UWOs: More Symbolic than Pragmatic?
The media excitement around the introduction of Unexplained Wealth Orders has obscured their actual strategic value. Are they as useful as advertised?
Since they were introduced under the Criminal Finances Act 2017, Unexplained Wealth Orders (UWOs) have been championed as a magic bullet in the fight against fraud, enabling the seizure of assets from individuals where they derive from suspected criminality. Designed to underpin the Proceeds of Crime regime, law enforcement agencies can use them simultaneously with interim freezing orders, but without other civil or criminal proceedings. Bambos Tsiattalou, founding partner of Stokoe Partnership Solicitors, assesses the practical power of UWOs and their application.
Although the National Crime Agency (NCA) is the principal applicant for UWOs, other agencies – the Serious Fraud Office (SFO), HM Revenue and Customs (HMRC), the Crown Prosecution Service (CPS) and the Financial Conduct Authority (FCA) – can also make High Court applications. The valuation threshold is £50,000 – if there are reasonable grounds to suspect that the beneficial owner does not have sufficient resources to have obtained them legitimately.
When UWOs were announced, media interest resulted in outraged polemics about how they would help rid the UK of the corrupt billions invested in the London property market. Politicians also lauded them as a tool to stop dirty money from entering the country. Following the Salisbury poisonings, Boris Johnson suggested that UWOs could be used to target Russian oligarchs living in London.
Such stories magnified the public perception of vast illicit wealth invested in Britain’s most expensive properties. However, the reality is more complex. The GOV.UK website provides the following definition: ‘A UWO requires a person 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, and to explain how the property was obtained, where there are reasonable grounds to suspect that the respondent’s known lawfully obtained income would be insufficient to allow the respondent to obtain the property.’
UWOs can also be applied to politicians or officials from outside the European Economic Area (EEA), or those who are associated with them i.e. Politically Exposed Persons (PEPs). Notably, a UWO granted in relation to a non-EEA PEP does not require suspicion of serious criminality.
When UWOs were announced, media interest resulted in outraged polemics about how they would help rid the UK of the corrupt billions invested in the London property market.
Despite the media hype, UWOs strategic value is minimal: they are generally more symbolic than pragmatic. The multiplicity of regulations introduced since the financial crisis has created huge levels of compliance and scrutiny. For example, a raft of AML (anti-money laundering) and KYC (know your customer) checks have been incorporated into English law. The upshot is that using dirty money to buy UK-based assets has diminished significantly as the proceeds of organised crime have moved elsewhere.
In the months following their introduction, only two UWOs were issued. But when the details became public, they did not disappoint. Although they were granted by the High Court in February 2018, it took nine months before the Court of Appeal allowed publication of the details: both UWOs related to Mrs Zamira Hajiyeva, wife of Jahangir Hajiyev, former chair of the International Bank of Azerbaijan, who was jailed for 15 years in Baku for embezzlement and fraud.
The NCA alleged that the stolen funds were used to purchase Mrs Hajiyeva’s Knightsbridge home, which was bought for £11.5m in 2009 by a British Virgin Islands (BVI) company. Another UWO was applied to a £10.5m Berkshire golf course which she owned. But her story was widely reported largely because of extravagant spending. As the BBC headlined it: ‘Zamira Hajiyeva: How the wife of a jailed banker spent £16m in Harrods.’ Her purchases included: Boucheron jewellery: £3.5m; Cartier jewellery: £1.4m; and the Harrods perfume counters: £160,000.
Last December, three Appeal Court judges unanimously rejected Mrs Hajiyeva’s application to overturn the UWOs, forcing her to reveal the source of her wealth. For those who had been outraged by Mrs Hajiyeva’s profligate spending, and were supportive of the UWOs brought against her, this was vindication. Unless she can demonstrate how she became wealthy enough (by providing proof of income) to buy a Knightsbridge mansion and a Berkshire golf course, she will lose both properties.
Very few examples of other UWOs exist: Mansoor Mahmood Hussain in relation to properties in Leeds, Cheshire and London valued at £10.5m; and Donna Grew, whom the NCS accuses of having paramilitary links in Northern Ireland and significant cigarette smuggling. She has been ordered to explain how she acquired six properties with a combined value of £3.2m.
The tiny number of UWOs highlights their relative insignificance. As part of the investigative and prosecution framework their importance has been much overstated. Although the NCA has talked about a list of 140 potential targets, most have yet to be investigated.
As an essential prosecution tool, UWOs therefore have more style than substance. Seizing assets that they are designed to target still relies on civil recovery proceedings. Rather than addressing the endemic problem of unexplained wealth resulting from fraud and corruption, UWOs might even be characterised as a grandstanding opportunity for the agencies involved.