Unexplained Wealth Orders (“UWO”) have attracted significant media attention since they came into force on 31 January 2018. They been hailed as the cure for Britain’s reputation as a haven for dirty money. A snapshot of the headlines illustrates this point:
“Are unexplained wealth orders the cure for Britain’s reputation as a haven for dirty money?”
“Unexplained wealth orders are new weapon in war on illicit assets”
"Russian elite must reveal how they paid for UK property, say MPs"
They have been alluded as providing once of the means to respond to the attack on Skripal in more robust terms and to President Putin and his allies continuing to hide and launder their assets in London.
Of real concern to lawyers, commentators and clients is the potential for political misuse by state interests. The first UWO sounds the alarm that these orders have far reaching consequences and may well be subject to misuse.
The respondent to the UWO was Zamira Hajiyeva. Her husband is Jahangir Hajiyev, the former chairman of the International Bank of Azerbaijan. The Azeberjaini state is the major shareholder of the bank. Mr Hajiyev has been convicted of a large-scale fraud relating to the bank and is serving a 15 years sentence of imprisonment. He was also ordered to pay the bank approximately $39 million.
The UWO was granted in respect of a property in London, close to Harrods. The property was purchased on 22 December 2009 by a company that is incorporated in the British Virgin Islands, Vicksburg Global for £11.5 million. Initially there was mortgage of £7,475,00. This was discharged on 23 December 2014. The UWO focuses on the source of the funds used as a deposit for the Property and for the subsequent discharge of the mortgage.
The grant of the UWO does mean that the High Court has made a finding of any wrongdoing against either her or her husband. It has simply found that in respect of the Property, it is held by Mrs Hajievea and that she meets the statutory definition of a PEP, and that the known amount of her lawful income appears insufficient to pay for the Property. It has made decided that there are reasonable grounds to suspect or believe that they exist.
The involvement of the Azerbaijan government should be of serious concern the UK authorities. A country ruled with an iron first by the President and his associates, torture, and repression are tools of the regime.
This case will cause serious concern to those from former CIS states as well as others. The political climate in the UK is anti-Russia but there is little acknowledgement by the NCA and others that foreign governments, often with appalling human rights records may use these orders to pressure political opponents or business rivals in the same way that Interpol Red notices, extradition and corporate raiding have been used previously.
What are UWO’s
Section 1 Criminal Finances Act (“CFA”) 2017 inserts ss.362A to 362H into POCA 2002. In essence a UWO is a disclosure order. It orders a respondent to provide an enforcement authority with information. It is an investigative tool. It does not provide for the recovery of the property that it is concerned with. They are not freestanding orders.
A UWO requires the respondent to provide a statement and such documents as may be required:
(a) setting out the nature and extent of his interest in the property.
(b) explaining how the respondent obtained the property.
(c) If held in Trust, setting out the details of the trust.
The failure to respond and provide the answers requested will lead to rebuttable presumption that the Property is recoverable property for the purposes of any proceedings taken in respect of the property under Part 5.
What are the grounds to make a UWO?
In order to grant an application for a UWO the Court must be satisfied that there is a reasonable cause to believe that (s362B POCA):
- The respondent holds the property.
- The value of the property exceeds £50,000
And reasonable grounds for suspecting that:
- The known sources of a respondent’s lawfully obtained income is insufficient to enable the respondent to obtain property.
- The respondent or involved in serious crime. Or connected to a person who is a PEP or involved in serious crime.
Or satisfied that
- The respondent is a politically exposed person “PEP”
National Crime Agency v Mrs A  EWHC 253
The first UWO was applied for by National Crime Agency. It was granted by Mr Justice Supperstone on 27 February 2018. The respondent applied to discharge the order. That application and the ruling of Mr Justice Supperstone on 3 October 2018 have now been made public. It gives an opportunity to analyse what arguments what deployed against the UWO and how they were dealt with.
The respondent was initially granted anonymity. On 3 October 2018 Mr Justice Supperstone rules that he was not satisfied that the non-disclosure of the identity of Mrs A or her husband is necessary in order to protect their interests. He decided that the public interest in a full report of the proceedings outweighed any concerns she may have about herself of her husband.
Ms Hajiyeva applied to the High Court to discharge the order see National Crime Agency v Mrs A  EWHC 2534 (Admin). The following arguments were made on her behalf:
i) Mr Hajiyeva is not a PEP.
ii) Mr Mr Hajiyeva employment was wrongly described by the NCA.
iii) The NCA was wrong to place reliance on Mr Hajiyeva s conviction.
iv) The NCA had not established the "income requirement" to the relevant standard.
v) The UWO ought to be discharged because the penal warning is wrongly attached to it.
vi) The UWO offends Mrs Hajiyeva’s Article 1, Protocol 1 ECHR rights. (“A1P1”)
vii) The UWO offends the privilege against self-incrimination and spousal privilege.
viii) The court ought not have exercised its discretion to make the order.
