An unexplained wealth order (UWO) is an investigative tool used by law enforcement that can be used with other civil powers to identify and retrieve the proceeds of criminal activities from the recipients. A UWO can be issued whenever it is reasonable to believe that property valued at more than £50,000, or about $60,655, was obtained through unlawful activities by a politically exposed person (PEP), a person suspected of criminal involvement or somebody closely connected to either of these two categories.
The purpose of UWOs is to require the recipient of the order to prove their innocence and explain their legitimate money source, rather than making the ordering agency prove their suspect is guilty. Unexplained wealth orders can be applied without any guilt or accusation of crime being placed on the suspect. UWOs rely on a level of proof that is much lower than that necessary in a civil or criminal trial.
Unexplained wealth orders became available to United Kingdom (UK) law enforcement authorities on January 31, 2018 under the Criminal Finances Act 2017. The tool had previously been implemented in Australia and Ireland; success rates in both countries are extremely high.
The UK initially enforced the tool with the focus of targeting Russian and Azerbaijan laundromats, but their use has expanded to all scenarios where the National Crime Agency (NCA) believes wealth was attained illegitimately, including tax evasion and money laundering.
Other UK enforcement agencies that hold the power to utilize unexplained wealth orders include: the Financial Conduct Authority, HM Revenue and Customs, Serious Fraud Office (SFO) and the Crown Prosecution Service.
How unexplained wealth orders work
An unexplained wealth order allows an investigator to ask any person possessing assets that they could not normally afford with their income to prove the legitimate source and acquisition of such assets. If the suspect is unable to substantiate their lawful source, then enforcement authorities can takes steps to reclaim the assets.
Before issuing a UWO, enforcement agencies must confirm that:
- the value of the property exceeds £50,000;
- there is reasonable cause to believe the suspected person is the one in possession of the property in question;
- it is reasonable to suspect that the known sources of the respondent's legitimate income could not have afforded or obtained the property; and
- the respondent is either a politically exposed person (PEP) or suspected of involvement in or connections to serious crime, either in the UK or elsewhere.
A PEP can be described as a person who is, or has been, assigned a prominent public position which makes them especially susceptible to corruption. A politically exposed person could be a member of parliament, a head of state or government or member of the board of central banks. This category extends to a politically exposed person's family, close associates or friends and other connected individuals. It is important to note that a UWO being issued to a PEP does not require any evidence of criminality or illegal actions by the suspect.
Each unexplained wealth order will be different, based on the case it is used for, but all should include an explanation of the form and manner of the claim and a specific time period for the suspect's compliance.
Applications for UWOs can be made without notice to the UK's High Court by law enforcement agencies if the agencies can specify or describe the property in question as well as the person who is believed to hold the property.
A UWO will require the respondent, or suspect, to produce a statement that outlines:
- the nature and extent of their interest in the suspicious property;
- a summary of how they acquired the asset;
- information on where the property is being; and
- any other information that might be useful or demanded by the order.
Penalties from unexplained wealth orders
When applying for a UWO, law enforcement agencies can also ask for an interim freezing order to be placed on all of the respondent's assets to ensure the preservation of the suspicious property. This penalty is applied whenever the court believes that any subsequent recovery orders will be impaired if the property is not protected and maintained.
Whenever a freeze is placed by the court, the enforcement agency has the option to apply for the appointment of an Interim Receiver. This person can be a member of staff in the respective enforcement authority who manages the suspicious property throughout the proceedings.
If it is determined that the property under question in the UWO was acquired through unlawful ways, then the assets will be seized by the authorities and the guilty party is subjected to fines or jail time.
If an unexplained wealth order is issued, but the respondent fails to comply, then the suspect is held in contempt of court and all assets are assumed to be illegitimate and, therefore, recoverable property, giving law enforcement the ability to seize all illicit assets. Failure to comply with UWOs can also result in fines or imprisonment.
Impact of unexplained wealth orders
Prior to the implementation of unexplained wealth orders, financial advisors had to comply with anti-money laundering regulations in order to ensure their services were protected against money laundering or terrorist financing. While these advisors are not specifically included in the new UWO provisions, they must increase their care and caution surrounding regulatory duties, otherwise they could be at risk of criminal punishment.
However, the real impact of UWOs can be found in the new power to prosecute that is given to UK law enforcement. Previously, agencies were unable to act on and investigate wealth they found highly suspicious unless there was an actual legal conviction within the country of origin. Now, law enforcement can issue a UWO and investigate any property they find suspicious, regardless of legal convictions or the assets' location. Furthermore, unexplained wealth orders are shifting the burden of proof away from law enforcement and prosecutors and onto respondent.
Since its implementation in 2018, UWOs have been used in a handful of cases across the UK. The only publicized case thus far is that of Zamira Hajiyeva, a woman who owns millions of dollars in properties around London, all through offshore companies, and was found to have spent around £16 million at Harrods department store. Hajiyeva's husband was a banker who was imprisoned for 15 years on charges of fraud and misappropriation of public funds. Authorities issued the order based on the significant disparity between the husband's income and the couple's wealth.
Unexplained wealth orders have already started exhibiting the impact that the UK initially hoped for. Mortgage brokers report that as a result of the increased government pressure and improvement of anti-money laundering rules, Russian purchases of top-quality real estate in London have slowed. UWOs have started to diminish the UK's attraction as a destination for illegitimate income.
However, the disadvantages of UWOs must also be noted. One weakness is the fact that the order becomes ineffective as soon as the respondent explains the source of their wealth if there is no evidence to prove the contrary.
Furthermore, money laundering cannot be solved simply by using unexplained wealth orders. The crime involves a wide range of criminal activities that require increased anti-money laundering rules and improvements to the UK's asset recovery program.