Zoya Burbeza examines Unexplained Wealth Orders in Law360

September 05 2019

When they were first introduced in January 2018, Unexplained Wealth Orders (UWOs) received acres of media coverage. Equally, they caught the public attention because of the extraordinary allegations of vast illicit wealth hidden behind the doors of some of Britain's most exclusive properties.

Labelled by the press as the “McMafia” law, UWOs were championed as a way of stemming the flood of “dirty money” coming into the UK. The widespread belief that London and some of the wealthier suburbs around the country harboured hundreds, if not thousands, of individuals whose wealth was derived, at least in part, from criminal activities fed the imagination of numerous journalists and the public alike.

But their collective excitement was not immediately met by a visible flurry of activity from those agencies (defined as enforcement authorities) empowered to apply for UWOs: the National Crime Agency, HMRC, the Financial Conduct Authority, the Serious Fraud Office, and the Crown Prosecution Service. Indeed, in the first year that they were available, only one UWO was issued. 

So what are UWOs? Introduced under the Criminal Finances Act 2017, they have been available to law enforcement since February 2018. In essence, a UWO is a civil power: an investigation order issued by the High Court which satisfies a number of tests. It is not, by itself, a power to recover assets, but it does require the respondent to provide information on their lawful ownership of a property, and the means by which it was obtained. When a UWO is granted, temporary asset freezes on the suspect’s properties are also obtained: they cannot be sold or transferred while an investigation is ongoing.

The GOV.UK website defines it as follows: ‘A UWO requires a person who is reasonably suspected of involvement in, or of being connected to a person involved in, serious crime to explain the nature and extent of their interest in particular property, and to explain how the property was obtained, where there are reasonable grounds to suspect that the respondent’s known lawfully obtained income would be insufficient to allow the respondent to obtain the property.’

A UWO can also be applied to politicians or officials from outside the European Economic Area (EEA), or those associated with them i.e. Politically Exposed Persons (PEPs). A UWO made in relation to a non-EEA PEP does not require suspicion of serious criminality.

When it was announced, the first UWO did not disappoint the journalists. It was used to seize the London home, valued at £12m, and a Berkshire golf course belonging to Zamira Hajiyeva, the wife of Jahangir Hajiyev, a jailed Azeri banker. The media loved the Hajiyeva story, not least the details of her very conspicuous consumption. Even the normally staid BBC News headlined: ‘Zamira Hajiyeva: How the wife of a jailed banker spent £16m in Harrods.’ The report summarised details of her extravagant spending - Boucheron jewellery: £3.5m; Cartier jewellery: £1.4m; and The Harrods perfume counters: £160,000.

In April 2018, NCA Director Donald Toon stated that his agency was considering UWOs as an investigative tool in “100s of cases”. More than a year later, in May 2019, the second UWO case against ‘an unnamed foreign official’ involved the purchase of London properties believed to have been purchased by fraudulent activities. Three London homes worth more than £80m were frozen by the High Court.

Things have picked up speed since then. Two more UWOs have been issued in recent weeks. The first involves a businessman in the North of England who has had his £10 million property business seized by the NCA until he can explain how it was funded. The NCA stated that this was the first such UWO in the UK targeted at suspected serious organised crime. The NCA revealed that the suspect was a “businessman in the north of England, whose property empire is suspected of being funded by criminal associates involved in drug and firearms trafficking.”

The most recent UWO involves a woman from Northern Ireland, whose properties are worth around £3.2 million. The NCA said the unnamed woman has “suspected links to serious organised crime” and has been “ordered to explain how she financed the purchase of six properties” – two in London and four in Northern Ireland. The NCA said it “believes the woman is associated with criminals involved in paramilitary activity and cigarette smuggling”.

The latter two cases demonstrate that UWOs can be effectively used to disrupt domestic organised crime, whereas the focus of the two previous orders was on non-European PEPs. Although they have taken time to gain traction, the increased use of UWOs also shows that the NCA and other UK law-enforcement agencies are becoming much more comfortable in undertaking the type of complex and detailed investigations which are inevitable in UWOs when pursuing cases against those suspected of serious organised crime.

However, the use of UWOs to seize assets when someone fails to explain his or her source of wealth is a lengthy, expensive and complicated process. Notwithstanding their increased use, a conspiratorial theory suggests that there is intense lobbying underway by the UK financial services and property sectors in particular. As very significant elements of the UK economy, they want to make sure that UWOs are used sparingly in relation to wealthy foreign individuals, whose assets are assiduously courted by UK financial and property companies and vigorously competed for by other wealth centres around the world.

A further dramatic increase in the use of UWOs may be widely anticipated, both in relation to organised domestic crime suspects and international PEPs with property and other assets in the UK. But the vast majority of international businesses and private clients in the UK with wealth situated overseas need not lose any sleep that UWOs will be used against them.

Zoya Burbeza

This article was originally published in Law360 and can be accessed here

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