Speed read: The new Unexplained Wealth Order framework is set to come into force. Anita Clifford focuses on the conditions for obtaining one, and analyses the potential for extraterritorial reach and issues surrounding the reverse onus.
Section 362A of the Proceeds of Crime Act 2002 (“POCA”) will, once in force, enable an enforcement authority to apply for an Unexplained Wealth Order (“UWO”) against a person. The effect of such an order will be to compel “a person” to explain the origins of particular property and provide any documents specified by the court to the enforcement authority within a set time frame. The Explanatory Notes to the Bill introducing the provisions discuss UWOs as applicable to “individuals”, and do not refer to corporate persons. However, a two-page “fact sheet” issued by the Home Office in November 2016 states that UWOs are available against individuals and companies. Whilst the Explanatory Notes are more authoritative, the position requires clarification. In any event, the UWO will be a new investigative tool aimed at strengthening the ability of UK enforcement authorities to investigate illicit wealth in the UK and, indeed, abroad.
This is because the new UWO framework has immense extraterritorial potential. POCA already captures property located outside of the UK by virtue of the definition in section 414. Further, the provisions applicable to UWOs, set out in Part 8, do not require a respondent to be connected, let alone located, in the UK. Indeed, of the two categories of UWO respondents that are permitted one is foreign or non-EEA Politically Exposed Persons and the other is criminal suspects and their connected persons wherever they may be located. In respect of the latter, the suspected criminal activity can occur in the UK or “elsewhere” (section 362B(4) of POCA). Consequently, the provisions will substantially assist the UK in investigating the illicit wealth of persons overseas. Reliance on international cooperation and the need to source information from a variety of public and private organisations abroad to further a UK-based investigation is likely to be reduced as UWOs offer UK enforcement authorities a direct path to securing information from or about overseas persons of interest themselves.
To obtain a UWO, a High Court judge will have to be satisfied of three conditions specified in section 362B of POCA: (i) that there is “reasonable cause to believe” the respondent holds the property in question and that its value is greater than £50,000; (ii) that there are “reasonable grounds to suspect” that the known sources of the respondent’s lawfully obtained income would be insufficient for the purposes of obtaining the property; and (iii) that the respondent is either a foreign PEP or that there are reasonable grounds for suspecting that they are involved in serious crime or a person connected thereto.
The threshold for obtaining a UWO is set rather low considering its implications. Once made, the order effectively reverses the onus of proof onto the respondent, who is then required to explain how the asset was acquired and provide all documents or information specified by the court. The information, to be provided in the form specified by the court and potentially orally (see section 362A(4) of POCA referring to “the place at which it is to be given”), is able to be used to further investigations, retained and shared with other enforcement authorities. Practically, it is envisaged that UWOs will often serve as precursors to non-conviction based property confiscation proceedings under Part 5 of POCA, but the main proviso is that an explanation cannot be used against the respondent in criminal proceedings. In these circumstances, there is considerable scope for derivative use of the explanation and documents that are provided by the respondent beyond Part 5.
Being a civil application, it is axiomatic that the new UWO framework will not engage criminal due process rights under Article 6(2) and (3) of the European Convention. Consequently, any right to silence guarantee falls away. Also, many UWO applications are likely to be heard ex parte owing to the requirement that an interim property freezing order, if one is to be sought, must be sought in the same proceedings (section 362J of POCA). Failure to comply with the order and provide an explanation without reasonable excuse will constitute a criminal offence and give rise to a recovery of property presumption under Part 5.
Despite its potential consequences, only time will tell whether the UWO provisions will be the subject of challenge. In Australia, one of the few jurisdictions with UWOs, the reverse onus of proof placed on persons not convicted of criminal offences has attracted criticism. Notwithstanding this and varied degrees of use between the state jurisdictions, UWOs remain a part of the Australian legal landscape. In the northern hemisphere, certain factors also pose difficulties. Arguably, the recoverability presumption that arises following non-compliance with a UWO bears a resemblance to the potential ability of a jury to draw an ‘adverse inference’ where a defendant does not give evidence or offer an explanation in the context of a criminal prosecution. The inference has been available since 1994. Moreover, the European Court of Human Rights (“ECHR”) has held that it is not incompatible with the notion of a fair hearing in Article 6(1) to place the onus on a person to give a credible account of his financial situation in a conviction-based confiscation proceeding (see Grayson and Barnham v United Kingdom (2009) 48 EHRR 30, more recently cited with approval in Zschuschen v Belgium, unreported and handed down on 1 June 2017 at ). Accordingly, it was no surprise when in a civil context, in Gogitidze & Ors v Georgia  ECHR 475 the ECHR also did not take issue with the reverse onus of proof that had been placed on a respondent to non-conviction based property recovery proceedings.
All this said, European consideration of reverse onuses or compelled wealth explanations has tended to occur in cases where, in the background, there is a criminal conviction or at least a belief that the person in question was engaging in criminality, usually within that particular jurisdiction. In striking contrast, the UWO framework in the UK captures foreign PEPs, their associates and persons connected to criminal suspects where there is no need for any belief or information to suggest that they are or were ever involved in unlawful activity.
Just how and against whom UWOs will be used is something to watch, along with potential challenges to the framework more broadly. The low monetary threshold of £50,000 suggests that UWOs have the potential to be used widely against both persons in the UK and abroad as well as the ultra-rich kleptocrats who were originally billed as targets. Although it is unlikely that UK authorities would dedicate resources into seeking a UWO against a person with no nexus to the UK, attempts to exercise extra-territorial jurisdiction can be expected. The ability to enforce extra-territorially, however, might be another matter.