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Britain may try to enforce unexplained wealth orders in Guernsey courts

Thursday, 12 April, 2018

International law firm Mourant Ozannes has warned Guernsey investors that the UK's new powers to serve unexplained wealth orders (UWOs) on non-EU politically exposed persons have international implications.

The powers were introduced earlier this year under the UK's Criminal Finances Act 2017, and require a suspected person to explain the origins of assets that are inconsistent with their income level. Two such orders have already been issued, against an unidentified politically exposed person, and it is reported that hundreds more are in preparation. The power to obtain a UWO is not limited to property acquired on or after that date; past acquisitions fall within the remit of UWOs.

Though the powers are not directly enforceable in Guernsey, an enforcement agency may seek foreign assistance to enforce UWOs extraterritorially, so they may be registered and recognised in local courts, says Sally French of Mourant Ozannes. She notes that the respondent need not be a UK resident, nor even a natural person, so investment vehicles such as trusts, companies and LLPs  can be subject to UWOs. Because there is no requirement that the property in question be located in the UK, it may concern foreign-sited assets. Where a serious crime is concerned, it need not have been committed in the UK.

'Care must therefore be taken when handling UWOs to ensure Guernsey recipients understand their obligations of disclosure but also those of client confidentiality,’ says French. 'Additionally, enforceable or not, awareness of a UWO may trigger [statutory] disclosure obligations. The default position is therefore to handle UWOs with care and seek advice if in doubt as to their meaning and effect.'

Vanessa Reid, of Bright Line Law, notes that the UK has steadily expanded its extraterritorial jurisdiction over financial crime since the Bribery Act 2010, which significantly expanded the extra-territorial jurisdiction of UK courts, particularly with respect to business organisations. It gave UK courts jurisdiction over conduct that occurred entirely overseas, provided that the individual who committed the act or omission has a 'close connection' to the UK.

The failure-to-prevent offence for commercial organisations establishes still broader extraterritorial jurisdiction, going beyond what had been granted by previous legislation or the general criminal law.

The Crime and Courts Act 2013 extended it still further with the aim of easing the enforcement of international civil recovery orders, says Reid. That Act authorised the making of a civil recovery or freezing order in respect of property 'wherever situated' and a person 'wherever domiciled, resident or present', as long as there was some connection between the case and the UK. It would prove a precursor to the equally broad powers soon to be granted with respect to UWOs, she said. Moreover, in R v Rogers (2014), the Court of Appeal established UK jurisdiction over extraterritorial money laundering.

'The introduction of UWOs represents the latest advance in the steady expansion of the extraterritorial powers of UK criminal courts and law enforcement agencies over financial crime, money laundering, and corporate crime', said Reid. However, she added, practical difficulties in gathering information from other jurisdictions will probably be the biggest impediment to UWOs' widespread use overseas.

'While it remains to be seen to what extent this new power will actually be put to use overseas, this new addition to the Proceeds of Crime Act indicates Parliament's apparent willingness to continue expanding international jurisdiction over financial crime, money laundering and corporate crime whilst largely maintaining traditional territorial limitations in other areas of criminal law.'

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