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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

From fundamentals to digital evolution: Deutsche Bank and ACT release comprehensive guide for treasurers

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From fundamentals to digital evolution: Deutsche Bank and ACT release comprehensive guide for treasurers 1

The Association for Corporate Treasurers (ACT), in partnership with Deutsche

Bank, has today announced the release of “The Group Treasurer: An ACT guide to the first 100 days”, which provides valuable insights on the role of the treasury function – serving as an in-depth guide to those moving into senior treasury roles for the first time, as well as a valuable refresher on the latest developments for treasury professionals.

Treasury departments are often staffed by people who move across from other finance disciplines and, for them, navigating their first 100 days – with a host of new, often alien, concepts and the need to quickly get up to speed –can be a challenge.

The Guide serves as a complete compendium of the crucial, need-to-know information – starting with the basics, including the role of treasury, how departments are set up and what you need to know about treasury policy, before moving on to a series of deep dives into the critical features of life in treasury, including all you need to know about cash and liquidity management, the innovative technologies that are driving change, as well whether an in-house bank is right for you. Scattered throughout the Guide are useful insights from treasury professionals across a wide range of industries and geographies – providing best practice advice for gaining maximum benefit from your time in treasury.

“We have looked to create a guide that goes back to basics – and the ACT seemed the perfect partner for this” says Ole Matthiessen, Global Head of Cash Management, Deutsche Bank. “While the ACT can provide treasury professionals with training and qualifications necessary for a successful career, Deutsche Bank, in its role as a trusted advisor, can provide up-to-date insight on the options available for treasurers in the market.”

The Guide is also a reaction to the sweeping changes seen in treasury over the last few years. With new processes and technologies moving centre stage, the Guide seeks to provide treasury professionals with a concise “refresh” of the latest developments – especially for perennial challenges, such as the availability of liquidity.

Release 1 | 2  “I hope readers will find the Guide a useful tool” says Caroline Stockmann, Chief Executive, ACT. “And remember: the ACT is here to support you, whether you are a member or not, as our Mission is to embed the highest standards of professionalism and integrity in the treasury world, and act as its leading advocate.”

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Finance

Satisfaction with Credit Card Issuers in Canada Remains Flat Amid COVID-19, J.D. Power Finds

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Satisfaction with Credit Card Issuers in Canada Remains Flat Amid COVID-19, J.D. Power Finds 2

Tangerine Bank Ranks Highest in Overall Credit Card Customer Satisfaction for Second Consecutive Year

With 73% of credit card customers in Canada saying COVID-19 has negatively affected them financially and 24% who say they are unable to make monthly credit card payments, overall satisfaction with their primary credit card issuer remains relatively flat year over year at 764 (on a 1,000-point scale), according to the J.D. Power 2020 Canada Credit Card Satisfaction Study,SM released today.

“While credit card issuers in Canada are faring somewhat better than their U.S. counterparts in averting the negative effects of COVID-19 on customer satisfaction, they are not out of the woods,” says John Cabell, director of banking and payments intelligence at J.D. Power. “Credit card companies are falling behind in key areas related to the customer experience, especially in factors linked to financial sensitivity and customer support channels, which are crucial during the pandemic.”

According to the study, despite a one-point increase in overall satisfaction from 2019, credit card issuers have experienced a year-over-year decline in key performance indicators (KPIs) related to interactions with credit card customers, such as showing concern for customer needs; appreciating customer business; problem-free experiences; card activation; and reward redemption. As a result, satisfaction is down 12 points in assisted online experience and down 11 points for call centres.

More than half (55%) of cardholders acknowledge COVID-19 has changed their card usage habits, mainly by spending less. Understanding customers’ needs and addressing their changing priorities can help card issuers to mitigate future decline in satisfaction and elevate loyalty. The study shows that offering free or discounted services in response to COVID-19 are the actions driving a more positive impression of the issuer (39% and 35%, respectively), followed by gestures such as employee support (33%); waiving fees (32%); and community support (32%).

“The pandemic presents an opportunity for issuers to align their card services and benefits with customers’ evolving needs,” Cabell said. “Issuers can increase the perceived value of the card and strengthen loyalty. Offering discounted airline tickets or free airport lounge access is probably not as lucrative these days for cardholders as, for example, it would be to extend the duration of annual fees.”

Following are additional key findings of the 2020 study:

  • Satisfaction declines with household income: With 29% of cardholders earning less during the pandemic, many are looking for relief from their credit card company and are more critical of card issuers. In fact, credit card satisfaction among customers whose household income has declined due to the pandemic is lower than among those whose income remained unchanged. The largest gaps in satisfaction are in rewards (-12 points); benefits and services (-11); communication (-8); and customer interaction (-8).
  • Call centre woes: The pandemic has put a greater strain on call centres, which has negatively affected satisfaction. Caller wait times jumped to more than 12 minutes during the pandemic compared with less than 8 minutes prior to the pandemic. Also, caller satisfaction with the level of courtesy exhibited by call centre representatives declined significantly, which calls out the need for card issuers to restore best practices among their reps and identify better ways to manage customer support.
  • Cardholders are digitally savvy: Nearly two-thirds (64%) of cardholders solely rely on digital channels to manage their primary credit card activities, and those cardholders are more likely to say it is easy to understand information about their account and do business with their issuer than do cardholders who do not rely solely on digital channels. In fact, one of the bright spots in the study is improvements in customer satisfaction with mobile and online interaction of 8 points and 7 points, respectively, from 2019.

