Unexplained Wealth Orders: under-used and unloved

To say unexplained wealth orders (UWOs) have not proved to be massively popular is something of an understatement. 

Introduced by the Criminal Finances Act 2017 to enable law enforcement agencies to compel individuals or companies to explain how they obtained certain assets when they were believed to have been obtained illegally, they were viewed as an important development. 

What do UWOs do?

With UWOs enabling authorities to start civil recovery proceedings under the Proceeds of Crime Act 2002 if they did not receive a satisfactory explanation as to how someone acquired a particular asset – even if no civil or criminal proceedings had been brought against that person – they were seen as a possible game changer. Individuals having to provide information about their assets without ever being convicted of wrongdoing or even charged weighted the situation heavily in favour of the authorities. 

The National Crime Agency (NCA), the Serious Fraud Office (SFO), the Crown Prosecution Service (CPS), the Financial Conduct Authority (FCA) and HM Revenue and Customs (HMRC) were all given the power to utilise UWOs. Their arrival was heralded by the press – which, taking inspiration from a TV drama, dubbed them McMafia Orders. And yet, years later, the grand total of UWOs has stuck at nine - and these relate to just four cases. 

Last year, the  Foreign Affairs Committee’s description of UWOs as “spectacularly unsuccessful” added insult to injury. When UWOs became a reality, the government had predicted we would see about 20 of them being used each year. By a rough calculation, we should have probably seen a hundred or so of them by now. Yet the total stands at a mere fraction of that.

Muscle?

A lack of resources and the risks involved have been put forward as reasons why the SFO and NCA have not been looking to UWOs as a vital component of their work. Targets of UWOs could put forward a mountain of evidence and then claim for huge legal fees if a UWO application was unsuccessful. So perhaps the agencies’ reluctance to use them was understandable.

Economic Crime (Transparency and Enforcement) Act 2022

Yet the UK government passing the Economic Crime (Transparency and Enforcement) Act 2022, in response to Russia’s invasion of Ukraine, gave the UWO regime some extra muscle. The Act allowed agencies more time to investigate material received in response to a UWO before discharging any interim property freezing order over the assets in question. The Act also protects agencies from the daunting prospect of having to pay unlimited legal costs when a UWO application fails, as was the case three years ago when the NCA had to pick up a £1.5m legal bill after an appeals court upheld a ruling that the agency did not have reasonable grounds to issue UWOs on property purchased by prominent Kazakh nationals. 

A new category of person who can receive a UWO — the responsible officers of the entity that owns the property – was also created by the Act. Significantly, the Act made it possible for a court to grant a UWO where there are “reasonable grounds for suspecting that the property has been obtained through unlawful conduct,” even in situations where the source of wealth for a particular asset can be explained.

This may, in theory, mean there is greater scope for using UWOs, not to mention fewer financial concerns. But the supposed boost that the Act gave the UWO regime does not appear to be prompting a huge surge in UWO popularity. 

AFOs

Contrast this with another product of the Criminal Finances Act 2017 – the account freezing order (AFO). AFOs allow law enforcement authorities to directly seize money that is suspected of having been obtained by unlawful conduct and freeze bank accounts for up to two years. Unlike UWOs, they are in frequent use by the authorities. They are intended to give law enforcement agencies time to investigate the source of the suspected funds while, at the same time, preventing those funds being disposed of. An AFO may then be followed by an account forfeiture order, which allows all or part of the frozen funds to be forfeited to law enforcement.

To obtain an AFO, HMRC, the NCA, the SFO or the police only have to show to the court that there are reasonable grounds to suspect that funds in a bank account are assets obtained through unlawful conduct or are intended by any person for use in unlawful conduct. As an example of just how popular AFOs are, it is worth referring to HMRC’s statement that it obtained 151 in a 12-month period. Compared to UWOs, they have become the tool of choice for enforcement agencies and are being used with increasing frequency. 

It should be emphasised that both the low evidential threshold required to obtain an AFO and the fact that an application for one can be made without notice can make obtaining one relatively easy – whereas obtaining the account forfeiture order later on can be a greater challenge for the authorities. Yet this is still seen by the authorities as a more viable route to success than the UWO option.

Conclusion

Defenders of UWOs may make the argument that one UWO can have a huge impact. On average, a UWO leads to the recovery of £10m. Yet such successes are rare – and show little sign of becoming more common in the near future. It remains to be seen if any further makeovers may be attempted to make the UWO regime a more attractive proposition.

Nicola Sharp is a partner with Rahman Ravelli: rahmanravelli.co.uk