persons are the proceeds of serious crime. However, they are often unable to freeze or recover the assets under provisions in the Proceeds of Crime Act due to an inability to obtain evidence (often due to the inability to rely on full cooperation from other jurisdictions to obtain evidence).

The authorities which may apply for such an order are:

The National Crime Agency
HM Revenue and Customs
The Financial Conduct Authority
The Director of the Serious Fraud Office
The Director of Public Prosecutions

If you are subjected to an order of this kind, you must provide a statement which does the following:

Sets out the nature and extent of your interest in the property
Explains how you obtained the property, particularly how any costs involved were met
Provides details of any settlement if the property is held by trustees
Sets out any other information about the property specified in the order

In addition to a statement, it may be necessary to supply documents connected to the property as required by the order.

Before it can make an order, the High Court must be satisfied that the following criteria are met:

There is reasonable cause to believe that the person in question holds the property and that it is worth over £50000
There are reasonable grounds for suspecting that this person’s known income (from lawful sources) would not be enough to obtain the property
The person in question is a politically exposed person (see definition below) or there are reasonable grounds for suspecting that they are or have been involved in a serious crime or someone connected to this person is or has been so involved.

A politically exposed person (PEP) is someone who is or has been entrusted with prominent public functions by an international organisation, a State other than the UK or another EEA State, a family member of such a person, a close associate or someone connected to them in another way. Simply because somebody has identified themselves (or been identified as) a PEP does not suggest in any way that they are engaged in criminal behaviour, however it is recognised that a higher level of due diligence will be attracted by PEPs in their business activities and financial dealings.

It is a criminal offence to knowingly or recklessly make a statement that is false or misleading in response to an unexplained wealth order. Doing so can result in two years’ imprisonment and/or a fine. This offence can be tried in either the Magistrates’ Court or the Crown Court.

Failing to provide the information, in full or part, may prejudice any civil forfeiture proceedings.

In some cases, a UWO will be accompanied by an interim freezing order. This prohibits the respondent to the UWO and any other person with an interest in the property from in any way dealing with the property.

Where the property is thought to be in a country outside the UK, the Secretary of State may forward a request for assistance to the government of the receiving county. This can be a request to prevent anyone in that country from dealing with the relevant property and provide assistance in managing it as required.