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.
Based on the recent UWO judgment by the High Court it appears clear for the time being at least that:
- The courts will give short shrift to those who seek to avoid UWOs by relying on human rights arguments. In its recent judgment the court recognised the relevant human rights in play - for example, the right to property and the privilege against self-incrimination - but those rights did not prevent the application of the UWO. The target still had to answer the questions or face losing their property.
- A wide range of people can be subject to a UWO. This is because both relevant “politically exposed persons” (which includes politicians and others such as senior managers of state-owned enterprises) and their, spouses, family members and “connected” people can be forced to explain their wealth.
- There will be more UWOs. It appears that the recent court judgment has emboldened enforcement authorities. On October 3 2018 the National Crime Agency issued a statement in which it indicated it would “seek to quickly move other [UWOs] to the High Court”. Given that bodies such as Transparency International say they have identified over £4.2bn worth of properties bought by politicians and public officials with suspicious wealth, there is ample scope for the extensive use of UWOs in future.
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