Unexplained Wealth Orders: The Weapon Against Dirty Money

Unexplained Wealth Orders: The Weapon Against Dirty Money – National Crime Agency -v- Baker & Others [2020] EWHC 822 (Admin)

What is an Unexplained Wealth Order?

Unexplained Wealth Orders (UWO’s) were introduced into law through section 1 of the Criminal Finances Act 2017 by inserting section 362A to I into Part 8 of the Proceeds of Crime Act 2002 (‘POCA’)  They require a person who is reasonably suspected of involvement in, or being connected with persons involved in serious crime, to explain the nature and extent of their interest in property and how that interest was obtained.[1] If the person cannot provide an adequate explanation or satisfactory evidence, the property becomes recoverable property, subject to the POCA 2002.

UWO’s are a civil power and an investigative tool. They cannot be used solely to recover assets.

Who can apply for a UWO?

 Applications for UWO’s can only be made by ‘enforcement authorities’[2]. Enforcement authorities are:

1. The National Crime Agency;
2. Her Majesty’s Revenue and Customs;
3. The Financial Conduct Authority;
4. The Director of the Serious Fraud Office; or
5. The Director of Public Prosecutions. [3]

How does an enforcement authority apply for a UWO?

Applications for UWO’s are often made without notice as there is no notice requirement. An application for an order must specify the property to which the application relates and the person whom the enforcement authority thinks owns the property.

The orders can be made without any pre-existing civil or criminal proceedings.

The application must set out:

1. The property in respect of which the order is sought; and
2. The person the enforcement authority thinks holds the property. [4]

When considering the application, the High Court must be satisfied to the civil standard of proof that there are reasonable grounds to believe:

1. The respondent holds the property;
2. The value of the property is greater than £50,000;
3. The respondent’s lawful income is not sufficient to obtain the property in question; and
4. The respondent is either:
   1. A politically exposed person;
   2. A person involved in serious crime; or
   3. A person connected with the respondent is involved or has been so involved in serious crime.

Once the requirements of section 362A POCA 2002 are satisfied, the Court has the discretion to make an UWO.

What happens once the order is made?

Once the Court orders an UWO, the responsibility shifts on to the respondent to explain how the property was obtained and to provide explanation and evidence as to how they gained an interest in the property.

The UWO must specify:

1. The form and manner in which the statement in response has to be given;
2. The person to whom it is to be given; and
3. The place to which it is to be given or the address to which it is to be sent. [5]

The order may also require the respondent to produce documents of a kind described and specified within the wording of the order.

The respondent must comply with the requirements of the order within the period of time specified by the Court.

If the respondent does not comply with the requirements within the order to the satisfaction of the enforcement agency, there are various options available:

1. The enforcement authority may seek a freezing order to prevent the dissipation of the property;
2. The asset can be deemed as recoverable and proceedings to ensure its recovery will commence;[6] or
3. The enforcement authority can seek to commence a criminal investigation.

If, in purported compliance with a requirement of a UWO, the respondent knowingly or recklessly makes a false or misleading statement, they are guilty of a criminal offence under section 362E of the POCA 2002 and will be liable on conviction to a term of imprisonment not exceeding 2 years and/or a fine.

Can you challenge a UWO?

There is no scope for the variation or discharge of a UWO. These applications are often made without notice, in the absence of the respondent. This, however, does not mean that every application is factually, evidentially and legally sound. This is where the opportunity for challenge arises. One must closely look at the requirements under the legislation, in particular section 1 of the Criminal Finances Act 2017 and section 362A of the POCA 2002, when considering whether the enforcement authority has fully complied with the requirements, namely:

1. Has the enforcement authority been transparent and provided full and frank disclosure to the Court?
2. Have the criteria in section 362A POCA been satisfied?
3. Is the respondent the correct person against whom the order should be sought?
4. Have the enforcement authority provided sufficient evidence? and
5. Has there been compliance with the order and to what extent?

Commentary

UWO’s are a non-conviction-based type of civil recovery on top of the pre-existing recovery methods under the POCA 2002. The new orders came into force in 2018 and since then the NCA, SFO and other enforcement authorities have sought to use them in an effort to crack down on the investment of ill-gotten gains in the UK. There have been few UWO’s made since the provisions came into force and enforcement agencies have come under pressure from external bodies, such as Transparency International (‘TI’), to crackdown on corruption and illegitimate monies being hidden in the UK. In the TI Corruption Index 2018, the UK ranked 11^th in the world for its anti-corruption measures.

In the case of in the case of NCA-v-Baker & Others, the High Court discharged a number of Unexplained Wealth Orders (UWO’s) made by Supperson J in May 2019. The applications to discharge the UWO’s and the interim freezing injunctions that were granted made in accordance to Part 8 of the POCA 2002.  The UWO’s were made at an ex-parte hearing, following applications by the NCA, related to three properties with a total value of £80 million. The NCA disclosed evidence stating that the properties had been obtained with laundered money from the proceeds of unlawful conduct by Mr R Aliyev. Following the issue of the orders, the respondents provided documentary evidence to the NCA and the Court, proving the legitimacy of the money. Despite this evidence, the NCA refused to withdraw the UWO’s on the basis that the parties had not complied with the requirements of the orders.

The respondents subsequently applied for the orders to be discharged on three grounds:

1. Error of law and the approach the NCA took in satisfying the requirements for the making of an order under Section 362B POCA 2002;
2. Material non-disclosure by the NCA to the judge at the ex-parte hearing; and
3. Information available now proves the orders were sought and made on a flawed basis.

Following a hearing at the High Court, Mrs Justice Lang discharged the UWO’s stating that the NCA investigation was “flawed by inadequate investigation into obvious lines of enquiry”. Mrs Justice Lang then went on to say that she felt the NCA “failed to carry out a fair-minded evaluation of the new information provided by the respondents…”.  This was the first successful application to discharge UWO’s since the orders came into existence in the UK.

In light of the aforementioned case, it is important that we remember the limited scope of UWO’s. They are investigative tools to be used in the most serious of cases, where there is “reasonable cause to believe” that that the property has been obtained with money arising out of unlawful conduct. The statutory framework inserted by section 1 of the Criminal Finances Act 2017 into Part 8 of the POCA 2002 is clear and we must not lose sight of its purpose.

The case of the National Crime Agency -v- Baker & Others [2020] EWHC 822 (Admin) has raised the flaws in the UWO application process, highlighting the investigative failures of the NCA as an enforcement authority in UWO proceedings.  Going forward, the NCA will need to actively review the appropriateness of proceeding with an UWO in light of the voluntarily information provided by the respondents.

[1] Section 362A(3) of the POCA 2002

[2] Section 362A(1)

[3] Section 362A(7)

[4] Section 362A(2)

[5] Section 362A(4)

[6] Section 362C(2)