Appeal against first Unexplained Wealth Order fails
Locations
Background
Following its introduction in the Criminal Finances Act 2017, the first Unexplained Wealth Order (UWO) was brought by the National Crime Agency to seize the assets of Zahira Hajiyeva, an Azeri national living in London in 2018. Under the terms of the order she was required to provide the NCA with a clear account of how she and her husband, Jahangir Hajiyev (an Azeri ex-state banker currently jailed for corruption in Azerbaijan) were able to purchase a home in Knightsbridge worth £15m and a golf course in Berkshire. Her assets were frozen, including several properties and a £1.1 million diamond ring.
UWOs require that their subject be a person 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 made in relation to a non-EEA 'Politically Exposed Person' does not require suspicion of serious criminality.
Mrs Hajiyeva applied to the High Court to discharge the UWO in 2018, but the Court rejected her application. She then appealed to the Court of Appeal.
Judgment
Mrs Hajiyeva appealed on several grounds:
The definition of PEP had been wrongly applied.
- There were no reasonable grounds for suspecting that the known sources of the lawfully obtained income available to her would have been insufficient to enable her to obtain the property (i.e. the 'income requirement test').
- The UWO offended the rule against self-incrimination and/or spousal privilege.
In respect of the first ground, a PEP, as defined in the Proceeds of Crime Act, is 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. Close associates and family members of PEPs can be subject to UWOs. Although she was a ‘family member’ of Mr Hajiyev, who was the ex-Chairman of the Azeri bank, Mrs Hanjiyeva argued that there was no evidence that her husband was entrusted with prominent public functions ‘by an international organisation or by a State other than the United Kingdom or another EEA State’. The Court of Appeal held that Mr Hajiyev fell within the definition of a PEP. In relatively simple terms, he had been the Chairman of a state-owned bank and therefore was entrusted with a prominent public function by a non-EEA State.
Mrs Hajiyeva also argued that the bank of which her husband was chairman was not state-owned, therefore he would not, and by consequence she would not, not fall within the definition of a PEP. The Court of Appeal swiftly rejected this argument. This was not an issue that fell to be determined by a close analysis of Azeri law. The evidence was clear that the state of Azerbaijan had more than a 50% shareholding in the bank and on the facts it was clear that the State had ultimate control.
On the second ground, Mrs Hajiyeva argued that her husband's conviction in Azerbaijan was unfair and therefore undue weight had been placed on it in granting the UWO. Whilst the Court of Appeal held that in principle a foreign conviction would not normally be a proper ground for reasonably suspecting that lawful income was insufficient to enable the acquisition of relevant property, in this case there were other factors. First, there was the evidence of Mr Hajiyev’s status as a state employee and the unlikelihood that his legitimate income would have been sufficient to generate funds used to purchase the property. Secondly, although there was evidence that he had been involved with companies and property transactions, it was not such as to come close to undermining the reasonable suspicion that such income would have been insufficient to fund the purchase of the property.
The third ground was also rejected. Mrs Hajiyeva argued that (i) the UWO failed to ensure the privilege from being required to give answers tending to expose her husband to a risk of prosecution in the United Kingdom (‘spousal privilege’); and (ii) in the absence of any formal undertaking by the NCA as to the future use to which any response to the UWO might be put in Azerbaijan, the order failed to protect her privilege against both self-incrimination and spousal incrimination in Azerbaijan. The Court of Appeal agreed with the first instance judge, who did not consider that Mrs Hajiyeav's evidence disclosed a real risk that either she or her husband would be prosecuted for offences in the United Kingdom. Accordingly, the threshold test for the privileges to apply has not been satisfied. Although she had asserted privilege in her witness statement, she did not identify what elements of the requested information would give rise to the alleged risk. She had not said which answers to which questions might incriminate her and mere assertion of the privilege against self-incrimination was not sufficient. As regards incrimination of her husband in Azerbaijan, the Court of Appeal again agreed with the first instance judge that it was clear that the privileges applied only as regards criminal offences under the law of the UK and she had no right to invoke privilege in relation to a risk of prosecution for criminal offences outside the UK.
Comment
In what has been seen as a 'test case' for UWOs, the Court of Appeal has provided some useful guidance for prosecuting authorities. Whilst Mrs Hajieva may have always been 'low hanging fruit' to target given her husband's foreign conviction for fraud, the Court's decision has not erected any unexpected barriers for prosecuting authorities to clear. In particular, the definition of a PEP has been kept reasonably broad. Accordingly, this will likely embolden prosecuting authorities, such as the NCA and SFO, to embark on further UWO applications in the bid to clean dirty money out of the UK. Meanwhile, Mrs Hajiyeva now has seven days to comply with the original order and provide the NCA with details of her wealth. If she fails to comply, the NCA can seek to recover her assets.