The UK has the unenviable reputation of being a "global hub for money laundering" with the NCA estimating that between £36-90 billion could be laundered through the UK each year. Much of this believed to be through real estate.
In an attempt to crack down on dirty money, the government is fast-tracking the Economic Crime (Enforcement and Transparency) Bill which focuses on three key proposals to help tackle money laundering (establishing a register of overseas owners of UK property; strengthening civil financial sanctions; and strengthening UWO's). This article will focus on the proposed amendments to UWOs and their potential impact going forward.
What is an UWO?
The Criminal Finances Act 2017 introduced UWOs, an investigative tool to be used by UK enforcement agencies to fight against suspected criminal money. UWO compel owners of property in the UK to reveal the source of their wealth where the legitimate funds of the owner appear to be insufficient to enable them to obtain the property.
The owner must be either a Politically Exposed Person (PEP) or someone suspected of a serious crime anywhere in the world (or those connected to them). The consequence of an UWO is that an interim freezing order is placed over property, preventing it from being sold or otherwise dealt with.
Although UWOs are available to several UK enforcement agencies, including the Serious Fraud Office, Crown Prosecution Service and Financial Conduct Authority, so far only the National Crime Agency has used them and in only a handful of cases. This includes their successful use in cases against Zamira Hajiyeva and Mansoor Hussain.
However, the NCA suffered a heavy defeat in 2020 (see NCA v Bakers and Ors) which resulted in the High Court discharging three UWOs and issuing a costs order against the NCA in the region of £1.5 million. With limited funds available to pay such a significant cost order, it is unsurprising that this was the last time a UK enforcement agency issued an UWO.
The Economic Crime Bill looks to change the UWO regime by making them easier to use (especially against complex corporate structures) and changing the rules on costs so enforcement agencies are far less likely to suffer a significant financial burden should they be unsuccessful. The changes include:
Limiting the costs to enforcement agencies in the case of an unsuccessful UWO, requiring them to only pay a respondent's costs where the authority has acted unreasonably, dishonestly or improperly;
Permitting UWOs to be issued against respondent's directors, officers or trustees, thereby expanding the scope to include those who hold property in the UK through complex corporate structures;
Giving enforcement agencies more time to review any material provided in a response to an UWO.
There can be little doubt that the UK enforcement agencies were deterred from using UWOs as a result of the significant financial risks attached with failure, particularly following the decision in Baker. However, the government will hope that the changes brought by the Economic Crime Bill will kick start the use of UWOs in the fight against dirty money. They will become much easier to use and less financially risky for law enforcement authorities. With the significant increase in government sanctions in recent weeks/months, we are likely to see a significant surge in the use of UWOs in the near future.
Regardless of these new powers, enforcement agencies are still required to undertake thorough investigations, and obtain sufficient evidence to demonstrate that the grounds for obtaining an UWO have been properly established.
Anyone subject to an UWO should seek immediate legal advice from an experienced expert. Howard Kennedy's renowned Business Crime and Regulatory team are frequently sought out to provide specialist expert advice in some of the most complex, and often high profile, financial crime investigations.