The National Crime Agency in the UK has been granted the first set of Unexplained Wealth Orders (“UWO”) under the Criminal Finances Act, by the UK High Court requiring that an unnamed foreign national from Asia provide a written statement explaining how they obtained sufficient wealth to purchase property. The foreign national subject to the first UWO is a politician and a politically exposed person who owns mansions and office property worth over US$30 million in London. Under the UWO, the owner is prohibited from transferring the properties.
The Criminal Finances Act came into force at the end of January, 2018, following evidence that the UK was being used by corrupt foreign nationals or PEPs to purchase expensive real estate with proceeds of crime or corruption. Several research studies showed that over US$6 billion of proceeds of foreign corruption is parked in London real estate.
UWOs are available for property over £50,000 in two cases: (a) where there are reasonable grounds to suspect that the person, or a person connected to them, is or has been involved in the commission of a serious criminal offence in the UK or anywhere else in the world; or (b) where the property is held by a PEP.
The application of the legislation is quite broad and can capture anyone connected to the person targeted including business partners. Essentially, if a person is suspected of having property they clearly could not afford based on their salary or reported income, or taxes paid, or if they are connected to such a person as a business partner, shareholder, family member or otherwise connected, they could be subject to a UWO.
Interim freezing orders
In terms of disclosure, UWOs require proof of legitimate sources of wealth and the disclosure of owners, including beneficial owners, shareholders, trustees, etc. or the property or asset subject to the UWO. If a person subject to a UWO refuses to comply with the disclosure of information to prove the legitimacy of wealth, their property is subject to forfeiture by the government. UWOs are issued with interim freezing orders over the property to prevent a situation where wealth can’t be proven and the person attempts to sell the property.
It is likely that assets held by people from places like Iran, Nigeria and China will be the most difficult to prove were paid for with funds obtained lawfully. With respect to Iran, that is because Iranians as a matter of course, violate sanctions law by funnelling money illegally through Dubai to hide its origin and move it to places like London and Vancouver. Sanctions avoidance is a serious criminal offence. With respect to China or Nigeria, while there is no issue of sanctions, often their foreign nationals have acquired wealth from corruption.
Any property, shares or money from anywhere
It is important to note that UWOs have an international reach: a person does not need to be a UK resident, and the property can be located outside the UK – ergo, you can be chilling in Canada with property in Canada, or in a Canadian bank, or be holding shares of a Canadian company and be subject to a UWO if you have unexplained wealth.
Also, a UWO can be made in respect of any “property” worth more than £50,000 – not just real estate. “Property” is defined broadly under the Proceeds of Crime Act 2002, to include property wherever situated, including money, bank accounts, cars, boats, shares, real property and other intangible or incorporeal property.