On 17 January, the Serious Fraud Office (SFO) secured its first Unexplained Wealth Order (UWO) as it seeks to recover a property in the Lake District, valued at about £1.5m, belonging to the ex-wife of convicted fraudster and former solicitor Timothy Schools. This marks the first time that UWOs have been deployed by an agency other than the National Crime Agency (NCA) and could also point to a significant expansion in the toolkit available to the authorities to recover proceeds of crime.
Given the nickname ‘McMafia orders’, derived from the hit TV series, UWOs were introduced in January 2018 to much fanfare with the aim of bolstering the UK’s armoury in its fight against economic crime. UWOs are investigatory orders placed on a respondent whose assets appear disproportionate to their income, and effectively shift the burden of proof onto the respondent to demonstrate that their assets were obtained by lawful means. Failure to do so could result in their property being seized and forfeited. When they were introduced, UWOs were expected to be particularly useful where there is little information about an individual’s source of wealth and where there are suspicions that they may be engaged in criminal activity, either in the UK or overseas.
Even though they are available to most enforcement agencies in the UK, the fact that the NCA had, until last month, been the only authority to deploy UWOs is a telling reflection of the mixed outcomes that the NCA has had to date, and the ensuing reluctance of other agencies to follow in their footsteps.
Most notably, the NCA had a disastrous result when it sought three UWOs in respect of properties allegedly linked to Rakhat Aliyev, a deceased Kazakh oligarch whom the NCA suspected had been involved in serious crime. While the NCA’s application was initially successful, the respondents to the UWO provided extensive evidence to show that the purchases of the properties were not connected to Mr Aliyev but were in fact purchases by his ex-wife who was independently wealthy.
Despite this, the NCA refused to withdraw the UWO. The respondents successfully applied to the High Court to have the UWOs discharged. On hearing the evidence, the High Court was critical of the NCA’s approach, finding that some of its underlying assumptions were unreliable and that its investigation was flawed by inadequate investigation into some obvious lines of enquiry. The High Court also found that the NCA failed to properly evaluate the information provided by the respondents after the UWOs had been imposed. Not only did the High Court discharge the UWOs, but the NCA was hit with a substantial costs order of circa £1.5m. Little wonder that no further UWOs were sought in the year that followed.
The tide could be changing, however, with the arrival of the Economic Crime (Transparency and Enforcement) Act 2022, which introduced protective measures against the financial risks associated with costs orders. Costs orders can now only be made against enforcement authorities where they have acted unreasonably, dishonestly or improperly, a significant reduction in the risks borne by these agencies.
It is against this backdrop that the SFO has issued a UWO to go after property following the conviction of Schools, who was sentenced to 14 years in 2022 for fraud that resulted in investors losing an estimated £100m.
Ordinarily, prosecutors would rely on powers afforded to them under the Proceeds of Crime Act 2002 to confiscate assets post-conviction, but issues often arise in respect of hidden assets and monies which appear to be dispersed. In this case, the SFO appears to be attempting to overcome those frustrations by firmly placing the burden on Schools’ ex-wife to prove that the property was purchased through lawful means.
There is no doubt that this case will be closely monitored by other enforcement agencies who are faced with similar challenges. If successful, the case could provide the catalyst for further use of UWOs by UK enforcement agencies, opening up a new frontier in their fight against financial crime.
Kyle Phillips is a partner at Howard Kennedy LLP, London
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