Unexplained wealth orders – the year ahead
To date, unexplained wealth orders (UWOs) have been a damp squib. In the two years since their introduction, there have been five cases, and one of theses has ended in disaster. Meanwhile, according to the UK’s National Risk Assessment, the level of money laundering has increased during the same period. Based on this performance, wealthy criminals will not be quaking in their boots in the coming year. Jonathan Fisher QC writes
WOs were introduced as an additional tool to assist enforcement authorities in the fight against international crime, particularly organised crime and those who abuse public office.
Jonathan Fisher QC is Lead Counsel at Bright Line law, specialising in financial crime cases
The new legislation enabled the key enforcement authority, the National Crime Agency (NCA), to apply to the High Court for an order requiring a person to explain their interest in property, and most significantly, how they obtained it. If a person failed to comply or gave an explanation which did not satisfy the Court that the property had been acquired with lawfully obtained assets, the NCA could then apply to the High Court for a civil recovery order and the property would be confiscated.
In fairness to the enforcement authorities, before criticising their performance too harshly, three things need to be said.
First, as with any new piece of criminal justice legislation, it is difficult for enforcement authorities to hit the ground running. Sufficient resources need to be allocated to the department responsible for implementation, and extensive training needs to be arranged. Also, time has to be allowed for prior investigations to take place before an application for a UWO can be made. In one of the five cases, the NCA has been waiting for a decision from the Supreme Court to clarify the law. This was handed down on 21 December 2020.
This leads to the second point. The legal requirements which need to be satisfied before a UWO can be obtained are not straight-forward. The NCA must satisfy the High Court that there are reasonable grounds for suspecting that a person’s known sources of lawfully obtained income are not sufficient to enable them to obtain the property in question. In making this assessment, the law requires the High Court to consider sources of income that are “reasonably ascertainable” from available information. This includes information held in public registers and by public authorities, whether in the UK or abroad. The making of these enquiries abroad will be a costly and time-consuming experience.
Additionally, the law provides that income is to be regarded as “lawfully obtained” if it is acquired lawfully under the laws of the country in which the income arises. Evidentially, this requirement is more difficult to satisfy than appears at first blush. If the conduct committed abroad was transposed to the UK, in many cases it would not be difficult for the NCA to show that the assets had been unlawfully obtained. But this is not the test. The question is whether the acquisition of assets had taken place lawfully in the country in which the assets were acquired. This is a different matter which on occasions can be more demanding to prove.
Thirdly, it is right to acknowledge that the NCA has seen some significant success in four of the five cases. In the case involving Jahangir Hajiyeva, the wife of a former chairman of the International Bank of Azerbaijan, the NCA is moving closer to obtaining an order confiscating millions of pounds stolen from the bank.
In total, in the four successful cases, the NCA obtained UWOs which froze assets to the value of £143.2m. Though it remains to be seen how much of this property is confiscated in due course. In the meantime, this needs to be balanced against the disastrous action taken against Rakhat Aliyev who was a former deputy foreign affairs minister in Kazakhstan. After a failed application for a UWO, the NCA was hit with a £1.5m legal bill.
In the longer term, with the statutory framework having been put in place and a political desire to prevent the UK becoming a place of refuge for illicitly obtained funds, UWOs will definitely become more of a threat to organised criminals and corrupt politicians and bankers. Similar enforcement tools have seen some success for the enforcement authorities in Ireland, and also, to a lesser extent, in Australia. The Hudson Institute’s Kleptocracy Initiative has recently recommended that the United States should introduce UWOs, and a similar proposal is pending before the House of Assembly in the British Virgin Islands.
The real problem is that expectations were not properly managed when UWOs were introduced into the UK, and the indications emanating from the NCA at the time were inappropriate. The Impact Assessment published by the Home Office estimated that there would be around 20 UWOs in the second year of their implementation. Meanwhile, approximately two months of their introduction, the then Director for Economic Crime at the NCA saw fit to announce that his officers were working on 100 cases.
In terms of future activity, in the coming twelve months the making of a small number of UWOs can be expected. Inevitably, there will be a small number of orders involving high profile foreign public officials, and a slightly larger number of orders made against organised criminals operating in the UK.
The NCAs experience in the Rakhat Aliyev case will not deter future action. However, inevitably, it will make the NCA more cautious.