Unexplained Wealth Orders (UWOs) were introduced to the UK in 2017. It is an investigatory order placed on the respondent whose assets appear to be disproportionate to their income to explain the origins of their wealth. A UWO can be used by authorities that investigate crimes when they believe that property has been used for money laundering of proceeds of crime. Consequently, the order gives the owner an opportunity to explain the origin of the property and thus retain it. If the person in question fails to give a sufficient explanation, they may lose the property in question.
How it works
A UWO can be ordered when the person in question does not appear to have funds from their lawful income to have paid for property worth more than £50,000.
The scope of UWOs
The High Court must be satisfied that the person is a non-EEA politically exposed person, an individual who is, or has been entrusted with prominent public functions by an international organisation or a state outside of the UK or the EEA. It additionally includes family members and close associates.— ORThere are reasonable grounds for suspecting that the respondent is, or has been, involved in serious crime (whether in part of the United Kingdom or elsewhere), or are connected to someone who is.
Why is this relevant in today’s climate?
The certified agencies have found it very difficult to succeed with UWOs, with only nine obtained to date. Therefore, in light of the conflict between Russia and Ukraine, a reform was necessary to give UWOs more powers. Consequently, the British government decided to respond to criticism of the lack of targeting money laundering by individuals both in the UK and abroad through UK property by introducing The Economic Crime (Transparency and Enforcement) Act 2022.
Reform of UWOs
Expanding the scope of persons and property subject to a UWO
The new reforms include "specified responsible officer", thereby including directors, and ensuring that targets cannot hide behind complex ownership structures, which was seen as the principal reason for UWOs ineffectiveness. As well as, allowing UWOs to be sought against property held in trusts and other complex ownership structures such as opaque foundations.
Establishing a lower test for the grant of a UWO
It will now be sufficient, if the court is satisfied that there are reasonable grounds for suspecting that the property has been obtained through unlawful conduct.
Allow for a longer extension for interim freezing orders
From 60 days up to 186 days after a UWO has been complied with, giving the enforcement authority more time to review if there are grounds to proceed to a civil recovery.
Protections for the enforcement authorities
Most importantly, limiting an enforcement authority’s liability for costs in proceedings about UWOs or interim freezing orders.
Investigation time period
Removal of key barriers to the use of UWOs provides more time for law enforcement to investigate and review the evidence in response to a UWO.
What is the practical effect?
While these changes are helpful in strengthening UWOs powers, reform may not be so revolutionary. It remains uncertain how these new provisions will assist HM Government enforcement agencies, having additional time to investigate will not solve issues if the evidence resides in another jurisdiction, where legal co-operation may be non-existent. Perhaps further reform is necessary as these changes do not address the potential human rights issues of the low threshold, which potentially brings a wide range of people under the radar having to justify their income, which has drawn criticism to the invasive nature of UWOs.Encapsulating, it is clear these reforms signal a new level of intent for enforcement agencies.
