In our April 2018 Quarterly Update, we covered the recent introduction of Unexplained Wealth Orders (UWOs) in the UK and the relevant legal mechanics. We had anticipated that the UK Enforcement Authorities – the NCA, HMRC, FCA, SFO and DPP – would place a significant emphasis on UWOs. This has now proven to be the case: there has been repeated reference to UWOs by both politicians and the Enforcement Authorities in recent months, and the NCA is in the process of bringing test cases to trial.
In summary, UWOs are an important new power for the UK Enforcement Authorities, which enable them to require that individuals and companies in specified categories explain how they acquired and hold property (including real estate or other assets) in the UK. If they do not provide an explanation, the normal burden of proof is reversed and the assets in question will be presumed to be the proceeds of crime and subject to the POCA civil recovery regime.
Recent developments in relation to UWOs include:
- A judgment in the High Court on 3 October 2018 in relation to a challenge made to three UWOs obtained by the NCA (being the only UWOs obtained to date), in confidential proceedings brought against the NCA by Mrs A (Zamira Hajiyeva). Mrs A’s husband (Jahangir Hajiyeva) was a state banker from a former Soviet Union country outside the EEA (who was jailed overseas for a major fraud). Mrs A argued that the fraud conviction was unjust, that the wealth was not unexplained, and that her husband’s role did not relate to public functions (such that the family was not politically exposed), but could instead be explained by his legitimate overseas enterprises and commercial banking. The family’s assets in the UK include property worth £22m and £15m of shares. The High Court found in favour of the NCA and upheld the UWOs. As a result, Mrs A also lost her right to anonymity on 10 October 2018, subject to any appeal, which she has indicated that she will be making.
- Responding to the judgment, the NCA stated that it “will continue with this case and seek to quickly move others to the High Court. We are determined to use the powers available to us to their fullest extent where we have concerns that we cannot determine legitimate sources of wealth.”
- The NCA has indicated that it will seek to increase the total number of UWOs obtained to double figures within the next year, and target politically exposed persons. The director of the NCA’s economic crime unit has stated that Russia, former Soviet Union republics, Africa and Asia are a current focus for UWO activity. The Security and Economic Crime Minister, Ben Wallace, has suggested that preparations for a significant number of further UWOs are already underway.
- The SFO has recently published a speech by its general counsel titled “Unexplained wealth – whose business?” in relation to the forfeiture of criminal wealth in the UK, addressing a two-pronged attack which comprises separate investigations into crime and its proceeds.
We expect that UWO developments will continue over the coming months, as the courts make important decisions on their validity, and politicians continue to rely on the regime to demonstrate progress being made on a prominent political topic.