Six years on from the UK government introducing Unexplained Wealth Orders as a new law enforcement tool to combat ‘dirty money’, Commercial Litigation and Fraud partner Pia Mithani spoke to City AM’s Ben Lucas about their relative lack of use by the UK’s authorities to date.

In this summary of the conversation, Pia provides commentary on the state of Unexplained Wealth Orders (UWOs) and how they can be used better to combat criminal activity. Read the full City AM piece here.

Have UWOs been as effective as hoped?

Despite the fanfare when first introduced, the take up of UWOs hasn’t been anywhere near what one might have expected. However, in my view, it is important to look at this in context, as the press coverage of what UWOs are, does not necessarily reflect the reality.

UWOs are an information gathering tool to support Civil Recovery Orders under the Proceeds of Crime Act. They are not an end in themselves. The civil recovery order regime is itself under used: for example, in 2020-2021 just £12.7m was recovered through civil recovery orders and that reduced to £9.8m in 2021-2022. Contrast that with some £200m recovered in the same year via criminal confiscation orders.

What policy lessons can we learn from this?

Aside from the above point of putting the UWO regime in context, the overall issue in my view is one of resource within law enforcement bodies. I think it would be wrong to describe the powers as weak on paper – the threshold requirements to obtain a UWO are not in themselves particularly onerous.

The problem comes when the evidence to support an application is put under the microscope and challenged by very well resourced respondents who want to challenge them and set them aside. The National Crime Agency v Baker in 2020 case is a good example of how this can play out.

Have the authorities been too hesitant to use these powers against oligarchs?

It is important to remember that the court will look at the evidence objectively when a case comes before it. I think the hesitation comes more from the amount of work needed on the part of authorities, to resist robust attempts by respondents to set a UWO aside.

In the sorts of cases where UWOs are likely to arise, there can be very complex asset structures in place, often involving difficult questions of factual evidence and sometimes questions of foreign law. These are very resource-intensive issues for public law enforcement bodies to grapple with, and that is a more likely explanation for their hesitation.

We should remember also that objections to UWOs are heard in the civil courts and if law enforcement lose, they can be on the hook for the respondent’s costs. These costs can be extremely high when large City law firms are engaged to act for defendants.  The reforms in the Economic Crime (Transparency and Enforcement) Act seek to ease this issue by limiting the scope for adverse costs orders against law enforcement in these situations.

Are the authorities still facing difficulties in freezing and recovering criminal assets? If so, what changes could be made? 

Resource issues are still an important factor, but the legal tools are available for effective enforcement action particularly with the reforms set out in the Economic Crime Act. Two changes would however make the regime more effective.

Firstly,  high profile economic crime often has an international profile. The need for effective cross border co-operation is fundamental. Where a property in the UK is owned via a complex international structure subject to foreign law in countries that operate stringent secrecy regimes, the teeth behind purely domestic action will always be limited without international cooperation.

Secondly, improved co-operation between public and private sectors could make the situation easier for authorities where criminal investigatory work runs parallel to civil asset recovery. Co-ordination between the two could certainly be improved.

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