[co-author: James Colautti]
Summary
Following the Criminal Finances Act 2017’s entry into force on 31 January 2018, the UK enforcement authorities added a new weapon to their arsenal in their fight against corruption.
The Act introduced a new investigatory power in the form of Unexplained Wealth Orders (“UWOs”). UWOs are a civil power that can be used to compel respondents to provide certain information. However, they are not, by themselves, a power to recover questionable property, and to do so UWOs would need to be deployed alongside other powers to recover the proceeds of crime granted under the Proceeds of Crime Act 2002 (“POCA”).
Who does the power extend to?
The following UK enforcement authorities are now able to issue UWOs:
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National Crime Agency (“NCA”);
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Her Majesty’s Revenue and Customs (“HMRC”);
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Financial Conduct Authority;
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Serious Fraud Office; and
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Crown Prosecution Service.
It should be noted that, from 16 April 2018, HMRC’s powers will extend even further to cover the search for, seizure and detention of cash and specified items of valuable property. “Items of valuable property” include precious metals and stones, watches, art works, face-value vouchers and even postage stamps. “Cash” has been widely defined to include gaming vouchers, fixed‑value casino tokens and betting receipts. HMRC will also be empowered to issue “administrative forfeiture notices” that will require recipients to forfeit cash and any money in bank and building society accounts without first being sanctioned by a court.
Who will be targeted?
UWOs are intended to target persons who are reasonably suspected of involvement in, or of being connected to a person involved in, serious crime[1]. Such persons would be required to explain, within a time period set by the court, the nature and extent of their interest in particular property and explain how the property was obtained. Failing to provide a response to a UWO within the specified time period may lead to a presumption that the property is recoverable through a subsequent civil recovery action.
Notably, the legislation is stated to be retroactive, meaning that it affects property that was obtained before it came into force. This is an area of the legislation that is likely to be tested in the courts.
The UK enforcement authorities can apply for and be issued with a UWO without notice being given to the respondent. However, for this to happen, the following conditions must be satisfied:
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The respondent is either a Politically Exposed Person (“PEP”) or there are reasonable grounds to suspect that the respondent, or a person connected with them, is or has been involved in serious crime[2]. Perhaps surprisingly, a UWO made in relation to a PEP from outside the European Economic Area would not strictly require suspicion of serious criminality.
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The respondent holds the property in question, the value of which is greater than £50,000. Items of property can be aggregated so that their value exceeds £50,000, and, notably, it is only the value of the property that must exceed £50,000, not the respondent’s interest in it.
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There are reasonable grounds to suspect that the respondent’s known and lawfully obtained income would not permit them to acquire such property.
For the purposes of a UWO being issued, the property and respondent’s locations are irrelevant; they could be in the UK or abroad. Equally, the fact that other persons may also hold the property does not, in theory, matter. It will be interesting to see how this is applied in practice in light of the extensive case law in respect of POCA and matrimonial assets.
UWOs can be obtained even if the respondent is absent, which is significant given their wide scope that covers foreign officials and nationals. UWOs alleviate the burden on UK authorities of proving a criminal charge. The authorities will not even need to prove that the property in question is the proceeds of crime since the burden of proof is placed on the respondent.
Further offences
An offence is committed if, in responding to a UWO, a person makes a statement that they know to be false or misleading in a material way, whilst creating an appearance of complying with the UWO. A similar offence is established if a person recklessly makes a statement that is false or misleading in a material way.
Penalties
Anyone found guilty of an offence is liable to conviction on indictment to imprisonment for up to two years and/or a fine. Anyone found guilty on summary conviction faces imprisonment for up to 12 months and/or a fine.
Considerations and significance
The entry into force of this new power does not come as a surprise given: (1) the Criminal Finances Act 2017 having received Royal assent in April 2017, (2) the UK’s vocal commitment to pursuing and prosecuting corruption matters in recent years, and (3) the Home Secretary’s announcement of the UK’s Anti-Corruption Strategy in December 2017.
There has been a trend towards closer enforcement cooperation on both a national and international scale. In fact, agencies that are not granted this new power are able to refer suitable cases to the relevant enforcement authority, although it remains unclear whether this will apply to foreign authorities as well. Nevertheless we can expect to see this trend continue and even gain momentum.
Transparency International reported that it has identified approximately £4.4 billion (US$6.1 billion) worth of questionable property in Britain, and it is also reported that the NCA is currently examining two PEPs that it may use as test cases[3]. Whilst the efficacy of UWOs remains to be seen given the ineffectiveness of civil recovery actions under POCA, they will at the very least lead to some notable individuals being made a request they cannot refuse.
[1] The test for involvement with serious crime is set out in Part 1 of the Serious Crime Act 2007.
[2] The involvement can be either in the UK or elsewhere; this gives the UK authorities considerable extra-territorial jurisdiction.
[3] The Times, 3 February 2018: Russians in Britain told to reveal their riches.