PEP – Grounds 1
In order to find that Mrs Hajiyeva was a person connected to a PEP, it needed to be established that her husband was a PEP. A PEP is defined is s.362B(7) 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,”
Article 3 of Directive 2015/849/EU of the European Parliament and of the Council of 20 May 2015 applies for the purposes of determining whether a person has been entrusted with prominent public functions. Article 3(9) of the 2015 Directive defines a PEP as
"… a natural person who is or has been entrusted with prominent public functions and includes the following: …
(g) members of the administrative, management or supervisory bodies of State-owned enterprises."
Mr Justice Supperstone was satisfied that a majority shareholding in the Bank was sufficient to make it a “state owned enterprise”.
Grounds 2,3 and 4
The NCA’s case was that Mrs Hajiyeva’s income came entirely from her husband which was in turn wholly sourced from unlawful conduct. The argument that he was in fact a well-known international banker at a commercial bank was rejected this argument, principally because the bank was a state owned enterprise.
It was that the NCA should not be allowed to rely upon Mr Hajieva’s conviction given that there are real concerns about the fairness of his trial. Supperstone J decided that given that this was the reliance on the conviction was in order to obtain an investigative order, it was permissible. He noted that in the trial part of the allegations made Mr Hajieva included abuse of his position at the Bank by issuing credit cards in the names of family members, resulting in large debts being run up. This allegation was supported by the fact that between September 2006 and June 2016, a total of £16,309,077.87 was spent by the use of cards under the Harrods Customer Loyalty Rewards Card Scheme. This included spending on numerous different credit cards apparently issued by the Bank.
The arguments that having been involved in finance all his working life, and having been the Chairman of a major international bank for 14 years, Mr A would have had sufficient lawful sources of income available to him was similarly rejected.
Ground 5 and 6
The argument UWO should not have a penal notice because the statute provides that the consequence of non compliance with a UWO is the presumption is civil recovery proceedings that the Property is the proceeds of crime was also rejected. Supperstone J observed that section 362C does not implicitly oust the court’s power to attach a penal order to enforce non-compliance through committal proceedings.
Supperstone J rejected the argument that the UWO would infringe Mrs Hajievea’s privilege against self-incrimination and spousal privilege given that she is the subject of an ongoing criminal investigation in Azerbaijan. He noted that Parliament in creating the UWO regime plainly intended to abrogate these privileges.
“However, I do not consider that disclosure of information under the UWO about the property will give rise to a real or appreciable risk of prosecution of Mrs A or her husband for offences in the UK or in the non-EEA Country (even assuming for present purposes that she would return to the non-EEA Country). There is no evidence that they would be at risk of further criminal proceedings in any event”
He also rejected the argument that the UWO infringed against Mr Hajieva’s Article 1 Protocol 1 rights, on the basis that the UWO in and of itself did not give rise to any loss of value of the Property. There was accordingly no material infringement.
Finally, in rejecting the argument that is was wrong to exercise his discretion of grant the UWO Supperstone J stated as para 120:
“The UWO has been made at the investigative stage of this case. I agree with Mr Hall that the concern that Mr A will not be able to participate meaningfully in the UWO process is not a reason for discharging the order. It has been made against Mrs A who informed the Home Office that she is the ultimate beneficial owner of the registered proprietor of the property. It does not follow from the fact that Mr A is in custody abroad that the NCA is unable to carry out its investigation. It is clear from Ms Bartlett's witness statement (at paras 74-108) and the documentation in this case that there are others who may well be able to assist with the investigation, and who are well placed to explain Mr A's sources of wealth and how the charge on the Property was paid off. If, subsequently, civil recovery proceedings are instituted, Mr A claims an interest in the property or wishes to participate as a witness, consideration will then have to be given to ensuring a fair trial of the claim at that stage”
The grant of the UWO is not the end of the story. Mrs Hajievea and her lawyers will now need to decide how to respond to the UWO. In the event that she does respond it will then by for the NCA to decide if to bring proceedings for the civil recovery of the Property. What will be interesting is whether or not the International Bank of Azerbaijan and or the State of Azerbaijan seek to be added to these proceedings as an interested party to claim that the Property belongs to them as the victims of a fraud.