Jonathan Wall of Burton Copeland explains what these orders are, who can apply for them, how they work and what you need to do if you receive one.
Unexplained Wealth Orders have been very much in the news recently in relation to the case of Zamira Hajiyeva, the 55 year old wife of ex-state banker Jahangir Hajiyev from Azerbaijan. Mr Hajiyev, the former chairman of the International Bank of Azerbaijan was jailed in 2016 for 15 years having been convicted of a major fraud and embezzlement involving tens of millions of pounds which allegedly disappear from the bank.
The Court overturned a legal challenge to the order made by Mrs Hajiyeva’s legal team following the successful application for the order made by the National Crime Agency (NCA) in February 2018. The order required Mrs Hajiyeva to explain how two properties jointly valued at around £22 million, had been funded and purchased.
Why is there a need for Unexplained Wealth Orders (UWO)?
It is reported by Transparency International, an organisation fighting against corruption, that the UK freezes only $225 million (US Dollars) in assets each year despite the belief by the NCA that billions are actually being laundered through the UK and there have been suggestions that lots of real estate has been purchased in the UK either by domestic organised criminals or corrupt public officials from overseas.
Government sought to assist UK law enforcement agencies by legislating and making it simpler for those agencies to force individuals to explain the origin of their assets. This led to the enactment of the Criminal Finances Act 2017 which came into force in January 2018. The Act amends the Proceeds of Crime Act 2002 by allowing for the provision of the UWO and is likely to greatly assist law enforcement agencies as the burden of proof required to obtain the order is much lower than other legal proceedings. For example the burden required is ‘on the balance of probability’ and in criminal proceedings ‘beyond all reasonable doubt’. As you will see the UWO only requires “reasonable grounds to suspect”.
There is also no need for investigators to prove that the property came from crime or to commence criminal proceedings. In fact, the burden of proof is reversed, so that if a court makes an order then it is for the individual concerned to prove the legitimacy of their wealth. This means that investigators do not have to go through the often time consuming and expensive investigation and prosecution and can rely on intelligence rather than hard evidence.
What is a UWO?
A UWO is an investigative order issued by the High Court on satisfaction of a number of tests. It is a civil power and an investigation tool which requires the respondent to provide information on their lawful ownership of a property and the means by which it was obtained. It should be noted that the granting of a UWO does not on its own give the authorities the power to recover or confiscate the property. It is a power designed to be used by law enforcement agencies alongside other powers given to them by the Proceeds of Crime Act 2002.
What is the test the court has to consider in granting a UWO?
S362B of the act sets out the requirements that the court must satisfy itself with in order to make an order and the court must be satisfied of all three limbs below.
First there must be a “reasonable cause to believe” that the respondent holds the property, and that the value of the property is greater than £50,000.
Second, the court must be satisfied that there are “reasonable grounds for suspecting” that the known sources of the respondent’s lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property. “Lawfully obtained” is defined as having been obtained lawfully under the laws of the country from where the income came.
Third, that either the respondent is a politically exposed person or that there are reasonable grounds for suspecting that he or she is, or has been, involved in serious crime, (either in the UK or elsewhere) or a person connected with them is, or has been, involved.
A Politically Exposed Person (PEP) is defined in subsection (7) and includes a person entrusted with prominent public functions by an international organisation or by a State other than the United Kingdom or another EEA State, or a family member, close associate or connected individual. Serious crime is any offence set out in schedule 1 of the Series Crime Act 2007 and covers most offences such as drugs trafficking, fraud and firearms offences. A non EEA PEP does not require suspicion of serious criminality.
Investigators must have regard to any mortgage, charge or other kind of security that it is reasonable to assume was or may have been available to the respondent for the purposes of obtaining the property. But, it is a retrospective law meaning that it doesn’t matter whether the property was obtained before the act came into force or whether any other person holds the property. For example where there is a joint ownership of a property or the property is in the possession of somebody else.
What does a person served with a UWO have to do?
As you will see from the consequences below, it is in the person’s interest to co-operate with a UWO, which requires the individual to explain the nature and extent of their interest in particular property and how the property was obtained.
The Order will specify or describe the property and the person/s investigators believe hold the property and what information is required. Generally this is likely to be at least to require the individual concerned to provide a statement setting out the nature of the persons interest in the property, how the respondent obtaining the property and include how any costs were met. It could also include a requirement to specify where that property is held.
A statement made in response to a UWO cannot be used as evidence against the individual in criminal proceedings, unless they have deliberately provided incorrect or misleading information. But, any document or other material you produce with the statement could be used in a prosecution.
What happens is you fail to answer a UWO?
It is not an offence to fail to provide a response to an UWO, but it may give rise to a presumption that the property is recoverable under any subsequent civil recovery action. Civil recovery is a procedure in the High Court to recover the proceeds of crime in accordance with part 5 Proceeds of Crime Act. Civil recovery powers are also only available to the enforcement authorities listed above.
A person does commit an offence if, they make a statement that the person knows to be false or misleading in a material way, or recklessly makes a statement that is false or misleading in a material way and can be imprisoned for up to 2 years.
Who can apply for an UWO
Only law enforcement agencies can apply for such an order, so these cannot be used by estranged husbands or wives contemplating divorce proceedings. The “enforcement authority” is defined in S362A (7) as:
(a) the National Crime Agency,
(b) Her Majesty’s Revenue and Customs,
(c) the Financial Conduct Authority,
(d) the Director of the Serious Fraud Office, or
(e) the Director of Public Prosecutions
Other law enforcement agencies who do not have access to these powers such as Councils or Trading Standard cannot therefore apply directly for a UWO. However, they could consider referring a suitable case to an enforcement authority.
Can you legally challenge a UWO?
As with the case of Mrs Hajiyev, it is possible to challenge a UWO in a number of ways. If for example it is suspected that you have been involved in serious crime, in some circumstances you may be able to show that this is not the case, for example if you could prove that you are not the individual concerned or that the crime did not take place, but this is likely to be extremely difficult. Mrs Hajiyev unsuccessfully argued that she was not an associate of a PEP so a similar argument could also be made where for example there is an argument that the individual did not meet the test for being a PEP or are not associated with.
If the allegation is that the person is a PEP (or a close associate of that PEP) outside of the EEA, it may be possible to prove that this is in fact incorrect.
However, these types of challenges may be rare as one would assume that law enforcement already has fairly good intelligence or evidence to link those persons to public positions or serious crime before undertaking the expense of making an application for such an order.
Will I be named in Court?
The Hajiyeva case demonstrated that the court was unwilling to allow her to remain anonymous. The court originally did grant her anonymity but that decision was overturned following an argument by the media that the public ought to know her identity.
The future of UWO’s
Following the Hajiyeva case, Donald Toon, NCA Director for Economic Crime, said, “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.”
It is clear in my view that these orders are here to stay and given that they are relatively easy to obtain, I predict that applications will increase year on year. I can recall when the Proceeds of Crime Act came into force and many believed it was a doubtful that it would be commonly used. It is right to say that in the early years the act was only used in a limited number of cases where it was clear that the offender had assets. Nowadays however in my experience virtually all trigger cases result in a financial investigation and Proceeds of Crime Act proceedings.
What do I do if I receive a UWO?
In order to protect you and your assets it is important that you act quickly and obtain expert legal advice. Ensure that you do your best to gather and keep secure any material and documentation which is likely to assist in demonstrating that the property came from a legitimate source or source of income.