05 Jul 5.07.2018 Unexplained Wealth Orders
5.07.2018 Unexplained Wealth Orders
Designed principally to root out movement of funds from politically exposed individuals, UWO is a continuation of measures to crack down on properties owned by, for example, off-shore companies. In 2013 the annual tax on enveloped dwellings was introduced. This is a tax which is levied on any property over £500,000 which is owned by the company. Furthermore, stamp duty land tax was raised to 15% for off-shore companies. But according to the UK Land registry, there are still 97,000 properties held by off-shore companies.
There has been a drive to ‘de-envelop’ ownership in the last five years, i.e. switch ownership from off-shore company to personal name; but it’s expected that the ‘de-enveloping’ process will gain even more interest with the new UWO law.
However, UWOs go a little further than just a crackdown on off-shore structures. There is already one such order granted in relation to a £22 million property in London and South East of England. The owner of these properties has not been named, but resides in central Asia.
So what is a UWO and who can expect to receive this order through the post?
It is important to understand that this legislation was enacted as continuation of the Proceeds of Crime Act 2002, so it is literally a further insertion into this law.
Previously, the authorities did not have powers to order freezing orders or even investigate the source of funds in relation to the existing property if they suspected illegality as part of the ongoing criminal investigation.
This new law now enables the enforcement authorities to go a little further and order an investigation into the person’s property ownership and, in particular, the means by which it was obtained. It is also possible to freeze assets whist the investigation is ongoing.
This brings us to the next question: who can receive such an order?
Firstly, a UWO is a civil power and an investigative tool. It requires the respondent to provide information on certain matters (their lawful ownership of a property, and the means by which it was obtained). The UWO is not by itself a power to recover assets.
Secondly, the order can only be issued by the High Court, so it is a serious legal process. The High Court would then need to be satisfied that there are reasonable grounds for suspecting that the person’s known lawfully obtained income would have been insufficient to buy the property in question. The court would also need to be satisfied that the person is either a politically exposed person or has been involved in a serious crime.
This takes me to a very important point: to receive a UWO you would have to be a politician who does not have income to prove the ability to buy expensive property or to be involved in a serious crime. The High Court would not make these orders lightly and such orders would usually be made in continuation of an already ongoing criminal investigation.
It should be noted however that a UWO made in relation to a politically exposed person would not require suspicion of serious criminality. The new law also includes family members of politically exposed persons, so an investigation can be brought to related family members.
It should also be highlighted that the ability to apply for a UWO is limited to the National Crime Agency, Her Majesty’s Revenue and Customs, the Financial Conduct Authority, the Serious Fraud Office or the Crown Prosecution Service.
However, it is possible to refer a suitable case to the relevant enforcement agency, and this ability to suggest people that makes this legislation a powerful tool for the enforcement agencies.
We have advised on the implications of this new legislation to a number of clients. We have also seen a new wave in changing ownership from off-shore companies to personal names. If you would like to consult with us on the above, please get in touch with Tatiana Svetlova at firstname.lastname@example.org or by clicking here.