New powers under the Criminal Finances Act 2017 came into force on 31 January 2018 relating to unexplained wealth orders (UWOs).
The purpose of these orders is to require a person to account for the origin of their assets.
Under this new legislation, the High Court can make an UWO in respect of any property held by a person which is greater in value than £50,000, and when the Court is satisfied that there is reasonable cause to believe that the respondent is a politically exposed person who has been involved in serious crime or that a person connected with the respondent is, or has been, involved in serious crime.
A politically exposed person is described as an individual whose prominent position in public life may make them vulnerable to corruption. These categories include heads of state, heads of government, members of parliament and members of the boards of central banks.
The enforcement agencies with the power to apply for these orders are the Financial Conduct Authority, Serious Fraud Office (SFO), the National Crime Agency (NCA), HM Revenue and Customs, and the Crown Prosecution Service.
If the Court makes an order then the respondent must provide a statement covering the following matters:
(a) setting out the nature and extent of their interest in the property in respect of which the order is made;
(b) explaining how the property was obtained (including, in particular, how any costs incurred in obtaining it were met);
(c) where the property is held by the trustees of a settlement, setting out such details of the settlement as may be specified in the order; and
(d) setting out such other information in connection with the property as may be so specified.
At the end of February 2018, the Court used these powers for the first time to grant two unexplained wealth orders following an application by the NCA.
While the person who is the subject of the orders has remained unnamed, it is believed that they are a politician from central Asia.
The NCA has stated that the orders relate to two properties with a combined valued of £22m.
If the respondent of the order is unable to show the origin of the property and demonstrate that it was obtained with legitimate funds, then there is a risk that it will be recovered under civil enforcement.
How will this affect financial advisers?
Prior to these orders being available, financial advisers were required to comply with anti-money laundering regulations to take steps to prevent their services from being used for money laundering or terrorist financing.
While financial advisers are not specifically referred to within the new provisions, under legislation they must remain mindful of their regulatory duties or risk criminal sanction.