Unexplained Wealth Orders (UWOs) are a powerful new weapon in the armoury of enforcement agencies.
Anyone who is subject to a UWO must explain whether they hold suspect property and how they came to acquire the property.
UWOs hit the headlines recently because, although they have been available since January this year, the first ever court judgment has now been delivered.
The judgment upheld a UWO and forced the target (the wife of a foreign ex-banker) to explain how she came to hold a property worth £11.5m. Although the headlines concerning the case focused on the target’s identity and her extravagant spending at Harrods, the judgment itself delivered some powerful lessons and showed that the courts will take a tough approach with those who wish to avoid explaining their wealth.
Importantly, UWOs are available even if there is no hard evidence that the target is guilty of wrongdoing.
It is only necessary to show that there is “reasonable cause” to believe that the target holds property and the known sources of the target’s income are insufficient to have enabled them to purchase the property.
For example, if a foreign politician has a salary of $50,000 (£39,044) but holds a property in Mayfair worth £10m, they can be required to explain how they lawfully came to acquire the property.
Those who refuse to explain their wealth - or provide an explanation which is unsatisfactory - face having their properties confiscated.
What next?
Based on the recent UWO judgment by the High Court it appears clear for the time being at least that:
How will this affect financial advisers?
It would be prudent for financial advisers to become familiar with UWOs and advise relevant clients of the new risks associated with such orders.
As a risk management exercise, clients who feel at risk should consider now how they would answer (or challenge) a UWO and whether they are able to produce the kind of evidence that would meet the requirements of an enforcement agency.
Andrew Wanambwa is a partner in the dispute resolution team at Lewis Silkin