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Unexplained wealth orders, what you can do if one lands on you

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Unexplained wealth orders, what you can do if one lands on you

By Azizur Rahman, Senior Partner, Rahman Ravelli www.rahmanravelli.co.uk 

With the first Unexplained Wealth Orders (UWO’s) having been issued by the National Crime Agency, Aziz Rahman explains what to do if you are the subject of a UWO.

The National Crime Agency announced on 28th February that it had secured UWO’s on two properties valued at £22M, whose ultimate owner was a “politically exposed person”. The FT reported that the PEP was a politician from central Asia. The properties are also subject to interim freezing orders, to prevent them being sold or transferred. Their owner is believed to be from a country belonging to the Commonwealth of Independent States (CIS); which consists of ten former Soviet republics as well as Georgia and Azerbaijan.

Azizur Rahman

Azizur Rahman

In announcing the UK’s first two UWO’s, the NCA’s Director for Economic Crime, Donald Toon, said: “Unexplained wealth orders have the potential to significantly reduce the appeal of the UK as a destination for illicit income. They enable the UK to more effectively target the problem of money laundering through prime real estate in London and elsewhere.’’

The fact that the NCA has only taken a month to issue its first UWO’s indicates that it has been doing its research well in advance of being able to use the new tool at its disposal. This is to be compared with the SFO whose Director, David Green, recently warned not to expect a flood of UWO’s and emphasised that the SFO would take its time to pick the right case, as corruption cases have high costs and make slow progress.

The NCA’s recent result shows they do not share the SFO’s apparent lack of enthusiasm. Land Registry records suggest that 40,000 properties in the capital are now owned by secretive offshore companies. Transparency International says it has identified UK property worth a total of £4.4 billion that should be subject to UWOs.

But what exactly are UWO’s? And what purpose do they serve?

UWO’s were introduced by the Criminal Finances Act 2017. Section 1 had the effect of heavily amending the Proceeds of Crime Act 2002 (POCA) to introduce these new orders. The relevant provisions came into force only on 31st January this year. A UWO can be obtained by the NCA, the Serious Fraud Office, the Crown Prosecution Service, HM Revenue and Customs or the Financial Conduct Authority.

Applications are made without notice to the High Court. The Order requires the target to provide information about how a particular asset, say a big house in Mayfair, was acquired. Such orders will usually be accompanied with a Freezing Order so that the property concerned cannot be sold or transferred. If the person on the wrong end of the UWO does not provide an explanation, or provides unsatisfactory evidence, that will then raise a presumption that the asset constitutes “recoverable property” for the purposes of a civil recovery order under POCA.

UWO’s may be deployed against individuals, companies or trustees-see s362H. The applicant has to show; (i) a reasonable belief that the target holds the property; (ii) that the person is a non-EEA “Politically Exposed Person” (PEP) or that there are reasonable grounds to suspect that the target, or a person “connected with” the target is, or has been, involved in serious crime in this country or elsewhere.

A PEP, is defined at s362B(7) as:

  • an individual who is, or has been, entrusted with prominent public functions by an international organisation or by a State other than the United Kingdom or another EEA State,a family member of a person within paragraph (a),known to be a close associate of a person within that paragraph, orotherwise connected with a person within that paragraph

The other category of target is a person suspected of serious crime (anywhere in the world) or connected to such a person. This casts the net very wide. The test for involvement in ‘serious crime’ is whether the suspected criminality is listed in Schedule 1 of the Serious Crime Act 2007. The offences listed there are various and include drug trafficking, people trafficking, firearms offences, bribery, money laundering and other offences.

Civil Recovery

If an individual fails to comply with a UWO without reasonable excuse, the identified property can be considered for civil recovery under POCA. No criminal proceedings can rely on the information obtained from UWO’s – that is because the information would have been obtained by compulsion and infringes the right to silence applicable in criminal proceedings and protected by Article 6 of the European Convention on Human Rights. That is why the civil route is used. We predict, now that UWO’s are starting to be granted, a significant increase in civil recovery proceedings.

Civil recovery is highly specialised High Court litigation. It is basically a criminal trial in a civil court so that the civil standard of proof applies – no one goes to prison but property can be ‘recovered’ by way of a Civil Recovery Order if a civil recovery trial is lost by the respondent.

Defence

But the various agencies do not always get it right. There is a risk at the UWO stage. That is because the agency will be making applications on a without notice basis – the target is not there and has no opportunity to make representations against the making of the Order.

Such investigative orders are not unique but, unusually, the UWO provisions do not include a direct right for a respondent to vary or discharge the Order – if it is made in England or Wales. This is odd as most provisions that provide for state agencies to be able to secure orders against individuals, without them being notified, allow for the target to be able to challenge the Order after it is made. The lack of any direct provision for such a challenge arguably leaves the whole scheme open to attack. It is our view that there is scope in the common law to argue for UWO’s to be challenged in the same way that search warrants, production orders and the like can be challenged. There are, however, specific provisions dealing with the challenge to a freezing order – and such an order will inevitably be made along with a UWO.

