In recent years, UK authorities have expanded their toolkit to include draconian Unexplained Wealth Orders (UWOs). The seizure of suspect wealth remains firmly on the agenda.
Super-prime property, art and jewellery as well as elite schools have all been identified as attractors of illicit wealth. As a safeguard, banks, lawyers, estate agents and high-value dealers in the UK must report suspicions to the National Crime Agency and the threshold for reporting is low.
Suspicious Activity Reports filed by banks, estate agents and trust and company service providers have all increased this year.
Private schools are also now expected to be alert to suspect wealth and Politically Exposed Persons (PEPs). All this means that reports are inevitably being made in relation to high net worth persons, including Russian oligarchs based in the UK.
Information in a report, which can include details of domestic and foreign bank accounts, addresses and assets, can in due course trigger a UWO application or account freeze. It begs the question whether the UK’s assertiveness when it comes to source of wealth queries is causing some to think twice about establishing themselves and their families here.
The UK is one of only a handful of countries with a UWO regime. An authority may apply to the High Court for an order where it believes there is a discrepancy between a PEP or criminal suspect’s wealth and a specific asset.
The order requires the person to explain how they acquired the asset. An unsatisfactory explanation will lead to a further application to forfeit the asset. When they were introduced in 2017, UWOs were billed as a major weapon against corruption. So far, they have targeted not just organised crime figures but wealthy foreigners, including those who have fallen out of favour with their governments. PEPs from Russia and other CIS States (Commonwealth of Independent States) are squarely within the sights of the authorities as the regime does not apply to domestic or European Economic Area PEPs.
As the lead agency for UWOs, the National Crime Agency is likely to be scrutinising the profiles and assets of oligarchs with property in the UK, including holders of Tier 1 investor or “golden” visas.
Suspicious Activity Reports filed by banks, estate agents and trust and company service providers have all increased this year. Tax records as well as information provided in support of visa applications may be shared by other agencies. Not only the high profile will be in the spotlight. The definition of a PEP for the purposes of a UWO is widely configured and includes past and present holders of prominent functions, as well as family members and close associates.
The group potentially exposed to a UWO is large. Mindful of this, it is not uncommon for an oligarch to actively seek advice on exposure and to prepare an audit trail in relation to certain assets. It can be time-intensive to ensure that the legitimate provenance of an asset is supported, especially where foreign income streams are involved or the source of funds go back many years.
Some are planning ahead to ensure that they are not caught on the back foot. From a practical perspective, undertaking the exercise now has a dual utility. The information gathered may also be deployed to satisfy customer due diligence requests made by banks, lawyers and other professionals in the UK and elsewhere.
Experience shows that oligarchs can be proactive when it comes to evidencing the origin of wealth but nothing suggests that UWOs are having a chilling effect on their presence or investment in the UK.
The UK’s prestigious educational institutions, respected legal system and sophisticated professional and financial services sectors continue to make it a desirable place to live and invest.
Other factors are the comparative safety and prime property market that is all the more attractive given the fluctuating currency. Further, the UWO experience has not been plain sailing for the National Crime Agency.
Although there have been headline-grabbing orders, it recently suffered a major setback when a UWO relating to a Kazakh PEP was lifted. Investigative deficiencies were laid bare and substantial costs awarded. The National Crime Agency can be expected to tread carefully on the next occasion but the recent outcome also suggests a willingness to take a risk in the pursuit of suspect wealth.
Although UWOs have not dented the attraction of the UK, PEPs from CIS States should not disregard their exposure.
Anita Clifford is an associate barrister at London-based Bright Line Law