Unexplained Wealth Orders – the new tool in the UK’s anti-money laundering armoury

Unexplained Wealth Orders – the new tool in the UK’s anti-money laundering armoury

The case of Zamira Hajiyeva made headlines throughout early October this year when she was revealed as the subject of the UK’s first Unexplained Wealth Order (“UWO”).

This story came after a period of public focus on the prevalence of foreign criminal money laundering in the UK, particularly in the capital, which was highlighted thanks to the hit TV series McMafia.

The government believes that UWOs will ‘make it easier for law enforcement agencies (LEAs) to recover the proceeds of corruption and other serious crime held in the UK’.

What are Unexplained Wealth Orders?

UWOs are a new investigative power bestowed upon the High Court by the Criminal Finances Act 2017 (“the CFA 2017”). This new law represents the most significant expansion of the UK’s money laundering and tax evasion regime in recent years. UWOs aim to combat the vast quantities of dirty money flowing through London and are designed to assist UK law enforcement in targeting both serious organised criminals and corrupt public officials who facilitate their operations.

How do they work?                        

Where an individual holds property that appears to be disproportionate to their income, a UWO freezes that property and requires the person to provide a legitimate explanation as to how it was obtained. Information gathered under a UWO can then be used by the authorities to apply for a civil order to recover the proceeds of crime.

The orders, which can be issued by the High Court, require a person who is suspected of involvement in serious crime, or of being connected to such a person, to explain their interest in the specified property (valued at over £50,000) and to explain how they obtained that interest.

The Court must be satisfied that the interest in the property could not have been obtained using the individual’s known sources of lawful income.

UWOs can also be obtained against politically exposed persons (“PEPs”) or those associated with them, i.e. politicians or officials from outside of the European Economic Area.

The case of Zamira Hajiyeva

The order against Mrs Hajiyeva is a good example of a UWO being obtained against the associate of a PEP. Hajiyeva is the wife of Jahangir Hajiyev, the former chairman of the International Bank of Azerbaijan. In 2016 Hajiyev was sentenced to 15 years in prison for defrauding his state-owned bank out of as much as £2.2 billion.

Alongside spending a reported £16 million in Harrods over ten years, Mrs Hajiyeva had also purchased property in Knightsbridge to the value of £11.5 million using a company incorporated in the British Virgin Islands. The National Crime Agency (“NCA”) alleged that the funds embezzled by her husband were eventually used to acquire the Knightsbridge property.

A point to note regarding this case is that although Mrs Hajiyeva’s was originally subject to an anonymity order (known to the media as ‘Mrs A’), this order was later discharged. It remains to be seen whether anonymity orders will continue to be granted in future cases involving UWOs.

Mrs Hajiyeva’s case also highlights the effectiveness of UWOs in compelling, high-net worth individuals (particularly those who are either former or serving public officials) and anyone connected to them, to provide information on their income that the authorities might otherwise find difficult to obtain.

Consequences of UWOs

Once a UWO is imposed an individual is given a limited amount of time to respond (the court has discretion to specify the amount of time that the respondent has to comply with the requirements of the UWO and each requirement may have separate time limits).

Failure to respond to a UWO can be relied upon in civil recovery proceedings, which means that the person is compelled to cooperate if they wish to retain the property that is subject to the order. It is however of paramount importance that such a response is carefully considered as it can be used to inform further investigations, including whether any property can be made the subject of a civil recovery order, or whether criminal proceedings should be commenced.

Whilst the statement made in response to a UWO cannot be used against an individual in criminal proceedings (except for scenarios where the person has provided deliberately misleading information) this protection does not apply to any evidence produced by the individual.  As such, any documents or other material submitted to the court may be used in evidence in a prosecution if criminal charges are authorised down the line. Additionally, law enforcement may pursue enquiries on the basis of this statement, which could then be used to prosecute others.

Challenging a UWO

There are a number of ways that a person subject to a UWO may seek to challenge this. For example, in Mrs Hajiyeva’s case, she sought (unsuccessfully) to argue that the position held by her husband did not establish him as a PEP and that he was in fact just a “fat cat banker”.

Where allegations are made in relation to involvement in serious crime the individual may be able to challenge the UWO by demonstrating that the activity in question did not occur. Or, in the case of overseas conduct, that the allegations made were spurious or politically motivated.

Additionally, there may be scope to challenge a UWO on human rights grounds, if it can be shown to violate Article 1 of the First Protocol (right to protection of property) and/or Article 8 (the right to private and family life) of the ECHR.

As UWOs and the other supporting powers provided to law enforcement under the CFA 2017 are relatively new, it remains to see how effective and widespread they will become. It is probable that they will be more widely used against PEPs (and their associates) as no criminal activity need be proven. As can be seen from the Zamira Hajiyeva case, they can be an effective tool for UK authorities and the consequences for those targeted can be severe. Mrs Hajiyeva is now on police bail awaiting extradition to Azerbaijan.

Dan Martin is head of Criminal Defence, specialising in financial and business crime. If you have an enquiry related to this or any other area of criminal law, please contact us using crime@blasermills.co.uk or on 02038142020.