Unexplained Wealth Orders - What are they?
An “unexplained wealth order” (UWO) and supporting “interim freezing orders” are new powers given to HMRC and other agencies that started in January 2018. They are new powers and are issued by HMRC where a person who is reasonably suspected of involvement in, or of being connected to a person involved in serious crime, has to explain how property, incomes or goods were obtained. They are issued where there are reasonable grounds to suspect that the respondents known lawfully obtained income, would be insufficient to allow the person to hold or obtain the items in question.
The interesting approach of UWO’s are that they require the assets owner to show the source of the funds as opposed to previously where enforcement agencies had to show that laundered funds had been used in the purchase of the asset.
UWO’s have recently become news as an anonymity order was lifted and the wife of the former chairman of the International Bank of Azerbaijan must now show a legitimate source for how several properties were purchased or the National Crime Agency can apply to the High Court to seize the property. The documentation also showed that the spending patterns of the individual did not match with the lawful income that would have been received.
The full story can be found https://www.bbc.co.uk/news/uk-45812210
This is one of the first public high profile uses of UWO’s and it is being watched with interest. UWO’s are still in the early stages of use and HMRC and the other enforcement agencies will want to ensure that these are fully tested and successfully used before wider deployment of these tools becomes commonplace.
Misters had stated that UWO’s were going to be part of a “full spectrum” assault on serious crime and corrupt overseas officials but there has not been much use of the orders since their introduction. Ministers claim to be placing pressure on agencies to use them and anticorruption campaigns such as Transparency International UK, have said: “UWOs should now be used more widely to pursue more of the £4.4 billion worth of suspicious wealth we have identified across the UK.”
With HMRC facing pressure to increase exchequer receipts and political pressure to bring tax avoidance to the top of the agenda, the use of UWO’s may become a more frequent occurrence in the next few years.