Unexplained Wealth Orders: civil attack against ‘Dirty Money’

Partner Bambos Tsiattalou discusses the use of Unexplained Wealth Orders since they were introduced to enforcement agencies in February 2018, and their use in relation to “politically exposed persons”.

Bambos’ article was published in CrimeLine, 4 September 2019 and CCR Magazine 1 December 2019, and can be found here and here (page 12) respectively.

“Unexplained Wealth Orders (UWOs) are orders issued by the court to compel someone who is reasonably suspected of involvement in, or of being connected to a person involved in, serious crime to explain the nature and extent of their interest in particular property. The individual is required to explain how the property was obtained where there are reasonable grounds to suspect that their known lawfully obtained income would be insufficient to allow them to obtain the property. If they fail to do so, they are liable to have these assets seized.

It is an offence if, in purported compliance with a requirement under a UWO, a person makes a statement that they know to be false or misleading in a material way, or if they recklessly make a statement that is false or misleading in a material way. The offence carries a maximum sentence of two years imprisonment.

A UWO can be issued against items worth more than £50,000. As well as becoming available where someone is suspected of being involved in serious crime, UWOs are also available if the property owner is considered a “politically exposed person” (PEP), where their political or commercial connections are in a country outside the European Economic Area. Implicated people from Britain or other European countries could still find their assets frozen under an UWO, but only via the serious crime route.

Introduced under the Criminal Finances Act 2017, UWOs essentially apply a reverse onus principle. They are a civil power requiring a person to provide information as to their lawful ownership of property and the means by which it was obtained. The power is an investigative one, meaning that a UWO on its own is not one that can be used to recover assets. There is in existence a wealth of powers available under the Proceeds of Crime Act (POCA) for that purpose and UWOs should not therefore be viewed in isolation. It is also important to note that evidence obtained under a UWO cannot normally be used against the person who provided it in any subsequent criminal prosecution.

UWOs have been available to limited law enforcement agencies since February 2018. The enforcement agencies currently able to obtain UWOs are the The National Crime Agency (NCA), Her Majesty’s Revenue and Customs (HMRC), The Financial Conduct Authority (FCA), The Serious Fraud Office (SFO), and The Crown Prosecution Service (CPS).

The implementation of UWOs is a key part of the Government’s campaign to tackle money laundering in the UK. The orders make it easier for enforcement agencies to seize assets suspected of representing criminal property.

Dubbed the ‘McMafia Law’, since implementation there have been a number of instances where the orders have already been put into effect, with the NCA indicating earlier this year that there are hundreds more cases being considered for UWOs.

The first UWO related to Zamira Hajiyeva, initially only known as “Mrs A”. Hajiveva is the wife of the former chairman of a state-owned bank in Azerbajan who was imprisoned on fraud charges. Hajiveva was named following a legal battle with the BBC and other media partners. After the High Court ordered that she disclose how she became so inexplicably wealthy, papers obtained during the NCA investigation into her day to day spending were disclosed. The lavish spending included:

• £16.3 million between 2006 and 2016 at Harrods
• A five-bedroom house in Walton Street, Knightsbridge for £11.5 million using a British Virgin Islands company in 2009
• £10.5 million on the purchase of the 170-acre Mill Ride golf and country club in Ascot
• £100,000 worth of Cartier jewelry
• $42 million on a Gulfstream G550 jet

As Hajiveva sought to challenge the order, the media continued to scrutinise her extravagant spending. The UWO in her case was not as a result of suspected involvement in serious crime but as a PEP. In court, her lawyers argued that she should not have to prove the source of her wealth because she was not a PEP, and that her husband was simply a banker, as opposed to a state employee. But Jonathan Hall QC for the NCA argued that as a state employee between 1993 and 2015, it is very unlikely that he would have generated sufficient income to fund the acquisition of the property.

A number of legal challenges meant that it took until October 2018 for Hajiveva’s appeal to be refused, by which time Azerbaijan had sought to extradite her to face trial. A trial that she maintains will be unfair. The implications of UWOs, therefore, clearly go well beyond their purpose to tackle money laundering and can include political consequences.

