The Criminal Finance Bill is skipping along through the parliamentary process and is expected to become law before the summer. It contains several new far-reaching measures which arise from what the government calls its “anti-corruption agenda”. Top billing goes to Unexplained Wealth Orders.
An unexplained wealth order is issued by the High Court. It requires the named party to provide a statement setting out the nature and extent of their interest in the property identified in the order. They must also explain how they funded their interest, and may also be required to provide information or produce documents.
The property will be presumed to be recoverable property under the terms of the Proceeds of Crime Act, if there is a failure to comply with the order without a reasonable excuse. That means that in proceedings to seize the property, the state are almost home before the starting whistle blows.
A statement made in response to the order may not be used against that person in criminal proceedings. However:
- this protection will not apply if the person makes a statement in any subsequent proceedings which is inconsistent with the statement given in reply to an unexplained wealth order; and
- the information provided can be widely used by law enforcement for actual investigations and for intelligence purposes.
The order can be issued on an application without notice. This means that the first someone may know they are the subject of an unexplained wealth order is when it is served on them, having already been made by the court in private.
To grant an order, the court must be satisfied of the following three conditions:
- The party concerned holds the property in question and the value is greater than £100,000. Importantly, it is the value of the property, and not the person’s interest, which must exceed £100,000. Additionally, where an order is intended to cover more than one item of property, those items can be aggregated to achieve the threshold amount of £100,000.
- There are reasonable grounds to suspect that the known sources of the respondent's lawfully obtained income would have been insufficient for the purposes of enabling him or her to obtain the property.
- the respondent is a Politically Exposed Person (somebody who holds a prominent public function such as a government minister or senior diplomat anywhere in the world); or
- there are reasonable grounds to suspect that the respondent, or a person connected with him/her, is or has been involved in serious crime (in the UK or elsewhere).
There is concern that we could see these orders issued where a person has purchased an expensive property and their tax records do not appear to support that sort of wealth. The authorities could use this material as grounds to suspect tax evasion (a serious crime) as well as supporting the contention that the known sources of income would be insufficient to enable the purchase of that property.
A person targeted by an unexplained wealth order can be outside the UK. It does not matter whether the property is jointly owned or where it is located.Critically, it also does not make any difference if the property was obtained before this legislation comes into force.
As if that was not enough, it is a criminal offence where a person makes a statement in response to an unexplained wealth order that they know to be materially false or misleading, or if they recklessly make such a statement. This is punishable by up to two years’ imprisonment and/or a fine.
Those who find themselves the subject of an unexplained wealth order will have important and difficult decisions to make. The experienced Business Crime Group at Mishcon de Reya is ready to help by resolutely defending our clients' interests.