So what challenges might there be? A respondent served with an UWO has options. First, a detailed consideration of whether all the statutory tests have been properly met on the evidence before the court. Has the NCA, SFO or other agency involved been completely candid with the judge? The agency is under a duty of full and frank disclosure at without notice hearings: they would have to put forward any defence point the agency is aware of, that might be put forward by the defence if it had been present. This is critical and is often a point that law enforcement agencies slip up on. In our experience, the police do find it difficult to ‘put on their defence hat’ as the case law obliges them to for ex parte hearings. That is when search warrants, productions orders etc get discharged. It is likely that the same challenges can be made in respect of UWO’s.

UWO’s are controversial as they mean the authorities do not have to prove the person’s assets are the proceeds of crime. A UWO assumes criminal activity and makes it the responsibility of the subject to prove that is not the case. And, as UWO’s are a civil law device rather than a criminal law one, when it comes to applying to the court for one, the authorities only have to show that a crime was committed on the balance of probabilities – the civil law standard of proof -rather than beyond reasonable doubt, which is the criminal standard.

Rahman Ravelliis the most experienced firm of solicitors in the country when it comes to dealing with POCA civil recovery cases. We were the first firm to challenge a civil recovery order all the way to the Supreme Court. In our view, despite what David Green says, we will be seeing a lot of UWO’s in the future.

For those on the wrong end of an UWO, it is vital that he or she acts quickly. They must also be able to consider what is required some months down the line as well as being capable, if possible, to mount a challenge to the immediate UWO and the freezing order that comes with it. Civil recovery proceedings will be just round the corner, otherwise.

Finance

Black Friday payment data reveals rapid growth of ‘pay later’ methods like Klarna

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Black Friday payment data reveals rapid growth of ‘pay later’ methods like Klarna 1

Payment processor Mollie reveals the most popular payment methods for Black Friday

Mollie, one of the fastest-growing payment service providers, has revealed insights into the most popular payment methods used this Black Friday. The data, which provides a year-on-year comparison of 2019, shows that payment methods allowing customers to pay flexibly – like ‘pay later’ service Klarna – has more than doubled in 2020. The study spans 101,000 merchants across Europe, primarily from Germany, U.K., France, the Netherlands and Belgium.

Black Friday trends: 

  • In 2019, Mollie saw a 36% increase in the overall number of transactions on Black Friday versus the previous year. In 2020, this shot up to a growth of 56% on the 2019 numbers, representing a difference of 20%.
  • And this year, even in the four days leading up to Black Friday, there was a 58% YoY growth in transactions.
  • Use of ‘buy now, pay later’ services on Black Friday (such as Klarna or ClearPay) has more than doubled from 1% of all payments in 2019 to almost 2.5% in 2020.
  • Use of mobile payment methods on Black Friday is consistent on the previous year – 0.20% in 2019 to 0.25% in 2020.

“There is a lot of pressure on consumers’ wallets at the moment, which is making people look to payment methods that offer them financial security,” said Ken Serdons, Chief Commercial Officer at Mollie. “It makes sense that fintechs like Klarna, who have performed phenomenally well this year, have been so popular this Black Friday. The increase is in-line with this growing trend towards more flexibility in how consumers pay for goods.”

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Finance

Beyond Transactions: The Payment Revolution

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Beyond Transactions: The Payment Revolution 2

By Marwan Forzley, CEO of Veem 

The uninterrupted disruption brought on by the pandemic accelerated the need for robust, digital-first tools created to support remote teams and accelerate online commerce.

As offices across the US moved to work from home for indefinite periods, specialized back office departments handling sensitive information have had to go a layer deeper to find tailored solutions that support the transition of their in-person workflow. For finance teams, payment approvals, issuance, and general management became a challenge overnight. Particularly for those who — even in 2020 — continued to send and receive paper checks through the mail.

For years and even to this day, millions of small business owners around the world have relied on slow and confusing bank processes to manage their business finances. Every day, they spend valuable time using old, complex and expensive platforms to transact with domestic and international vendors — never knowing where their payment is or even when it arrives at its destination.

With ongoing economic and logistical uncertainty looming as we move into 2021, this old norm should not be expected for much longer. This year has seen small business owners wear more hats than ever before, and has influenced a mass adoption of online financial applications that offer heightened security, save more time, and provide more value as budgets tightened.

A study conducted by Mastercard earlier this year saw online business-to-business payments skyrocket in popularity with more than half (57%) of small business owners across North America turning to digital services since the start of the pandemic to improve cash flow and modernize their payment processes.

