Understanding UWOs: A New Financial Crime Buster is here now

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Unexplained Wealth Orders are a comparatively new power granted to police force by the government underneath the Proceeds of Crime Act 2002 and the Criminal Finances Act. The legislation requires a individual who is reasonably suspected to be involved with serious crime to describe the character and extent of the curiosity about particular assets, and to disclose the causes of their wealth.

Although this tool has been in the National Crime Agency's disposal since 31st January 2021, UWOs recently been thrust into the spotlight because of the fact that the UK's first UWO continues to be enacted against Zamira Hajiyeva. The Azerbaijani national spent over lb50 million in the united kingdom during the period of a decade, including the purchase of a Berkshire golf club, a jet and a lb16 million spending spree in Harrods, the equivalent of a lot more than lb4,000 a day. Mrs. Hajiyeva will have to explain the origin of her wealth for purchasing the properties, and when she cannot, they'll presumed to be the proceeds of unlawful conduct and can become available to civil recovery proceedings.

It is the first time we have seen one of the so-called 'super-powers' in the Criminal Finances Act being used, and also the industry is going to be watching with baited breath to ascertain if a flood of further UWOs is going to be utilized by law enforcement in other cases to compel disclosure of funds as well as their legitimacy.

The case for implementing UWOs

Unexplained Wealth Orders are members of a new arsenal of tools designed to stem the flow of laundered money passing with the UK. Whilst undoubtedly a crucial part of police force in this area, as a new power, there should be absolute certainty and confidence that they will be a highly effective measure against financial crime. In legal circles, UWOs continue to be a slightly controversial measure as evidence of illicit wealth sources is not required legally enforcement to challenge politically exposed persons about the causes of their wealth.

According towards the International Centre for Asset Recovery's 2021 Basel AML Index, there has been “little measurable progress in countering money laundering” globally, with 64% from the 129 countries listed using a score over five, which is defined as a 'significant chance of money laundering and terrorist financing' occurring.

Across the board, effectiveness in stemming these dirty money flows is lagging behind technical compliance, and there is a low level of effective enforcement of anti-money laundering and counter-terrorist financing measures. Indeed, the Index also showed that 47% of nations assessed possess a low level of effectiveness in investigating and prosecuting money laundering offences.

Law enforcement agencies globally are struggling with resource and for that reason enforcement of regulations. The NCA is ahead of the game in this matter, which is why we're looking to see UWOs become more extensively used in the near future, but in the interim, it's up to the financial services community to set up place much more rigorous anti-money laundering controls. Unless the right checks and balances have established yourself, dirty money can cross a border and become converted into other currencies or assets before anyone realises that the financial crime continues to be committed.

The Hajiyeva order

In the situation of Mrs. Hajiyeva and her husband, there is allegedly a discrepancy between your apparent joint income of the family and their amounts of spending, particularly when it found the ownership and purchase of top-end assets for example property. It was the foundation of the NCA filing the very first UWO.

During purchasing any real estate, commercial or else, there ought to always be an appropriate degree of due diligence conducted by both the estate agents and then any solicitors involved in the process to be sure that the buyer's causes of wealth are valid. When it comes to Mrs. Hajiyeva's golf club purchase, for example, questions are increasingly being raised about whether adequate checks were conducted and even, how effectively these checks are now being implemented more broadly within the acquisition of premium real estate.

What's next?

UWOs operate at the highest judicial level, using the NCA working alongside the High Court should the individual susceptible to an order not be able to prove a legitimate source of their wealth or property. There are further tools at law enforcement's disposal at a more local level, however. Freezing orders, also known as asset freezing orders, may be used by local courts at an operational level to freeze suspected high value assets quickly.

In accessory for going after financial criminals directly, the government has made clear that it will also target those who may be enabling this kind of crime, including lawyers, accountants and other intermediaries, so called 'professional enablers'.

Using a combination of freezing orders and UWOs, chances are there will be a further clampdown on top-end assets, such as real estate, where money flows come from high-risk countries. Russian cash is one of the greatest concerns here, but there are more areas such as Azerbaijan, the Middle East and regions of Africa that the Basel AML Index has noted to become of equally high, otherwise higher risk.

Whilst spotting red flags and 'following the money' should be the foundation of any research when examining suspicious wealth sources, the challenge is increasingly originating from new types of money laundering schemes that have not been seen before. To combat this, there has to be higher amounts of information sharing between financial institutions, law enforcement agencies and regulators to understand from each other and share best practice, to up the ante in the combat financial crime.

 

Michael Harris
Director of monetary Crime Compliance at LexisNexis(R) Risk Solutions
www.risk.lexisnexis.co.uk