The UK’s Serious Fraud Office (SFO) has recently secured its first-ever Unexplained Wealth Order (UWO) against the former wife of a solicitor jailed for defrauding investors in the Axiom Legal Financing Fund.

The SFO has quite rightly trumpeted this decision as a significant moment in the fight against UK financial crime. The UWO demands that the spouse of the alleged wrongdoer should explain how she acquired a £1.5m ($1.85m) property in the Lake District, an asset suspected of having been purchased with illicit funds. The ruling is not only a milestone for the SFO, but for UK law enforcement in general.

Illicit money

UWOs were introduced in the UK an attempt to combat the growing problem of illicit money flowing into the country. The concept behind UWOs is simple: if an individual is suspected of holding assets worth more than £50k ($62k), and the source of the wealth is unexplained or suspicious, a UWO can be granted. The individual is then required to explain how they acquired the wealth or face the possibility of having the asset(s) seized.

In an ideal world, crooks would be investigated, prosecuted and ultimately jailed for serious criminality. However, law enforcement bodies only have finite resources and the UWO system enables the burden of proof to be shifted onto the suspect. This allows authorities to investigate without immediately having to prove the criminal origin of the assets in question.

There will be some who consider this power to be draconian, not dissimilar to the cash seizure powers in the Proceeds of Crime Act 2002 (POCA). In reality, anyone who has a significant amount of money or assets should be able to show the derivation of the funds without too much problem. The issues arise when they cannot point to a legitimate source, leaving them vulnerable to the UWO.

While the recent announcement of the SFO’s new UWO is welcome, it is also important to recognise that UWOs have been part of UK law landscape for several years. The powers were introduced under the Criminal Finances Act 2017, and the recent order obtained by the SFO marks only the second time UWOs have been successfully utilized.

Law enforcement needs to start sending out the message that the UK should no longer be considered a money laundering paradise.

There are several reasons for the underuse of these orders, most notably law enforcement’s fear of legal backlash (being sued), and the inherent cost of protracted legal battles. All this said, I believe that law enforcement needs to pursue more UWOs to ensure that they are effective. Or both these tools and law enforcement agencies themselves will be seen as toothless.

The first-ever UWO was granted in 2018, obtained by the National Crime Agency. This was a high-profile case, involving the wife of an Azerbaijani banker suspected of laundering money through luxury properties in London. She was required to justify how she acquired £22m of assets, leading to her relinquishing several millions of pounds worth of such assets as a result of the order.

Target London

Although UWOs are a relatively new tool, their concept is not unique to the UK. Other countries, including Australia, Canada, and Singapore, have adopted similar measures to address the growing problem of illicit wealth and money laundering.

I accept, however, that their application can raise complex legal issues. It was no different when my former Merseyside Police colleagues and I previously created a dedicated POCA cash seizure team.

Neither our team, the force’s lawyers, nor the courts had any real idea as to how the processes would work. Indeed, some of our earlier attempts led to much legal wrangling, and even a stated case from the Court of Appeal. The point is that the UWO powers are available, and law enforcement must use them or potentially lose them.

Two UWOs in almost eight years is nothing to shout home about. We all know that London in particular is awash with criminal money, with millions, if not billions, in criminal assets held there. It is a target-rich environment, and law enforcement needs to start sending out the message that the UK should no longer be considered a money laundering paradise.

Tony McClements is head of Investigations at MKS Law, an international asset recovery litigation practice based in the British Virgin Islands.