The tightening up of anti-money laundering rules in the UK last year saw the introduction of a new anti-corruption tactic; the Unexplained Wealth Order (UWO).
Soon after the introduction, news headlines relating to the first UWOs began to grab our attention:
‘McMafia Wife’ - ‘Big Spender’ - ‘£16 Million Harrods shopping list’
But what exactly is a UWO and how does a UK enforced order relate to Jersey?
What is an Unexplained Wealth Order (UWO)?
A UWO is an investigatory tool available under Part 8 of the Proceeds of Crime Act 2002 (POCA) to UK criminal investigative authorities.
In simple terms, it is a new anti-corruption measure of the High Court of England and Wales, which orders individuals or corporate bodies to reveal the source of wealth.
For example, a UWO could demand the explanation of the exact nature and extent of ownership of a high-value UK property.
A person served with a UWO is required to provide a statement setting out the nature and extent of their interest in the relevant property, how they obtained it, how it was paid for, and any other information that is specified in the UWO. Where the property is held by trustees of a settlement, details of the settlement may also be required to be provided
It is important to stress that while this is a UK enforced order, a UWO can be ordered in respect of property worldwide – there is no requirement that the property (or the respondent) be based in the UK.
Does a UWO only target the super-rich?
A UWO can be applied to any individual or corporate entity owning an asset valued at £50,000 and above, where the source of wealth cannot be easily traced or is highly-suspicious.
The individual under investigation may have a share of the asset less than £50,000.
Under what circumstances is a UWO enacted?
A UWO may be ordered under three conditions:
There is reasonable cause to believe that the respondent holds the property in question, and that the property's value exceeds £50,000.
Reasonable grounds for suspecting that the known sources of the respondent's lawfully obtained income would be insufficient for the purposes of enabling them to obtain the property.
The respondent is (a) a politically exposed person (PEP); or (b) there are grounds for suspecting that the respondent – or a person connected with them - has been involved in serious crime.
Failing to respond satisfactorily to a UWO without a reasonable excuse does not affect the property or the ownership of it, but it may result in a 'civil recovery order' being issued.
Where non-compliance with a UWO occurs the respondent must prove that the property was lawfully obtained.
Consequences of non-compliance can be significant and it is a criminal offence to make false or misleading statements in a response.
Who can enact a UWO?
Only UK authorities can apply for UWOs, they are: HMRC; the National Crime Agency; the Financial Conduct Authority; the Serious Fraud Office; and the Crown Prosecution Service.
Can a UWO extend to the Channel Islands?
Offshore service providers offering registered office and company administration services could see UWOs in respect of companies they administer.
For example, a UK property held by an offshore company.
Whilst the territorial reach of a UWO can extend to Jersey, at present in order for it to be enforced in Jersey it would have to be registered or recognised in Jersey via the Law Officers’ Department. However, we do expect some may well find their way to Jersey in the future.
The overarching aim of UWOs is to disrupt further criminal activity in the UK through the identification of money launderers and the use is expected to increase.