Study Rankings

Tangerine Bank ranks highest in overall customer satisfaction with a score of 825, which is 61 points higher than the industry average of 764. American Express (801) ranks second and Canadian Tire (793) ranks third.

The Canada Credit Card Satisfaction Study measures satisfaction of cardholders’ primary credit card issuer. The study measures performance in six factors critical to the customer experience (in alphabetical order): benefits and services; communication; credit card terms; customer interaction; key moments; and rewards. The study includes responses from 6,728 cardholders who used a major credit card in the past three months and was fielded in May-June 2020.

Satisfaction with Credit Card Issuers in Canada Remains Flat Amid COVID-19, J.D. Power Finds 3

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Finance

The impact of the Accounts Payable risk landscape

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The impact of the Accounts Payable risk landscape 4

By David Thorley, Director of Customer Development, FISCAL Technologies

The current economic climate has never been so uncertain. Not since the 2008 financial crash has there been a period where organisations are mindful about how the markets will play out and the effect this will have on economies around the globe. As a result, organisations have become increasingly conscious about the way they spend money, but they have also become more aware about how they save money.

The Accounts Payable (AP) department aims to reduce the amount of money lost in an organisation, making sure all payments are completed on time and are done so correctly, but this is unfortunately not always the case. For example, half of large organisations have duplicated or misdirected a payment to suppliers. This roughly accounts for £3 million being directed to the wrong supplier and resulting in a long and lengthy process in getting this money reclaimed.[1] On top of this, 33% of organisations experience internal fraud every year, with an average loss of half a million.[2]

Therefore, it is clear that in almost every financial department things slip under the radar, but what are some of the risks in the AP department and how can they impact a company?

Lost opportunities reducing income

The capacity for AP resources to work on higher value activities is reduced due to error and query resolution, this can range from anything from chasing up suppliers to looking for a misplaced document. As a result, those within the department are limited to what they can do due to these mundane, repetitive tasks.

Ultimately, lengthy pre or post audit activity reduces the ability of the business to transact, limiting growth and reducing competitiveness, all of which can be avoided if the correct tools are in place.

Financial penalties

In some geographies and industries, errors and adverse findings in statutory audits can lead to financial penalties. These penalties can be anywhere from a few thousand pound to tens of millions. Just last year a leading consultancy was fined almost £20m for poor auditing. Payment Policy infringements can reduce an organisation’s ability to bid for certain types of contracts; critical infrastructures for example, which can have a significant impact on the way an organisation operates.

Restricted cashflow

Payment errors and fraud directly affects the bottom line, which can result in a major impact in the financial reporting. Often financial reporting is skewed resulting in liquidity and profits being reduced. In public sector organisations, these lost funds reduce the capital available for frontline services, which can not only impact the quality of service provided but could also affect the reputation.

Increased processing costs

Invoice exceptions prevent supplier invoices being processed automatically. AP staff spend an inordinate amount of time checking, correcting and managing invoice exceptions, which significantly increases processing costs and time. Given the current climate, this time and money could be put to better use, helping a company grow and expand.

Audit administration

Organisations making overpayments – paying duplicate or incorrect invoices – and fraud are a common problem. Together, these account for between 0.5% and 1.5% of the number of invoices processed, with the cost running into millions in many cases.[3]

As a result, whenever an audit is conducted, the AP team spends time finding and providing information and documents. The more issues that are found, the more time audits take to identify and recover lost cash.

Wasted time

AP teams will frequently need to check supplier records during their normal transaction processing. Large, unmanaged MSF hold numerous duplicates and no-longer-required records that create more payment errors and hours spent investigating and resolving queries.

Reputational damage

Whether a private or non-profit organisation, fraud, errors, compliance breaches or poor financial results all heighten the risk of reputational damage for the organisation generally and the finance director in particular. The reputational damage caused by a high profile incident of fraud can be significant, affecting the business’ credibility and even the share price.

The shockwave from fraud can be more damaging than the financial loss. After a fraud is discovered, considerable time will be taken up investigating every new potential risk of fraud. Whatever the outcome of the investigation, this is an unwelcome distraction for the managers concerned. But, more importantly, the effect on morale and belief in the leadership’s capabilities throughout the organisation – not just the finance team – will be harmed.

Managing these risks

AP assures the protection of cash within an organisation, identifying risks and resolving them. To do this effectively and efficiently it’s imperative AP departments have the correct tools in place to ensure they follow a simple process that allows them to save time and money, helping their organisation both in the short and long term

[1] (The Hackett Group, Key Issues Study 2020)

[2] Source: https://www.qsoftware.com/fraud-prevention-and-detection/erp-fraud-prevention-key-measures/

[3] https://www.cfo.com/payments/2020/03/metric-of-the-month-detect-and-prevent-duplicate-or-erroneous-payments/

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