News 30th May 2017

Unexplained Wealth Orders: A Brief Guide

Rachel Davies Teka

Advocacy Director

Rachel has worked on anti-corruption policy for over a decade, focussing on corruption in the UK and the UK’s role as a safe haven for dirty money. She is Co-Chair of the UK Anti-Corruption Coalition and leads Transparency International's UK advocacy team. She was formerly Chair of the Economic Crime Civil Society Organisations Steering Group (CSOSG) and was a founding member of the UK Open Government Network steering group.

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The Criminal Finances Act, which received Royal Assent in April, introduces new measures to tackle asset recovery and money laundering in the UK. A key element of the Act is Unexplained Wealth Orders (UWOs) – an investigative tool to help law enforcement act on corrupt assets. This is something that Transparency International has been pushing for since 2014.

Why are Unexplained Wealth Orders needed?

Unfortunately, there is growing evidence that the UK has become a safe haven for corrupt individuals and their assets. UK law enforcement has limited power to seize corrupt property.

At present, little can be done to act on highly suspicious wealth unless there is a legal conviction in the country of origin. In cases where the origin country is in crisis or the individual holds power within a corrupt government, this can take decades to obtain or is unlikely to be achieved at all, producing a mere trickle of results against a torrent of corrupt illicit funds.

How would Unexplained Wealth Orders work in practice?

The Minister for Health in a country outside the European Economic Area (EEA) has misappropriated millions of pounds from the health budget into his own pocket. To hide the proceeds of this crime, he decides to buy a multi-million pound property in London.

The house is far beyond the means of the Health Minister’s annual salary, raising serious questions. These allegations are brought to the attention of law enforcement agencies.

After an application from an enforcement authority[1], a high court judge can give notice of a UWO only if she is satisfied that the respondent is likely to be the owner of suspicious wealth beyond his means, and if all of the following tests are met:

1) The respondent is a Politically Exposed Person[2] (PEP) outside of the EEA; or there are reasonable grounds to suspect that the respondent is or has been involved in serious crime

2) The respondent’s known income is insufficient to obtain the asset

3) The value of the asset is greater than £50,000

The UWO requires the respondent to explain how he lawfully acquired his assets. If he fails to respond or gives an inadequate response then this extra information can be used in a separate civil recovery process (an existing measure under the Proceeds of Crime Act) if law enforcement has gathered sufficient evidence.

What was Transparency International’s role?

In 2014, Transparency International convened a taskforce of experts – lawyers, law enforcement and anti-corruption campaigners – to identify the problems with the UK’s asset recovery regime, and come up with solutions. The taskforce deliberations, and subsequent report, resulted in the recommendation of the adoption of UWOs. We advocated for this consistently – to government departments and, later, to parliamentarians and civil society organisations to prepare them for the introduction of the law into parliament.

What’s next?

The UWO tool is expected to commence by the end of this year and Transparency International will be monitoring its use and effectiveness. Any law is only as good as its implementation. The next government needs to ensure these powers are used effectively to target all suspicious wealth being brought into the UK.

The UK’s asset recovery and anti-money laundering regime is still far from perfect – for example, fragmented supervision and anonymous ownership of property are just two of the areas where we’re still advocating for change. There is more to do to, but this is a good step forward.

[1] Enforcement authorities listed in the Bill are: The NCA, HMRC, the FCA, the Director of the SFO, and the Directors of Public Prosecutions (for both the England & Wales, and the Northern Ireland jurisdictions)

[2] In the Bill, a PEP is defined as ‘a) an individual who is, or has been, entrusted with prominent public functions by an international body or by a State other than the UK or other EEA State, b) a family member of a person within paragraph (a), or (c) known to be a close associate of a person within that paragraph.