If this study is of any indication, the days of making an appointment with a banker or sending a wire transfer through an outdated web portal have passed. And the time for the payment revolution is here.

Putting the user in the driver’s seat

Major world events have always acted as a catalyst for innovation and change. As of a result of the growing pains we experienced this year, in 2021 businesses can finally say goodbye to huge transaction fees and bank-imposed gatekeeping when it comes to managing their financial processes.

The financial technology firms, in partnership card and local bank networks and sometimes even each other, have been building and iterating on products over the past decade that were created to work flawlessly from a desktop or smartphone.

For the first time, small businesses have access to needed, user-friendly financial tools packaged to make their lives easier. No longer reserved for major enterprises, those previously underserved by traditional banks can sign up for applications that consolidate billing, payments, working capital and more to one central dashboard.

With the owner in the driver’s seat, they can better communicate with vendors and customers and reallocate their time previously spent manually sending, receiving and reconciling payments toward growing their business — without ever stepping foot out of their home.

Marwan Forzley

Marwan Forzley

Genuinely seamless and automatic integrations with complimentary functions aligned to core financial activities mark a fundamental change in how businesses will choose to operate moving forward. Not only should experiences be integrated, but the entire lifecycle of the transaction should be digital.

Consider a freelance contractor that uses a time tracking and invoicing software to invoice a client. Through an integration between the time tracking tool and Veem (a complete online business payment tool) the client receives and captures the invoice within their Veem payment dashboard. Because Veem and Quickbooks are integrated partners, as soon as the invoice is received, a bill is automatically created, marked as paid, and reconciled on the client’s accounting software as soon as the funds are issued.

In this flow, the contractor only needs to send an invoice, and the client only has to approve the payment for everything else to move. Thoughtful integrations like these empower businesses to log-in to one application, but benefit from several, ultimately eliminating inefficiencies.

Relentless transparency

Understanding that old habits die hard, it’s expected that businesses of any size have questions when it comes to moving payments from a bank to an online provider.

Answering these questions with unprecedented product value and relentless transparency is the best way forward to bring more businesses onboard in 2021.

This means providing up front pricing, tracking, choice and flexibility to users. Before, during and after the pandemic, cash flow management remains the most critical part of running a small business. Digital payment providers enable the entrepreneur to have unparalleled insight, visibility, and control over their cash flow.

Through non-bank payment options, businesses can secure their information over a secure data network, watch their money move from origin to destination, and choose the speed at which they would like funds to move. By these tools working in harmony, the user can remove friction and spend more time focused on their business.

Separating the signal from the noise

2020 is a year that changed everything for the global small business community. In a report by Veem issued at the start of the pandemic, an overwhelming 80% of businesses shared that they anticipated COVID-19 to impact their business over the next 12-16 months. Problems surfaced that many didn’t even realize they had. And in finding those problems, businesses turned to technology to support them.

As enabling technology, it’s our job to listen and bring clarity and solutions to those contributing to and growing our local and global economies despite the hurdles and challenges they’ve faced.

Right now, small businesses deserve more. More access, more choice and more credit. In the road ahead we expect online payments and bundled user friendly financial services to play a pivotal role in the recovery of small businesses. The payment revolution will see the continuation of important and meaningful products that value the users time and enable businesses to launch, grow, and scale regardless of what’s to come in 2021.

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Finance

The UK’s hidden payments crisis: why businesses should rethink their payments strategy

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The UK’s hidden payments crisis: why businesses should rethink their payments strategy 3

By Edwin Abl, Chief Marketing Officer at Modulr.

As the economic conditions imposed by the Coronavirus endure, businesses are facing a dilemma about how to reduce operational costs while meeting customer needs in as economical a way as possible. And all without compromising on their quality of service.

A recent survey of 200 payments decision makers across the UK, revealed there are hidden costs of payment processing which will have an exponentially greater impact on wider businesses if left untreated. It found, UK businesses are spending an average of £1.5m a year in costs attached to payments – money they simply cannot afford to lose to inefficient processes in these uncertain times.

Businesses need to plug any holes in their boat to avoid sinking. And for many this includes the examination and recalibration of their payments strategy.

The research reveals that the payments process now represents a huge 12% of a business’s total operational expenditure. With two-thirds (64%) of all businesses expecting the cost of payment processing to increase over the next two years.

Two thirds (67%) of payments decision makers surveyed believe the way they process, and service payments has had a direct impact on their customer experience. In fact, 62% of respondents believe the hidden costs of poor payments outweigh the hard costs. This indicates that a poor payments strategy is no longer something business leaders can ignore, as it now has a far greater and unseen impact on wider business mechanics.

The top three hidden costs attached to inefficient payment processes were ‘impact on customer experience/satisfaction’ (38%), ‘influence on relationships with other teams and departments (35%) and ‘impact on competitor differentiation’ (31%).