The high value London property market has for a long time been a target of money laundering. The second instance in which the NCA obtained a UWO was also in respect of a PEP believed to be involved in serious crime. In June 2019 the NCA used UWOs in its investigation into London property totalling £80 million. Andy Lewis, the agency’s head of asset denial, said: “the individuals behind these offshore companies now have to explain how the three properties were obtained.” He went on to say that it “will not shy away from complex and detailed investigations against high profile individuals and professional enablers.”

Graeme Biggar, the director general of the National Economic Crime Centre, said: “The purchase of prime property in London is a tactic used to launder money and we will use all the powers available to us to target those who try to do this.”

The UK property market has consistently been used by criminals to launder the proceeds of their crime. The sheer size of the market, especially in the capital, means that significant sums of money can be ‘cleaned’ in one single transaction, making it an attractive prospect for those seeking to hide their large sums of dirty cash.

Ben Wallace, Minister for National Security and Economic Crime, said: “Criminals who seek to use this country as a place to launder money should be in no doubt that they have nowhere to hide. Estate agents are a crucial line of defence against them and that’s why they’re under a legal – and moral – obligation to file a report when they spot something amiss.”

Seemingly therefore, the focus has previously been on non-European PEP’s with UK assets. Perhaps in a bid to avoid any suggestion that UWOs are being used in a PEP witch hunt, there has, this month, been a change of focus to targeting domestic organised crime.  On 18^th July the NCA announced that it had obtained a UWO in respect of eight properties bought by a businessman in the North of England. He has been ordered to reveal the source of his £10 million property business which has been seized by the NCA until he can comply with the order. The case marks the first UWO obtained solely on the basis of an individual’s alleged involvement in serious organised crime with officers believing that the property purchases were funded by a number of criminal associates involved in drug trafficking, armed robberies and supplying firearms.

Andy Lewis, Head of Asset Denial at the NCA, said: “We are pleased to have again successfully secured a UWO to allow us to investigate the source of the funds used to purchase these properties. These orders are a powerful tool in being able to investigate illicit finance generated within, or flowing into the UK and discourage it happening in the first place”. He went on to re-iterate that the NCA will not shy away from complex and detailed investigations, in this instance relating to those suspected of serious crime.

Graeme Biggar added: “We will use all the powers available to us to target those we believe are trying to launder money through the property market. A priority for the NECC is to ensure we explore every opportunity to deny assets linked to illicit finance. Our aim is to prevent misuse of the UK’s financial structures which undermines the integrity of the UK’s economy and institutions.”

It is clear that the various prosecuting authorities to whom the civil powers were bestowed are prepared to obtain them where necessary and are keen to enforce that they will not shy away from any such investigation. What is also clear, however, is that UWOs carry with them potentially lengthy and costly legal challenges, as well as political implications. Since their implementation in February 2018, we have only seen the obtaining of three such orders and only this month was one obtained solely on the basis of links to organised crime. The NCA has promised that hundreds more such cases will follow. The agency asserts that:

“Money laundering underpins and enables most forms of organised crime, allowing crime groups to further their operations and conceal their assets. Although there are no exact figures there is a realistic possibility that the scale of money laundering impacting the UK annually is in the hundreds of billions of pounds.”

The NCA goes on to state that virtually all high-end money laundering schemes, and several cash-based ones, are facilitated by the abuse of legitimate processes and services. Accounting and legal professionals, and estate agents, can be criminally exploited – this is sometimes complicit, sometimes negligent, and sometimes unwitting – and this minority of people can pose a very significant threat.

If the promise of hundreds more cases to follow is true, there is no doubt that all concerned should be well aware of the arguably draconian implications of being made the subject of a civil order that reverses the onus of proof onto the ‘suspect.’ The process is clearly lengthy, costly and complicated but it is one that the NCA, at least, are prepared to use.”