Unexplained Wealth Orders' Role In UK Dirty Money Bill

Law360 (March 8, 2022, 2:38 PM EST) --
Aziz Rahman
Aziz Rahman
The U.K. government is understandably keen to bring forward measures to tackle the flow of dirty money into the country. It is a response to the Russian invasion of Ukraine and has at its heart the aim of targeting Russian oligarchs who have substantial U.K. assets.

A new economic crime bill — the Economic Crime (Transparency and Enforcement) Bill, passed by Parliament on Monday following its introduction last week — will mean that the U.K. will finally have a register showing the true owners of overseas companies controlling assets here. It will also mean a strengthening of the unexplained wealth order, or UWO, regime. 

Critics may point to such actions being a perfect example of shutting the stable door long after many Russian stallions have departed. Draft legislation for an overseas entities register was originally drawn up and then shelved in 2018. That was also the year that UWOs, became available — to plenty of fanfare but little lasting effect.

Now, the government is set to give law enforcement agencies more time to review UWO case material. It is also looking to ensure these agencies do not face having to pay unlimited legal costs if an application for a UWO is unsuccessful. It is an attempt to beef up the UWO regime to make them a more effective tool, in the wake of what have to be considered fairly underwhelming early years.

The U.K government has recently faced calls to speed up efforts to target Russians who have assets here who are believed to have links to Vladimir Putin. The use of UWOs could play a significant part in any such efforts.

With the European Union already talking of the U.K. lagging behind when it comes to taking action against Putin's circle of associates,[1] UWOs could be the most obvious way for the U.K. to prove it has a genuine intention to tackle the problem of dirty money associated with the Russian leader's regime.

Until now, UWOs have been little used. But as the war in Ukraine intensifies, the U.K. public is unlikely to lose its belief in the need to see action taken against those with links to those who are orchestrating it.

The talk so far has been about targeted action against specific individuals. If that is the route that the government here chooses, it would be a surprise if UWOs did not play a major role in this. With, as mentioned earlier, the way being paved to assist law enforcement agencies in their use of UWOs, the war may prove to be the catalyst for greater use of such orders.

What begins as a campaign of UWOs against Russian targets could, possibly, embolden the agencies who can use them to take action against others who, until now, have not been viewed as suitable candidates for UWOs.

Turnaround

If such moves to boost the use of UWOs become reality, this will be quite a turnaround for them.

Introduced in the U.K.'s Criminal Finances Act 2017, UWOs were praised as a vital new weapon for authorities in their efforts to tackle organized crime. UWOs provide a means for the National Crime Agency, Serious Fraud Office, Financial Conduct Authority, HM Revenue and Customs and even the Director of Public Prosecutions to freeze and possibly seize an individual's assets if they are believed to have been obtained illegally.

Under a UWO, individuals can be targeted without having been convicted or even charged with an offense. A UWO requires an individual to explain how they acquired a particular asset. If the explanation given is not considered satisfactory, the authorities can start civil recovery proceedings under the Proceeds of Crime Act to seize those assets.

Yet despite the UWO process giving the authorities a head start against those they suspect of wrongdoing, they have been an all-too-rare occurrence. They have been used in just four cases, none have been obtained since 2019 and the NCA is the only authority that has chosen to use them since their introduction.

Track Record

It appears that UWOs now have their admirers again. The fact that it has taken a war to bring UWOs back into favor is, however, a far from ringing endorsement.

There will be many observers who will see any sudden rush to use UWOs as a classic case of too little too late. The possible targets for any proposed wave of UWOs could have been subjected to them months or even years ago.

It is only now that the government sees the need to cast its net a little wider that we might see UWOs becoming the force that their supporters always thought they could be. But it should be remembered that making someone the target of a UWO is far from a guarantee of success.

Serial big spender, Harrod's devotee and jailed Azerbaijani banker's wife Zamira Hajiyeva was a high-profile first UWO for the NCA.

Since then, the NCA's track record has been short, patchy and a major anti-climax. The running total of four cases involving UWOs seems a long way from the NCA's statement three years ago that it had over 100 possible targets for UWOs.

It is also worth emphasizing that UWOs the NCA obtained relating to three London properties — worth more than £80 million ($105 million) in total — were successfully challenged in 2020. The properties are owned for the benefit of Nurali Aliyev and his mother Dariga Nazarbayeva; the daughter of Kazakhstan's former president.

The family was able to keep them after the court made it clear that the use of complex offshore corporate structures or trusts cannot on its own be grounds for believing they have been set up, or are being used, for wrongful purposes, such as money laundering.

It was a case that showed that a well-devised and conducted response to the threat of a UWO can be successful — and that the track record of UWOs will have to improve if they are to be a genuine part of the cure for the U.K.'s dirty money affliction.

There are sure to be many who still have grave doubts about their ability to be a truly effective remedy.



Aziz Rahman is a senior partner at Rahman Ravelli.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


[1] https://www.theguardian.com/world/2022/mar/03/eu-urges-uk-to-act-faster-before-russian-assets-are-spirited-away.

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