According to Darren Matthews and Steve Holt, of K2 Intelligence, many wealthy individuals and families are subject to higher levels of public, governmental, and legal scrutiny.
There are a number of potential scenarios in which that happens. The most common include estate, tax or marital disputes; personal or business litigation; pre-acquisition due diligence; asset sales; regulatory investigations; license applications; and partnership formations or dissolutions. Maintaining comprehensive records now can pay off handsomely later: The amount of effort required to reconstruct past events rises exponentially in proportion to the level of disorder in one’s recordkeeping.
Enter the UWO
A recent development in the UK underscores the need for sound financial housekeeping. In January 2018, Parliament passed the Criminal Finances Act 2017, which introduced the Unexplained Wealth Order (UWO). The law came about in response to growing concerns that the UK (particularly London) had become a haven for vast ill-gotten gains originating elsewhere in the world. Broadly speaking, the UWO is a court order designed to be employed by UK enforcement agencies that suspect an inconsistency between an individual’s lawfully obtained income and size of assets. If successfully obtained, a UWO requires the individual named in the order to provide documentary evidence validating the acquisition of specific assets valued in excess of £50,000. If a UWO recipient can’t prove that the assets were legitimately acquired, the agencies can move to seize them. Individuals are eligible to be served with a UWO if they fall into any of the following categories:
Once an individual is served with a UWO, response is mandatory within the time frame set by the court. The recipient must provide a statement that does the following:
Two aspects of UWOs make them especially powerful. First, suspected individuals don’t have to be UK residents and their targeted assets need not be located in the UK. In other words, the enforcement agencies have wide latitude and long reach. Second, the legal burden of proof rests with the recipient, who must prove legitimate ownership of the assets—unlike the vast majority of charged crimes, in which the burden of proof lies with the authorities.
A Promising Start
Just one UWO has been served to date. The recipient was Zamira Hajiyeva, whose husband, Jahangir Hajiyev, was a former chairman of the state-owned International Bank of Azerbaijan. In 2016, Mr. Hajiyev was sentenced to 15 years in an Azerbaijani prison for offenses that included abuse of office and large-scale fraud against the bank. Ms. Hajiyeva was served with a UWO because UK authorities claim that her husband’s income as a state employee could not support her purchases of a $15 million home in London’s tony Knightsbridge neighborhood and a $14 million golf course and estate near Ascot. The High Court of Justice in London dismissed Ms. Hajiyeva’s challenge to the UWO in October 2018. There undoubtedly will be more UWOs to come. UK authorities have said that the pipeline of potential UWOs numbers approximately 90 to 100, and the Home Office Impact Assessment (conducted before UWOs came into force) anticipated around 20 applications per year.
Responding to a UWO: Best Practices
How best to respond to a UWO? The jury’s still out on this question given the tool’s brief existence. That said, K2 Intelligence professionals recommend a strategy that emphasizes―you guessed it―keeping your financial house in order. A mentioned previously, keeping comprehensive records is key. Maintaining a thorough historical record of asset transactions that includes financial statements and relevant legal documents is the starting point. From there, consider a more pre-emptive approach of keeping real-time notes that explain thought processes and any relevant circumstances that help to shed light on your actions—particularly where they might not appear straightforward. As for UWOs specifically, recipients should respond with full and frank information that shows sources of funds and proves rightful ownership of targeted assets. Responses can be short, but they should be heavily factual. Keep in mind at all times that the readers of the responses are lawyers and investigators who are looking for hard facts that will either prove or disprove their allegations. Full-throated assertions of innocence won’t help if unsupported by persuasive evidence.
The advent of the UWO is the latest reminder that in conducting your financial affairs, being prepared―and ready to substantiate your actions to others―is always a smart move. Consider it your own good housekeeping seal of approval.
Darren Matthews (firstname.lastname@example.org) is an executive managing director and regional head of EMEA at investigative, compliance and cyber defense services firm K2 Intelligence. Based in London, Darren is an expert in conducting and leading corporate investigations, and directs a team of investigators, forensic accountants, and asset tracing and recovery and compliance experts.
Steve Holt (email@example.com) is a managing director for K2 Intelligence, based in London. He leads financial and forensic investigations teams for clients facing instances of fraud, bribery and corruption, and misconduct.