On February 5, 2020, the UK Court of Appeal dismissed a challenge to the UK’s first Unexplained Wealth Order (UWO). Mrs. Zamira Hajiyeva, wife of the former chair of the International Bank of Azerbaijan who was sentenced to 15 years in jail in 2016 for defrauding the bank out of £2.2 billion, launched a challenge against the UK National Crime Agency’s (NCA) first ever UWO, attempting to overturn the UWO against a property in Knightsbridge, London, purchased for £11.5 million. Her arguments that the NCA mischaracterized her husband’s status as a politically exposed person (PEP) and that her husband’s conviction was the result of a “grossly unfair trial” were rejected by the Court of Appeal. This decision will likely energize and provide a boost to the NCA and other law enforcement agencies in seeking UWOs to seize ill-gotten gains in the future.
First introduced under the Criminal Finances Act 2017, UWOs require an individual respondent to explain the legitimacy of the source of funds used to acquire his or her interest in relevant property, both in the UK and abroad. Certain UK authorities can obtain UWOs against PEPs and individuals involved in serious crime outside the EEA and individuals who are, or are connected to those, involved in serious crime. To obtain a UWO from the English High Court, the interested authority need only satisfy a reasonably low threshold. It must show that:
- There are “reasonable grounds” to suspect that the respondent’s known lawfully obtained income would be insufficient to allow the respondent to obtain the relevant property; and
- That the respondent is, or is connected to, an individual who is involved in serious crime or a PEP outside the EEA.
If a respondent fails to evidence that his or her funds were clean, the interested authority may begin civil proceedings to freeze or seize the property.
In 2018, Mrs. Hajiyeva was made subject to a UWO, which required her to explain how she funded her apparently “lavish lifestyle” (she was reported to have spent £16 million in Harrods over the course of a decade) and her interests in two properties worth £22 million. In December 2019, Mrs. Hajiyeva launched a challenge at the UK Court of Appeal. She argued, amongst other things, that her husband was mischaracterized as a “central banker” and a PEP, and that the NCA’s UWO was grounded in a “grossly unfair trial” against her husband in Azerbaijan.
The Court of Appeal on 5 February 2020 dismissed Mrs. Hajiyeva’s appeal. On finding that the Azeri state owned more than 50% of the International Bank of Azerbaijan, the Court found that Mr. Hajiyev, as the chairman of a majority state-owned and ultimately state-controlled enterprise and being entrusted with a prominent public function, fell within the definition of a PEP. Therefore, as a family member of Mr. Hajiyev, Mrs. Hajiyeva was also considered a PEP. Based on evidence that Mr. Hajiyev’s and Mrs. Hajiyeva’s legitimate income would unlikely have been sufficient to fund the UK property purchases, Mrs. Hajiyeva is therefore required to explain the source of her wealth and interests in the properties. The Court of Appeal also denied Mrs. Hajiyeva’s application to appeal the judgment of the Court of Appeal.
To date, there has been limited use of UWOs. Although the Serious Fraud Office, Financial Conduct Authority, HMRC and the Crown Prosecution Service also have power to use UWOs as a tool to combat financial crime, so far, it is only the NCA that has made use of it, and that too only in the UK. 2019 saw the NCA finally ramp up the use of UWOs and supporting freezing orders, with 17 UK properties being targeted by UWOs last year.
In July 2019, the NCA secured UWOs against 14 properties, six of which belonged to a Northern Irish woman suspected to be involved in paramilitary activity and cigarette smuggling and another eight properties worth £10 million owned by a businessman, Mr. Mansoor Mahmood Hussain, who apparently purchased the assets with funds raised through drug trafficking, armed robberies and the supply of firearms. In addition to securing interim freezing orders to prevent dealing with the properties, the NCA also obtained a £1.13 million Account Freezing Order on 9 January 2020 with respect to a bank account of a company linked to Mr. Hussain. The UWO against Mr. Hussain was the first to be solely based on alleged links to organised crime.
It is clear that the NCA is attempting to crack down on the alleged proceeds of crime being laundered through the UK property market, and there are reports that the Met Police is looking at lowering the threshold for obtaining a UWO so they could be used to target the assets of lower-level organised criminals. Although it remains to be seen how the NCA and other agencies will continue to use UWOs and ultimately seize the targeted properties, it is likely that the NCA will increase its applications for UWOs as a tool to clamp down on illicit finance.