Unexplained Wealth – Not as good as it sounds (particularly if you’re getting divorced or involved in a commercial dispute)19 Apr 2017
The Criminal Finances Bill currently going through parliament contains far reaching powers in the Government’s crusade against the economic benefits of crime. Here, Specialist Regulatory and Business Crime Consultant for Kuits, Wendi Bussin, sheds light on why high-net-worth individuals and business directors need to sit up and take notice.
“I am not a terrorist or a money launderer”
Perhaps, but you may still have to explain how you come to have your wealth.
The Proceeds of Crime Act (POCA) already provides the ability to have assets tainted by crime recovered in a civil court, rather than simply confiscating assets following a conviction in a criminal court. The new Unexplained Wealth Orders (UWO) will, however, take that civil process one step further.
A UWO will require a person who is suspected of involvement in, or association with, serious criminality to explain the origin of assets that appear to be disproportionate to their known income.
Making false or misleading statements in that explanation would be a criminal offence. Not responding would lead to a presumption that the property is the proceeds of some criminal activity and could be used to obtain a freezing order pending civil proceedings for recovery under POCA.
It is to be expected that Government Agencies such as HMRC or the NCA will have intelligence on individuals who are involved in criminal activity, whether it be VAT fraud, tax fraud, customs duty fraud, drugs offences or even people smuggling. They may not, however, have sufficient evidence to prosecute or pursue a civil claim. A UWO could be used in an effort to obtain the evidence that they need.
Getting divorced or involved in a commercial dispute? Watch out
So, how might this affect you in real terms? Say you were in the midst of a particularly combative and nasty divorce, and your soon-to-be ex decides that you are trying to hide your assets to avoid a hefty settlement. Could they report you for tax fraud, for example, and wait for the investigation to reveal any hidden stash? Notwithstanding any rules of evidence which might prevent your ex from seeing the results of the UWO, it would certainly cause you serious stress and anxiety amidst the trouble.
Another scenario: you are involved not in matrimonial proceedings, but in the throes of a commercial dispute. The same issues would result for the target of a UWO initiated by a competitor or ex-business partner.
Only time and parliamentary tinkering will tell, but, in their currently proposed form, UWOs could be seen either as a novel threat or potent weapon – depending on which side of the fence you sit, of course.