Unexplained wealth orders are now available as a means of investigation in the UK, where police and other law enforcers have used them already. What might their implications be for Guernsey?

British investigators now have new powers that they have already put to use. The National Crime Agency – which the Government likes to regard as Britain’s answer to the US Federal Bureau of Investigation – obtained the first two such orders to investigate assets believed to be ultimately owned by a politically exposed person from central Asia. The orders relate to two properties, one in London and one in the south east of England.

But what are Unexplained Wealth Orders and what do they mean for Guernsey?

Unexplained Wealth Orders (UWOs)

UWOs are intended to help law enforcers clamp down on money laundering and to make the UK a less attractive location for the housing of illicit assets. They require respondents to prove their right to own to specified property, explain how they obtained it and, in particular, say how the acquisition was funded.

Certain law enforcement agencies can seek UWOs by asking courts to grant them. The following conditions must be met:

• The respondent holds the asset concerned;
• The asset has a value in excess of £50,000;
• There must be reasonable grounds for suspecting that the known source of the respondent's lawfully obtained income would have been insufficient for the respondent to acquire the asset; and

The respondent must be:

• a non-European-Economic-Area politically-exposed person or PEP; or
• a person whom it is reasonable to suspect of having been involved in serious crime (in the UK or elsewhere), or who is connected to such a person. Serious crime covers a range of offences which include trafficking in people, drugs and firearms, together with a range of economic offences such as money laundering and bribery.

The power is investigatory. It is not of itself a power by which the authorities can sequester (or, in the words of the Proceeds of Crime Act 2002, ‘recover’) assets, but it does interact with such powers.

Though UWOs only became available on 31 January 2018, they need not apply solely to property acquired on or after that date. Past acquisitions fall within their remit also.

How to respond to a UWO

A UWO requires a respondent to explain how he acquired the property in question and whether he did so lawfully. Should he to respond, or provide an inadequate response:

• this may be used as evidence against him in a civil recovery process;
• he may commit an offence if, in response to a UWO, he makes a false or misleading statement knowingly or recklessly; and/ or
• a court might grant a so-called interim freezing to prevent the respondent from disposing of the asset in question before he responds to the UWO fully.

Evidence obtained in response to a UWO can be used in any legal proceedings. However, such evidence cannot be used in subsequent criminal proceedings against the respondent, save for in limited circumstances such as perjury proceedings. These orders appears to be more useful for civil recovery rather than criminal prosecution but, as government investigators can hold information from them indefinitely and share it with other agencies, it seems likely that they will use them in broader investigations.

Implications for Guernsey

UWOs are British. They do not constitute part of Guernsey law, but they are international in outlook and may affect assets on the island in that way. Their territorial rules are as follows.

• The respondent need not live in the UK. There is no requirement that he has to be a natural person, so investment vehicles such as trusts, companies and limited liability partnerships can be subject to UWOs as well.
• The property in question need tot be located in the UK, so it may involve assets in Guernsey and elsewhere.
• If a serious crime is involved, it need not have been committed in the UK.

As a consequence, persons located in or with a connection to Guernsey may well become the subject of UWOs. These orders are not directly enforceable in Guernsey, but an enforcement agency may try to enforce such orders extraterritorially by asking Guernsey’s courts for assistance. We may therefore anticipate UWOs being registered and recognised in the Bailiwick’s courts.

Guernsey lawyers must therefore take care when handling UWOs. They must ensure that Guernsey-based recipients of these orders know what they are obliged to disclose but must also caution them about client confidentiality if they are wealth managers, trustees or other financial service providers. Additionally, no matter whether a UWO is enforceable or not, anyone who receives it may have to tell the Guernsey Financial Services Commission and/or send a suspicious activity report to the financial intelligence unit. The default position is therefore to handle UWOs with care and, when in doubt about their ramifications, seek advice.

* Sally French can be reached on +44 1481 739 341 or at sally.french@mourantozannes.com