What is an Unexplained Wealth Order?
An unexplained wealth order (“UWO”) is an order issued by the High Court requiring a person to provide a statement explaining how they obtained the money used to purchase a property having a value greater than £50,000.
A UWO is issued by the High Court on an application made by the National Crime Agency, the Serious Fraud Office or any police force in the UK.
A UWO can be issued in respect of any type of property (including cash, jewellery, art, shares and other financial assets) anywhere in the world.
Most UWOs are however being issued against individuals that have purchased, directly or indirectly (including through an offshore company), real estate assets in the UK (e.g. a house or flat in London).
An individual may receive a UWO even if they do not live in the UK.
A UWO gives the person against whom it is issued (the “defendant”) a fixed period of time (which may be relatively short, e.g. a few weeks) to provide to the High Court information in writing demonstrating that the money used to purchase the property was acquired by them through legitimate means.
Failure to provide such information without reasonable excuse is likely to result in the property being seized by the UK authorities.
An interim freezing order in respect of the property may also be issued pending the receipt of satisfactory information by the defendant on the origin of the money.
UWOs were brought into force in the UK in January 2018 in the fight against suspected criminal money invested in UK property and have already been used so far in several cases.
What should Individuals do?
Any person who is concerned that they might receive a UWO should ensure that, if they ever received it, they would be able to provide to the High Court at short notice sufficient information to demonstrate that the money used to purchase their property was acquired by them through legitimate means.
Such records include UK or overseas tax returns, evidence of inheritance or gifts, evidence of business profits or evidence of other gains such as lottery winnings.
What should financial institutions do?
Where a UWO concerning financial assets (e.g. savings, shares or bonds) is combined with an interim freezing order, the private bank, custodian or asset manager that holds or manages such financial assets is likely to receive a copy of that order.
Accordingly, private banks, custodians and asset managers should be prepared to deal with any such order and any requests for information they might receive in connection with it.
Private banks, custodians and asset managers should also consider how they would deal with their anti-money laundering obligations if they became aware that a UWO has been issued against one of their clients.
Options might include reviewing the information they have on file in relation to the client, assessing the transactions carried out by the client and determining the appropriate level of due diligence to be applied going forward in respect of the client.
How can we help?
If you are an individual, we can assist you to prepare a file (which we call a “Proof of Wealth Bible”) containing the necessary information to demonstrate that you have legitimately acquired the money you used to purchase your property in the UK.
Having a Proof of Wealth Bible ready means that, if you ever receive a UWO, you would be able to produce promptly to the High Court all required information without having to scramble to put together such information under a strict Court deadline.
If you are a private bank, custodian or asset manager, we can assist you to update your policies and procedures in relation to UWOs so that your relevant personnel is made aware of the existence of UWOs and how to deal with the situation where one of your clients has received a UWO.
Disclaimer: This article provides general information only. It is not comprehensive and does not constitute the provision of legal, investment or regulatory advice. FS REG is not responsible for any action taken or omitted to be taken on the basis of the information contained in this article. © 2020 FS REG Limited (www.fsreg.com). All rights reserved.