What are they?
For the first time, authorities in the UK will be able to obtain court orders requiring persons to explain how they obtained an interest in property. Any person subject to an UWO must demonstrate how they obtained the interest in the property within the time frame set in the order, or the property itself may be forfeited.
Who / what do they apply to?
- All property (whether in the UK or not) with a value of over £50,000, where the “known sources of income” of the person would have been insufficient to obtain that property.
- ANY non-EU PEP (including any person “connected” with such a PEP);
- Any person, where there are “reasonable grounds” to connect him (or a person connected to him) to “Serious Crime”;
- Includes corporate bodies and natural persons.
How do they work?
On 31 January 2018, sections 1 to 6 of the Criminal Finances Act 2017 (the ‘Act‘) come into force, and UWOs will be available to the National Crime Agency; HM Revenue & Customs; the Financial Conduct Authority; the Director of the Serious Fraud Office; and / or the Directors of Public Prosecutions for both England and Wales, and Northern Ireland.
An UWO requires you to provide a statement setting out any information required under the order with respect to any property that is the subject of the order, including but not limited to:
- The nature of your interest in that property;
- How you obtained the property; and / or
- Where the property is held by you as the trustee of a settlement, the details of the settlement.
If you fail, without reasonable excuse, to comply with the UWO, then the property is presumed to be recoverable under the civil recovery regime. The consequence of this is that, if the investigator then applies to the court to recover that property as the proceeds of crime, the burden will be on you to prove it was legitimately obtained, otherwise you risk losing it.
Before making an UWO the Court must be satisfied that:
- The collective value of the property named in the UWO is greater than £50,000; and
- There are reasonable grounds for suspecting that the known sources of your lawfully obtained income would have been insufficient for the purpose of enabling you to obtain the property; and
- You are a Politically Exposed Person (’PEP‘ – see below); or
- There are reasonable grounds for suspecting that:
- You are, or have been involved in serious crime; or
- A person connected with you is, or has been so involved.
What is a PEP?
A PEP is defined in the Act as a person who is:
- An individual who is, or has been, entrusted with prominent public functions by an international organisation or by any State other than the UK or any EEA State,
- A family member of a person within paragraph (1),
- Known to be a close associate of a person within paragraph (1), or
- Otherwise connected with a person within paragraph (1).
“Involvement in Serious Crime” is very widely defined, and while it includes instances where a person has been convicted of a serious offence, or has ‘facilitated’ such an offence, it also includes instances where a person “has conducted himself in a way that was likely to facilitate the commission by himself or another person of a serious offence in England and Wales (whether or not such an offence was committed).” [Serious Crime Act 2007 s2].
In other words, a criminal conviction is not a precondition for an UWO.
What should you be doing?
You should be prepared to demonstrate the provenance of any interest you have in any property, where there is a disparity between the value of that interest and your declared income. This includes beneficial interests in trusts and, for the purpose of the UWO, you would be treated as if you have “direct ownership” of a fair share of the property held by the trust.
This is particularly important if you:
- Are a PEP, or a person connected to or associated with a PEP (as defined above);
- Have an interest in any assets obtained or held through means other than UK declared income (such as, for example, if you are the beneficiary under a trust structure, a legatee, have received a significant payment for damages or some other financial settlement, etc.);
- Are facing (or are connected to someone facing) allegations of involvement in criminal conduct such as fraud, theft, money laundering or tax evasion – whether or not they have any substance – particularly in the context of litigation, ADR or settlement negotiations, and whether or not that conduct is connected to the assets in question.