These findings suggest there is widespread consensus that getting payment operations right, directly creates performance boosts elsewhere in the business. When asked to estimate, as a percentage, the business performance boost received if hidden payment inefficiencies were resolved, the average margin for improvement was +14%, with traditional banking the sector most likely (31%) to predict a performance gain greater than +15%.

The 5 key steps UK businesses can take to drive payment efficiencies

There are five key areas payments decision makers and tech leaders should be looking to change, so that they can drive end-to-end payment process efficiencies:

1 – Locate hidden payment process inefficiencies

Visibility is a key issue. Respondents across large (46%) and small businesses (47%) say they have very clear metrics directly related to payment process costs. Only 8% say that they don’t understand the costs involved. Yet, businesses know they could do better with improved visibility of costs. Both large and smaller companies cite ‘lack of visibility for operational costs’ as the top challenge when it comes to achieving strategic goals around payment process and money services provision.

Digital banking companies, including lenders and FinTechs, identified ‘lack of visibility for operational cost’ as a challenge when it comes to increasing payment services revenue (37%). This is in comparison with all respondents mentioning other issues such as lack of skills (25%) and constrained resources (25%) as secondary and tertiary challenges respectively.

For many businesses, developing a cost model for current and projected payment process costs, both hard and hidden, is a top priority.

2 – Make payments key to stakeholder experience management

Customer, departmental and even supply chain partner experiences are increasingly intertwined. There is no doubt that customer experience is a top priority for payment services strategy. But enhancing the broader stakeholder experience is a close second, and certainly complements the former.

Employee experience affects customer experience. So, payment services innovation must extend beyond customer touchpoints. Happy employees who feel they are working with effective and efficient payments systems will be best placed to enhance the customer experience. And, employees in commercial roles who have bought into the benefits of efficient payments will naturally want to extoll those benefits to customers.

Edwin Abl

Edwin Abl

Companies with a sophisticated and integrated supply chain are likely to be the frontrunners in implementing the integrated payment services that benefit all stakeholders, due to their historic experience. As customer experience management evolves into a broader discipline of stakeholder experience management, including employees and supply chain partners, it will become more crucial than ever to include payment services experience

3 – Integrate and automate to support payment innovation

Payment innovation is driving a culture change, connecting previously siloed functions such as IT and finance. There is increasing integration of systems from customer relationship management (CRM) and enterprise resource planning (ERP), into accounts and payments. The research tells us that payment processes are impacting nearly every department, affecting areas including customer experience, brand, leadership, business agility and ultimately, revenue. Integration enables new business models for paying suppliers and customers.

Automation is key to driving efficiency, replacing manual error-prone and time-consuming processes with real-time and responsive, digital ones. This is particularly the case when it comes to operational and payment processes.

Indeed, 52% of large companies say that team hours spent on payment processes was their biggest hard cost attached to payments, compared with 26% of smaller companies who share that view. This suggests that automation could contribute more to cutting the cost of payment processes in large companies.

A host of payments-as-a-service providers (including Modulr) are supporting customers to do just this by enabling them to stream a whole unified product ecosystem of payments functionality directly into their own software.

4 – Bring business leaders together

Payments innovation is driving systems integration and creating a more collaborative stakeholder ecosystem. As all the C-level roles become increasingly focused on the customer experience, the finance remit now includes overall business operations and its associated risks and opportunities. The role is evolving beyond just accounting, tax liability and funding. Therefore, closer collaboration between senior leaders is key to driving efficiencies and enhancing customer experience.

5 – Innovate by adding finance and payments to vertical services

Companies with a vertical focus are well placed to innovate by offering new payment services. In many vertical sectors, especially employment services, software vendors are increasingly embedding financial services facilities, such as payments, into their technology platforms. Employment services SaaS providers, across payroll, accounting, bookkeeping and more are offering financial services to existing and new customers within their specific ecosystem.

This means they can develop hyper relevant, convenient and delightful financial products and services for their end users through highly flexible, ‘plumbed in’ payments. This creates an ecosystem of stickier products while boosting the lifetime value of each end user.

Moving forward – engaging technology to drive efficiencies

If the onset of the Coronavirus crisis has taught us anything, it is that there are many advantages to investing in technology and having a digital infrastructure as responsive as your customer-facing experience.

However, whilst digital technologies enable companies to provide customer service in new ways during lockdown. These same businesses are failing to transform their digital strategies, with the biggest priority still being cost reduction (41%).

By not shedding legacy technology and shoring up operational efficiency, UK businesses are following an increasingly risky strategy. And one which will have an exponentially greater impact on the wider business if left untreated. Particularly when this widespread failure to act concerns the customer experiences that sit at the very heart of a proposition – the payments.

To find out how you can drive payment efficiencies into 2021 and beyond, download the full report here for all the insight you need.

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