The UK High Court has dismissed a challenge from a politically-exposed person (Pep) to have an unexplained wealth order (UWO) thrown out.
The UWO was one of the very first to be issued following the introduction of the new powers on 31 January 2018.
It is one of two UWOs that relate to the same investigation and require “explanations to be provided as to how properties in the south-east of England, valued in the region of £22m ($28.6m, €24.7m), had been funded and purchased”.
Failure to explain the source of the funds could result in the asset(s) being confiscated under the civil recovery regime.
Probing questions
In a statement on Wednesday, the National Crime Agency (NCA) confirmed that one of the respondents, a Pep from a non-EEA country, had failed in their bid to challenge one of the orders.
Donald Toon, NCA director for economic crime, said: “I am very pleased that the court dismissed the respondent’s arguments today.
“This demonstrates that the NCA is absolutely right to ask probing questions about the funds used to purchase prime property. We will continue with this case and seek to quickly move others to the High Court.”
He added: “We are determined to use the powers available to us to their fullest extent where we have concerns that we cannot determine legitimate sources of wealth.”
Scepticism and concern
UWOs, however, have not been without their critics.
Nick Rucker, partner at Irwin Mitchell Private Wealth, told International Adviser in August that the firm had only dealt with one UWO so far, during which the law firm was asked to explain “what is a trust?”.
He said it was very concerning “dealing with a crime agency that doesn’t know what looks normal in international wealth planning”.
His colleague, Alex Ruffel, highlighted the serious implications that such orders can have.
“Assets can be frozen for a long time and possibly destroy companies,” said the partner in the private wealth tax, trusts and estates team.
“You can be accused of a crime, spend a couple of years in hell and be acquitted in the end. There’s not a lot of balance.”
Prove your innocence
On Wednesday, Ben Rose, partner at law firm Hickman & Rose, commented: “While the applicant in this case is unlikely to win much public sympathy, the successful initial use of an Unexplained Wealth Order marks a turning point in our justice system that could have a significant negative impact on people who don’t spend £16m at Harrods.
“The key problem is that these orders invert the burden of proof. English law has, for centuries, relied on the principle that an accuser has to prove guilt. Unexplained Wealth Orders mean the accused now has to prove their innocence.”
Rose continue: “At the moment the public seems to accept this radical change. Perhaps it is because of who is being accused in this case and others like it. But if this principle were to be applied to ordinary people, in other areas of law, there would be outcry.
“Someone accused of committing a historic fraud might be obliged to provide banking paperwork dating back 20 or 30 years, for example. The allegation may be a complete fabrication. But if the accused can’t show the paperwork, they could be found liable.
“The facts of this particular case may be unpalatable. But there’s a real principle of law at stake.”
What is a UWO?
An individual who receives a UWO must explain how they obtained the asset in question. HM Revenue & Customs and other relevant enforcement bodies can apply for such as order at the High Court.
In order to obtain one, the organisation must prove that there is a reasonable cause to believe the individual holds assets worth more than £50,000, and there are grounds to suspect the individual’s known income would not explain the ownership of the property.
