Author: Azizur Rahman
6 March 2018
5 min read
The National Crime Agency announced on 28th February that it had secured UWO’s on two properties valued at £22M, whose ultimate owner was a "politically exposed person". The FT reported that the PEP was a politician from central Asia. The properties are also subject to interim freezing orders, to prevent them being sold or transferred. Their owner is believed to be from a country belonging to the Commonwealth of Independent States (CIS); which consists of ten former Soviet republics as well as Georgia and Azerbaijan.
In announcing the UK’s first two UWO’s, the NCA’s Director for Economic Crime, Donald Toon, said: “Unexplained wealth orders have the potential to significantly reduce the appeal of the UK as a destination for illicit income. They enable the UK to more effectively target the problem of money laundering through prime real estate in London and elsewhere.’’
The fact that the NCA has only taken a month to issue its first UWO’s indicates that it has been doing its research well in advance of being able to use the new tool at its disposal. This is to be compared with the SFO whose Director, David Green, recently warned not to expect a flood of UWO’s and emphasised that the SFO would take its time to pick the right case, as corruption cases have high costs and make slow progress.
The NCA’s recent result shows they do not share the SFO’s apparent lack of enthusiasm. Land Registry records suggest that 40,000 properties in the capital are now owned by secretive offshore companies. Transparency International says it has identified UK property worth a total of £4.4 billion that should be subject to UWOs.
UWO’s were introduced by the Criminal Finances Act 2017. Section 1 had the effect of heavily amending the Proceeds of Crime Act 2002 (POCA) to introduce these new orders. The relevant provisions came into force only on 31st January this year. A UWO can be obtained by the NCA, the Serious Fraud Office, the Crown Prosecution Service, HM Revenue and Customs or the Financial Conduct Authority.
Applications are made without notice to the High Court. The Order requires the target to provide information about how a particular asset, say a big house in Mayfair, was acquired. Such orders will usually be accompanied with a Freezing Order so that the property concerned cannot be sold or transferred. If the person on the wrong end of the UWO does not provide an explanation, or provides unsatisfactory evidence, that will then raise a presumption that the asset constitutes “recoverable property” for the purposes of a civil recovery order under POCA.
UWO’s may be deployed against individuals, companies or trustees-see s362H. The applicant has to show; (i) a reasonable belief that the target holds the property; (ii) that the person is a non-EEA “Politically Exposed Person” (PEP) or that there are reasonable grounds to suspect that the target, or a person “connected with” the target is, or has been, involved in serious crime in this country or elsewhere.
A PEP, is defined at s362B(7) as:
The other category of target is a person suspected of serious crime (anywhere in the world) or connected to such a person. This casts the net very wide. The test for involvement in ‘serious crime’ is whether the suspected criminality is listed in Schedule 1 of the Serious Crime Act 2007. The offences listed there are various and include drug trafficking, people trafficking, firearms offences, bribery, money laundering and other offences.
If an individual fails to comply with a UWO without reasonable excuse, the identified property can be considered for civil recovery under POCA. No criminal proceedings can rely on the information obtained from UWO’s – that is because the information would have been obtained by compulsion and infringes the right to silence applicable in criminal proceedings and protected by Article 6 of the European Convention on Human Rights. That is why the civil route is used. We predict, now that UWO’s are starting to be granted, a significant increase in civil recovery proceedings.
Civil recovery is highly specialised High Court litigation. It is basically a criminal trial in a civil court so that the civil standard of proof applies – no one goes to prison but property can be ‘recovered’ by way of a Civil Recovery Order if a civil recovery trial is lost by the respondent.
But the various agencies do not always get it right. There is a risk at the UWO stage. That is because the agency will be making applications on a without notice basis – the target is not there and has no opportunity to make representations against the making of the Order.
Such investigative orders are not unique but, unusually, the UWO provisions do not include a direct right for a respondent to vary or discharge the Order – if it is made in England or Wales. This is odd as most provisions that provide for state agencies to be able to secure orders against individuals, without them being notified, allow for the target to be able to challenge the Order after it is made. The lack of any direct provision for such a challenge arguably leaves the whole scheme open to attack. It is our view that there is scope in the common law to argue for UWO’s to be challenged in the same way that search warrants, production orders and the like can be challenged. There are, however, specific provisions dealing with the challenge to a freezing order – and such an order will inevitably be made along with a UWO.
So what challenges might there be? A respondent served with an UWO has options. First, a detailed consideration of whether all the statutory tests have been properly met on the evidence before the court. Has the NCA, SFO or other agency involved been completely candid with the judge? The agency is under a duty of full and frank disclosure at without notice hearings: they would have to put forward any defence point the agency is aware of, that might be put forward by the defence if it had been present. This is critical and is often a point that law enforcement agencies slip up on. In our experience, the police do find it difficult to ‘put on their defence hat’ as the case law obliges them to for ex parte hearings. That is when search warrants, productions orders etc get discharged. It is likely that the same challenges can be made in respect of UWO’s.
UWO’s are controversial as they mean the authorities do not have to prove the person’s assets are the proceeds of crime. A UWO assumes criminal activity and makes it the responsibility of the subject to prove that is not the case. And, as UWO’s are a civil law device rather than a criminal law one, when it comes to applying to the court for one, the authorities only have to show that a crime was committed on the balance of probabilities – the civil law standard of proof -rather than beyond reasonable doubt, which is the criminal standard.
Rahman Ravelli is the most experienced firm of solicitors in the country when it comes to dealing with POCA civil recovery cases. We were the first firm to challenge a civil recovery order all the way to the Supreme Court. In our view, despite what David Green says, we will be seeing a lot of UWO’s in the future.
For those on the wrong end of an UWO, it is vital that he or she acts quickly. They must also be able to consider what is required some months down the line as well as being capable, if possible, to mount a challenge to the immediate UWO and the freezing order that comes with it. Civil recovery proceedings will be just round the corner, otherwise.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.