New powers will be made available at the end of this month to the authorities in their efforts to combat money laundering through the ability to apply for unexplained wealth orders (“UWOs”). The new provisions, which work by supplementing relevant provisions in the Proceeds of Crime Act 2002 s.362, were clearly inspired by the Panamanian Papers incident which revealed just how successful those with questionable funds could be in hiding their wealth away. These High Court orders place an obligation on two sets of people – politically exposed persons (“PEPs”) and those involved in serious crime – to respond to an order for disclosure of the nature and extent of their finances and interest in property and an explanation of how it was acquired. Failure to respond to such an order can result in it being deemed to be recoverable, which may mean that it is confiscated in pursuance of part 5 of POCA in any event, and there are also offences in relation to knowingly or recklessly providing false or misleading information. The original minimum level of £100,000 for such an order to be made was reduced in the bill’s passage through Parliament to £50,000.
There are also ancillary provisions for an interim freezing order to be made in conjunction with an UWO where the court considers it to be necessary to avoid the risk that any recovery order might subsequently be frustrated. The effect of the order will be to prohibit the respondent from dealing with the property in question in any way while the order is in place, but there is a right to compensation in certain circumstances where losses can be linked to a serious default on the part of the enforcement agency concerned.
A number of concerns have been expressed about UWOs, mostly on civil liberties grounds in that liability might arise without any proof of criminal conduct, and also as to the uses that such information might be put to. In this regard, the new s.362F provides that the replies provided by the respondent may not be used against them in criminal proceedings, and it should also be noted that legal professional privilege is again a defence to not responding. Although it might be unlikely that most firms will encounter these processes it is important that Money Laundering Reporting Officers, in particular, are aware of them and can advise their clients on the issue if it does arise in the course of their work for them.
The other notable change in the Criminal Finances Act is the new offence of facilitating tax evasion, also in force from the end of September. Liability will only arise for relevant organisations, whether incorporated or not, and so do not extend to individual advisers. Rather as in the Bribery Act 2010 there is a defence of having adopted reasonable prevention procedures whereby liability will not arise if the organisation can “demonstrate that it has put in place a system of reasonable prevention procedures that identifies and mitigates its tax evasion facilitation risks”. HMRC guidance on the sorts of measures that need to be in place was made available some time ago. In all probability a simple policy statement linked to Principle 1 in the SRA Handbook requiring all concerned to uphold the rule of law and the proper administration of justice should suffice, coupled to more detailed procedures to cover circumstances where evasion might be a risk.