Unexplained Wealth Orders: the spectre of a change in investigatory strategy?

Published 31 January 2018

Sections 1 to 6 of the Criminal Finances Act 2017 came into force this week on 31 January 2018.  These provisions give enforcement authorities onerous new powers to support the recovery of assets from individuals and companies without the need to prove that they have been involved in any criminality.  Neither the assets nor the subject of the order need be within the UK.

The act enables the High Court, on an application by an enforcement authority without notice to the subject, to make an unexplained wealth order ("UWO") in respect of any property of a value greater than £50,000 if the court is satisfied that:

• There are reasonable grounds for suspecting that the known sources of the subject’s lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property; and

• The respondent is a politically exposed person, or

• There are reasonable grounds for suspecting that the subject is, or has been, involved in serious crime (whether in the UK or elsewhere), or a person connected with the respondent is, or has been involved in serious crime.

The order requires the individual against whom the UWO is made to provide detailed information concerning their finances, including their interest in the asset, how the asset was obtained, where it is held and "such other information in connection with the property as may be so specified".  The disclosure which may be required to comply with a UWO is potentially very broad and may require an explanation of the way in which the subject holds their assets more generally, for example the subject's interest in offshore structures.  This may be information which is not otherwise available to an enforcement authority.  A failure to provide an explanation gives rise to a rebuttable presumption that the assets are the proceeds of crime.  An enforcement authority may use this presumption as the basis on which to apply to recover the assets through civil recovery powers without the need to provide any further proof of criminality.  On the other hand, the subject of a UWO commits a criminal offence if he knowingly or recklessly provides misleading information in response to a UWO. 

The power has been touted as a measure to help enforcement authorities to more effectively police corruption.  It is intended to ensure that individuals and companies cannot avoid being stripped of assets identified during criminal or civil investigations as the proceeds of serious crime by hiding behind complex financial arrangements which frustrate the ability of enforcement authorities to secure sufficient evidence of criminality to recover the assets through the civil or criminal courts.   In order to obtain a UWO, an enforcement authority is only required to persuade the High Court that there are "reasonable grounds for suspecting" the subject has insufficient lawful income and a connection to serious crime.  This evidential burden on enforcement authorities is therefore significantly lighter than satisfying (i) a criminal court "beyond reasonable doubt" that the individual has committed a criminal offence or (ii) a civil court "on the balance of probabilities" that the specific assets themselves are the proceeds of unlawful conduct.

Time will tell how UWOs will be deployed and if the scope and power of this provision will trigger a change in the way in which enforcement authorities approach investigations.  Rather than to dedicate time and resources to investigate individuals, enforcement authorities may be attracted to apply for UWOs at the outset of an investigation in order to compel disclosure from the subject.  Although the evidence provided by the subject in response to a UWO cannot ordinarily be used in evidence against the subject in criminal proceedings it can be used as intelligence on which an enforcement authority may base an investigation.  It could potentially then also be used as evidence in any subsequent criminal proceedings against the subject if he makes a statement in the course of those proceedings which is inconsistent with anything said in response to the UWO.  Enforcement authorities may hope that such an investigatory strategy will kick-start a civil or criminal prosecution where there was little or no evidence to support it.

Those receiving UWOs in the coming months and years should be alive to the risks of this sort of investigatory strategy.  When considering how to respond, any company or individual should scrutinise so far as possible the stage of investigation reached by the relevant enforcement authority and the evidence likely to be available to them.  It may be that in these circumstances a more fundamental legal challenge to the basis on which the UWO has been applied for and granted will have significant merit in preserving the subject's position.