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On 15 March 2022, the Economic Crime (Transparency and Enforcement) Bill (‘the Act”) received Royal Assent paving the way for the bill to become an Act of Parliament. The Act clarifies and improves upon the sanction’s regime, unexplained wealth orders and introduces a register of overseas interests.
The Government states that the Act was envisaged as a response to Russia’s invasion of Ukraine, however it is evidently a long overdue piece of legislation designed to target so-called dirty money and dirty assets. The Business Secretary, Kwasi Kwarteng MP, remarked that ‘There is absolutely no room for illicit finance in the UK, and by bringing forward this Economic Crime Act at unprecedented speed we’ve put Putin, and the corrupt elites propping him up, on notice’
However, the Act will not simply vanish – nor be repealed - once the invasion of Ukraine ceases. The Government may be speaking in the languages of ‘Putin’s cronies and … corrupt elites’ however there should be no doubt that it is important that individuals are aware of the impending crack down on so-called dirty money and unidentified/suspicious foreign investment into the UK, arising from the Act.
The Act can be seen as a continuation of a series of legislation over the last 20 years designed to target financial crime including; Proceeds of Crime Act 2002, Fraud Act 2006, Bribery Act 2010, Criminal Finances Act 2017 and culminating with the Economic Crime (Transparency and Enforcement) Bill 2022.
The key components of the Act are as follows:
- Creation of the Register of Overseas Entities – increasing transparency of who ultimately owns UK property in the name of foreign companies. [Part 1, s.1 to s.44 of the Act]
- Unexplained Wealth Orders (UWO) – reforms to the application process, implementation and expanding UWO use. [Part 2, s.45 to s.53 of the Act]
- Sanctions – enabling them to be imposed quicker and intensifying enforcement [Part 3, s.54 to s.66 of the Act]
I frequently attend police stations representing individuals for a wide array of allegations. Over the last 6 months, I have noticed the Metropolitan Police and City of London Police asking a series of questions in police interviews about sources of income (even where it doesn’t appear to strictly pertain to the allegations). Concurrently, there has been an increase in the use of Civil Restraint and Forfeiture under the POCA 2002 framework alongside concurrent criminal investigations and prosecutions. The newly found focus by law enforcement agencies on ‘money’ arising out of the pandemic is an interesting thing.
Considering this new approach from law enforcement agencies, it is important to consider the impending changes to Unexplained Wealth Orders in some detail.
What is an Unexplained Wealth Order (UWO)?
Unexplained Wealth Orders were introduced by s.1 of the Criminal Finances Act 2017. UWO’s require individuals (referred to as ‘respondents’ by the legislation) to explain the sources of the funds which enabled them to obtain certain assets.
For a UWO to be made, the High Court has to be satisfied that:
- There are reasonable grounds to believe that the respondent has an interest in property valued over £50,000.00 and;
- There are reasonable grounds to suspect that the respondent would not have been able to obtain the aforementioned property using lawfully obtained income from known sources and;
- The respondent is either:
- A politically exposed person; or
- There are reasonable grounds to believe that:
- the respondent is, or has been, involved in serious crime (whether inside or outside of the UK); or
- The respondent is connected with a person who has been, or is involved in serious crime.
Applications are made by law enforcement agencies such as the National Crime Agency (NCA), HMRC, Financial Conduct Authority (FCA), Director of the SFO or the Director of Public Prosecutions (i.e. CPS).
Whilst it was considered an interesting development in 2017, only nine UWO’s have been successfully granted. If a UWO is granted, it can allow law enforcement agencies to utilise the POCA 2002 regime to seize/forfeit the assets and can lead to further criminal investigation by law enforcement agencies.
Impending Changes to Unexplained Wealth Orders
There are five key changes brought about by Part 2 of the Act.
- Costs Orders – the Act limits costs orders that can be made against the enforcement agency if unsuccessful in their application. Previously there were much wider powers to award costs to respondents, however now It is limited to
- The enforcement agency acted unreasonably in making or opposing the application; or
- The enforcement agency acted dishonestly or improperly during the course of the proceedings.
- Extension of Time – the Act allows for the enforcement agencies to apply to get further time to review information provided by the respondent. Previously, enforcement agencies had to reply within 60 days.
- Respondents – a respondent can now be a named responsible officer. This is in response to complex attempts using trusts and shell companies to prevent the discovery of the true ownership of property. Now, UWO’s can be granted and place a duty on the responsible officer to provide the information required.
- Interim Freezing Orders – enforcement agencies can now apply for an interim freezing order preventing the sale of the asset, at the time of the application for the UWO (i.e. before the UWO is granted).
- Alternative Test for UWO – perhaps the biggest change, there is now a further ground on which UWO’s can be granted. The Act now allows for a UWO to be granted where ““there are reasonable grounds for suspecting that the property has been obtained through unlawful conduct”. The reason why this is the biggest shakeup is because this is an order, that can be made, prior to criminal charge or conviction, but requires a respondent to reveal the sources of the funds for the property, and of course, that response is potentially admissible in criminal proceedings, as would a failure to respond.
Ultimately, there can be no doubt that the Government and Law Enforcement agencies are now actively going to seek the recovery of so-called dirty money and dirty assets. Whether this is a genuine attempt by politicians to clean up the impression of the UK on the global stage, or to appease marginalised individuals with little assets who feel High Net Worth individuals can act with impunity at a time when the cost of living is sky rocketing is unclear.
Either way, we are at the advent of a new approach to recovering the assets of individuals, who’s legitimate financial income does not match their wealth, and it wouldn’t be surprising if the changes to UWO’s in the Act play a large part in this.
Liam Lane is a Trainee Solicitor at Edward Fail, Bradshaw & Waterson.