The Criminal Finances Act 2017 introduced significant changes to the existing law dealing with money laundering and asset recovery under the Proceeds of Crime Act 2002 (Poca 2002).
Since its inception, it has created the new corporate offences of failure to prevent the facilitation of domestic and foreign tax evasion and a key element of the Act is the introduction of Unexplained Wealth Orders (UWOs) which came into force on 31 January 2018.
While existing legislation dealing with proceeds of crime has largely been domestic in its focus, the introduction of UWOs moves towards addressing corruption at an international level and is considered as a key civil investigative tool to identify and freeze the assets of individuals suspected to have been involved in economic crimes.
UWOs are targeted at individuals suspected of involvement in or association with serious criminality in the UK or abroad and for the first time the law specifically extends recovery powers to target non-EU politically exposed persons (PEPs).
The intention behind the legislation
Though given the existing legislation that deals with dirty money from drugs, frauds and other like offences, it is reasonable to assume that perhaps parliament’s real intention behind the introduction of UWOs was to galvanise a global response to corruption by particularly targeting PEPs who invest in extensive property portfolios in the capital and are thought to use the UK as a safe haven for their illicit funds.
Previous attempts to tackle this problem has remained insignificant. Section 241 of Poca 2002 already allows for recovery of assets where it is deemed proceeds of unlawful conduct abroad but in practice, evidential issues and budgetary restrictions have always been a hurdle in the way of effectively implementing this legislation.
To address this gap, UWOs are introduced as a robust investigative tool which allows the designated investigating authorities to make without notice applications for UWOs in the High Court in respect of any assets valued over £50,000.
This is on the basis there are reasonable grounds to suspect that the individual’s legitimate income is disproportionate to their ownership of the property (or properties).
The Act compels the individual to provide a statement explaining the provenance of their assets and failure to respond or provide a satisfactory explanation will result in a presumption that the assets are recoverable under the civil recovery regime (Part 5, Poca 2002).
The strict consequence of recovery of the asset is coupled with a threat of prosecution for a separate offence of providing misleading or untrue information, punishable by a fine and up to two years imprisonment.
More than meets the eye
While it is clear that the introduction of UWOs is championed as a step towards the global fight against money laundering and corruption, there is a lot more than meets the eye at this early stage.