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Unexplained Wealth Orders: A brighter future?
  • Feb 9, 2023
  • Latest Journal

In the modern world, PR seems to creep into everything, making many minor successes or even genuine failures appear to be resounding achievements. Yet there are occasions when no amount of positive spin can disguise the truth. And that, unfortunately, seems to be the case with unexplained wealth orders

The fact that they were dubbed “spectacularly unsuccessful’’ by no less than the government’s Foreign Affairs Committee a matter of weeks ago is an indicator of the problems surrounding UWOs. The Committee’s assessment is the latest blow to a concept for which many had high hopes – hopes that have proved to be, so far at least, misguided.

UWOs were introduced by the Criminal Finances Act 2017 to enable law enforcement agencies to compel individuals or companies to explain how they obtained certain assets when they were believed to have been obtained illegally. They were available to the National Crime Agency (NCA), the Serious Fraud Office (SFO), the Crown Prosecution Service, the Financial Conduct Authority and HM Revenue and Customs.

At the time, the government predicted around 20 UWOs would be used each year. Yet, as the Committee itself noted, only the NCA has used them – with a grand total of nine orders being issued, relating to just four investigations. This is why the Committee views UWOs as failure on a spectacular scale. It pinpoints a lack of resources and the risks involved as the reasons why the SFO and NCA - and arguably, the other agencies – have not rushed to utilise UWOs. The sheer amount of evidence put forward by targets of UWOs and the legal fees that an agency may have to pay out if a UWO proves unsuccessful are cited as major deterrents to their use.

The question now is whether UWOs will ever be as popular as their proponents believed they would be. In the past, I have said it would be wrong to write off UWOs as a white elephant. That is still the case. The idea still has its supporters and the UWO regime has, in recent months, been given what could prove to be an important boost.

Russia’s invasion of Ukraine prompted the UK government to pass the Economic Crime (Transparency and Enforcement) Act 2022, as an attempt to stem the flow of dirty money to the UK. This Act, in theory at least, has given strength to the UWO regime.

Agencies now have more time to investigate material received in response to a UWO before discharging any interim property freezing order over the assets in question. This increase, from 60 days to 186 days, could be of real use for agencies, as they look to pore over information relevant to a UWO. In addition, the agencies are now shielded from the prospect of having to pay unlimited legal costs if an application for a UWO is not successful.  Two years ago, the NCA was left facing a £1.5 million legal bill after an appeals court upheld a ruling that the agency did not have reasonable grounds to issue UWOs on property purchased by prominent Kazakh nationals. If such an outcome was, as the Foreign Affairs Committee believed, a factor in the lack of UWO use, that is no longer an issue, thanks to the Act. These two changes certainly remove factors that were viewed as hindering the use of UWOs.

The Economic Crime (Transparency and Enforcement) Act 2022 also created a new category of person who can receive a UWO — the responsible officers of the entity that owns the property. And the Act made it possible to secure a UWO on the basis that there are reasonable grounds for suspecting that the property has been obtained through unlawful conduct. Previously, there was a requirement to show that there were reasonable grounds for suspecting that the known sources of the respondent's lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property.
These changes mean there is now greater scope for using UWOs – and those who could use them are now, as I mentioned earlier, less bogged down by time and financial constraints. The question now is whether such changes will be enough to breathe new life into the UWO regime.

Supporters of UWOs may argue that they are now a more effective tool as those who can use them have been given greater freedom regarding their use. But past experience should warn us against over-optimism. Three years ago, the NCA said it was looking at more than 100 potential targets for UWOs. Yet the total of UWOs to date – after almost half a decade since they became available - is less than a tenth of that figure.

Things have now changed since the NCA was making such statements. UWOs may now be viewed by agencies as a more realistic and less risky course of action than they have been until now. They may never prove to be a spectacular success, but they yet be able to shed the tag of being spectacularly unsuccessful.

Author Nicola Sharp, Partner, Rahman Ravelli