Debut challenge to UK 'unexplained wealth orders' puts definitions to the test

13 August 2018 7:46am
Union Flag

3 August 2018. By Ben Lucas.

A UK court hearing last week touched on a cast of exotic characters and settings, revolving around Mr and Mrs A, a jailed “fat cat international banker” and his high-spending wife, who ran through millions of pounds at Harrods and enjoyed two ultra-luxury UK properties.

But the High Court hearing was also worth watching for another, more important reason: It was plotting uncharted legal territory. For the first time, UK police were defending their request for "unexplained wealth orders," or UWOs, that would force Mrs A to show that her wealth was obtained legitimately.

UWOs were only brought into force in the UK on Jan. 31 and have never been tested in court before. The ones at issue in the hearing were the first to be requested and first to be granted.

UWOs are civil investigatory tools that can be used to force an individual “reasonably suspected” of being involved in or linked to serious crime or corruption to explain their relationship to the assets and how they were obtained, where there are “reasonable grounds” to suspect they wouldn’t have been able to afford them legitimately. They apply to assets above 50,000 pounds ($65,000).

But last week’s hearing focused on a second, less obvious scenario where UWOs may be sought: so-called politically exposed persons, or PEPs. The orders can be used to target politicians and officials from outside the European Economic Area, and individuals associated with them, with UK links, who are considered to present a higher risk of being involved in corruption. PEPs from the UK and Europe are exempt from these orders.

Arguments over what constitutes a PEP and whether a UWO’s target must be established as a PEP or not dominated the hearing. While the full significance won’t become clear until a ruling later this year, the arguments are important in helping to inform future cases.

— PEP talk —

The National Crime Agency, the UK’s lead agency for serious crime, applied for the UWOs to the High Court, which granted them in February, in a bid to make Mrs A explain the source of 22 million pounds used to buy two properties in London and southeast England.

The NCA believes the properties are ultimately linked to her husband, whom it argues is a PEP, and it became clear as soon as the lawyers locked horns in court that the definition of a PEP would be a central issue.

Mr A was convicted for fraud and is currently in jail in his home country — which was unidentified but is a non-EEA state — after having worked at a bank in that country from 1993 to 2015.

— Just a banker? —

Early in the hearing, Mrs A’s lawyer, James Lewis, argued that Mr A wasn’t a PEP but was instead a “well-known international banker at a commercial bank.” He later caricatured him as a “fat cat international banker” to underline his point.

He argued that Mr A wasn’t a PEP, saying that identifying someone as such would require “evidence that the state has entrusted you with public functions.” There was no evidence to show that this applied to Mr A during his time at the bank, Lewis said.

He also rejected an argument by the NCA that the definition of a PEP is intentionally broad because it is used to highlight a “risk” of potential money laundering or corruption.

Lewis argued that UWOs aren’t about identifying risk but are about investigating a well-founded suspicion, requiring the NCA to satisfy a much more tightly scripted definition when using this new order.

— Grounds for suspicion —

While the NCA’s lawyer, Jonathan Hall, countered this argument, he focused on making a case that the definition of a PEP wasn’t a critical determining factor in seeking a UWO.

The “primary condition,” Jonathan Hall argued, was proving to a court that there were “reasonable grounds” to suspect an individual had acquired assets that seemed too valuable in comparison to their known legitimate income.

Not until a later stage would there be a requirement to establish whether they are a PEP or show that the assets in question may be linked to serious criminality, Hall said.

Hall nevertheless pursued the argument that Mr A was a PEP. He argued that the country in question had been “directly involved” in his bank appointment because its shareholders had appointed him to his position, and the state held a majority share in the bank.

— Key question —

The hearing threw up other challenges, the relevance and importance of which the judge will also be forced to consider.

For example, Lewis produced lines of attack including the claim that his client would risk self-incrimination by responding to the UWOs, that the NCA had lacked enough credible evidence for the orders to be permitted, and that Mr A hadn’t had a fair trial leading to his fraud conviction so it shouldn’t be considered.

But at the end of the three-day hearing, Judge Michael Supperstone stressed the novelty of proceedings around the UWO regime and came back to the definition of a PEP as possibly the “most important” aspect.

His ruling on the challenge, due in September, is likely to give much-needed clarity on this broad term, and determine its relevance in the UWO process in future.

Damage Limitation: Trucks & Cartel Claims