The British Government has begun using a powerful weapon it recently added to its anti-money laundering arsenal, the Unexplained Wealth Order (“UWO”). UWOs target foreign politically exposed persons or organized crime suspects, requiring them to disclose the source of their wealth if it is found to be disproportionate to their income.
Obtaining an Unexplained Wealth Order
A UWO is an order issued by a UK High Court judge upon application by an enforcement agency that requires a person to explain the nature of his or her interest in property and how he or she obtained that interest. Note that no criminal conviction or civil judgment is required to make this application.
Applications for UWOs can be made to the UK High Court without notice to the respondent by enforcement authorities. The applying enforcement office must specify or describe the property and specify the person who it believe holds the property.
A UK High Court judge may grant the application if the agency shows:
- Respondent holds property with a value greater than £50,000;
- Reasonable grounds for suspecting respondent’s lawful income is insufficient to enable them to have obtained the property; and
- Respondent is a non-European Economic Area (“EEA”) politically exposed person, involved in a serious crime, or a person connected to one of the former.
A politically exposed person (“PEP”) is defined 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.”
The High Court UWO will specify the form and manner in which the subject must comply, and it may also specify a period for compliance.
Even though the amendment has been in effect since January 31, 2018, the UK High Court has only granted UWOs against one respondent to date. The orders were granted against Mrs. Zamira Hajiyeva, wife of Jahangir Hajiyev, a former banker imprisoned for fraud and embezzlement in Azerbaijan. Under the terms of the UWO, Mrs. Hajiyeva must disclose to the NCA how she could afford £22 million worth of UK real estate.
She challenged the UWOs on multiple grounds, arguing her husband was not a PEP and that the government relied on an unfair trial in Azerbaijan as evidence that he had been involved in a serious crime. In the hearing, the government presented more evidence supporting its case, such as the complex corporate structures used to hold the properties and the millions of dollars Mrs. Haijiyeva spent at Harrod’s, a high end department store in London.
The High Court Judge, Justice Supperstone, recently dismissed the challenge, finding that Mr. Hajiyeva was a PEP, and that Mrs. Hajiyeva, as his wife, was also a PEP. She will be required to disclose the source of her interest in those properties worth £22 million.
Implications in the United States
It is difficult to imagine a similar law surviving legal scrutiny in the United States, given the protections provided by the Fifth Amendment to the U.S. Constitution. The UK High court can grant a UWO with a showing that there are reasonable grounds that the property constitutes proceeds of a crime or unexplained wealth before the burden shifts to the respondent. By contrast, reflecting constitutional concerns, the Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”), 18 U.S.C. §§ 981 et seq., requires that the Government show a “substantial connection” between the property and a specific offense. Under U.S. law, property is the subject of forfeiture because “guilt” is attached to it, it is an instrumentality of an offense, or property facilitating commission of an offense, or proceeds of a specific offense.