These Orders raise a number of questions about the proper scope of the law in how they are enforced and why; they also force property investors in particular circumstances to review the risks. A lawyer gets to grips with the issues in this article.
Earlier this week it was reported that the UK authorities, in the form of the National Crime Agency, had wielded the newly-crafted weapon of the Unexplained Wealth Order to go after a wealthy figure whose sources of wealth seemed unexplained. While some of the regular media coverage may wax lyrical about “mansions”, high spending and colourful tales of how a person acquired a fortune, what is troubling is that UWOs do not appear to require concrete proof of criminal activity of the level that would pass the smell test in a court of law. UWOs came into force under the previous Conservative administration at a time of continued public focus on the behaviour of super-wealthy foreigners in London, such as Russian oligarchs, others from the former Soviet Union, as well as those from other regions. It tapped into disquiet about claims of London becoming a money launderers’ playground. Concerns about UWOs have been aired before in this news service.
How safe from a due process point of view are UWOs, however, and where do the exercise of such powers leave high net worth property investors from overseas? The UK has for decades cultivated the image of a stable legal and political jurisdiction, a quality that has helped the country, particularly London, attract inward investment and business for wealth managers. How will UWOs affect this?
To discuss the topic is Lee Adams, partner, JMW Solicitors LLP. The editors of this news service are pleased to share these comments with readers. The usual editorial disclaimers apply. To respond, email firstname.lastname@example.org and email@example.com
The BBC recently reported that a multi-million pound mansion on the London street known as ‘Billionaire’s Row’ is the subject of a High Court battle over the grant of an Unexplained Wealth Order. UWOs were introduced in 2018 under measures known as “McMafia laws” and have put investment strategies in the spotlight. The National Crime Agency (known as the UK’s FBI) use UWOs to target owners who do not openly have the resources to buy luxury homes. If a satisfactory explanation is not given, then the home may be confiscated. Homes owned by offshore companies under a legitimate investment strategy may nevertheless be targeted, with the result that the home’s owner has to engage with the courts or risk losing the asset.
Unexplained wealth orders
You do not have to be a defendant in civil or criminal proceedings to be the recipient of a UWO. The NCA and a select few other authorities can apply for an order in respect of any property valued over £50,000 ($63,104), if they have reasonable grounds to suspect that the owner does not have a large enough legitimate income to have obtained the property. It is worth emphasising that there do not have to be any existing civil claims or criminal proceedings, which ordinarily would be the case for court orders involving property.
If a judge is satisfied that there are reasonable grounds to believe that a person owns a home without having the legal income to have purchased it, the judge will order that person to provide details of the nature and extent of their interest in the property, including how they purchased it, the costs involved, and any other information that the judge specifies. This could be less than straightforward, depending on the ownership structure of the home in question.
The result of not satisfactorily complying with the court’s order is that the home will become recoverable property for the purposes of a civil recovery order. In other words, it can be confiscated.