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Unexplained Wealth Orders – Where are we now?

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United Kingdom

The introduction of Unexplained Wealth Orders (UWO) in the Criminal Finances Act 2017 was heralded as a powerful new weapon for enforcement authorities to wield in the fight against organised crime. UWOs (dubbed 'McMafia orders') allow certain UK enforcement authorities (the NCA, SFO, FCA, the Director of Public Prosecutions and HMRC) to freeze and potentially seize the assets of individuals whose wealth is suspected to be unlawfully obtained.  Several UWOs have been obtained over the past three years. There have been some successes, but also a costly own goal. With the first subject of a UWO having exhausted all her appeals following a decision of the Supreme Court, now is an appropriate time to evaluate the status of UWOs and how they will be used in the future in light of the successes and failures that have taken place.
 
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. Where the respondent is or is connected to a non-EEA 'Politically Exposed Person' (PEP) no suspicion of serious criminality is required. If the subject cannot explain their interest in the relevant property, it can be seized. UWOs are often accompanied by an interim freezing order, which will freeze the subject's assets to prevent them being dissipated before the UWO process is complete. Crucially, the UWO process is administered under civil law, which has a lower threshold for standard of proof than criminal law.
 
The first UWO was made in 2018 against Zahira Hajiyeva, an Azeri national living in London. 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 £15 million and a golf course in Berkshire worth £22 million. Her assets were frozen, including several properties and a £1.1 million diamond ring. Whilst this case was high profile (notably because of details of Mrs Hajiyeva's extraordinary shopping habits), and the value in question was very high, this was seen as a test case against low hanging fruit. Mrs Hajieva's husband, determined by the court to be a PEP, had already been convicted of corruption in Azerbaijan and the NCA argued that his salary as a state employee (a mere £54,000) meant that it was very unlikely that such a position would have generated sufficient income to fund the acquisition of the properties.
 
Both of Mrs Hajiyeva appeals as to the lawfulness of being subject to the UWO, first to the Court of Appeal, and then to the Supreme Court, were dismissed. She must now satisfy the NCA that her wealth was lawfully obtained. If she cannot, the properties will be seized. This is a notable win for the NCA, as their case resisted numerous legal arguments that Mrs Hajiyeva put forward in her appeals and sets helpful precedent case law for future UWOs.
 
In terms of asset recovery, the NCA has been successful in this respect too. In October 2020 Manoor Hussain, a property developer from Leeds, agreed to hand over nearly £10 million of assets, including several properties across England. Hussain was hit by a UWO in 2018 after the NCA accused him of being a money launderer for crimelords in the north of England. Hussain agreed an out-of-court settlement with the NCA instead of proceeding to a trial. He ultimately handed over forty-five properties in London, Cheshire and Leeds, four parcels of land, £600,000 in cash and other assets with a combined value of £9.8 million.
 
These cases have undoubtedly been significant victories for the NCA, but in amongst them was an action that backfired. In May 2019 two companies which own three multi-million pound properties in London - which are said to be worth approximately £80 million in total - were made subject to UWOs by the NCA over links to Rakhat Aliyev, a Kazakh politician turned dissident who was once married to the daughter of Nursultan Nazarbayev, the former president of Kazakhstan. The NCA argued that there were grounds to suspect that Rakhat Aliyev had enriched himself through the corrupt use of his public position and therefore the properties had not been acquired through legitimately obtained money. Nurali Aliyev, the son of Rakhat Aliyev, occupies one of the properties and he and his mother, Dariga Nazarbayeva, were ordered to explain how these properties were acquired.  These UWOs were clearly an attempt to obtain a big scalp to address increasing concerns that luxury London properties are being used to launder illicit wealth, often by individuals connected to foreign governments.
 
The defendants to the UWOs challenged them in the High Court and in April 2020 this challenge was successful. The Court held that the properties were legally owned through two companies, and that "the NCA's assumption" that Rakhat Aliyev was the source of the money used to buy the three properties was ultimately "mistaken" and "unreliable". The High Court concluded that there was "cogent evidence" that Dariga Nazarbayeva and Nurali Aliyev had founded the companies which owned the homes, and had provided the money to pay for them. Ultimately, the High Court ruled that the NCA's evidence did not sufficiently prove that that Rakhat Aliyev's funds had been used to set up various offshore shell companies used to purchase the properties. As a result, the High Court discharged the UWOs and ordered the NCA to pay the defendants' costs, estimated at approximately £1.5 million.
 
Where the NCA (and indeed other investigating authorities) will go from here will certainly be of interest. Since their introduction in 2017, UWOs have not been employed as frequently as might have been hoped (and curiously, by only the NCA and no other enforcement authority). Having been stung by the Aliyev case, the NCA may decide to change tack and focus predominantly on 'low-hanging fruit' where there is a strong likelihood of obtaining an out-of-court settlement, avoiding the expense and hassle of contested legal proceedings. This might even extend to relatively low value UWOs, given that the threshold for unexplained property value is only £50,000.  The risk of seeking UWOs against high-profile targets is that the NCA could be faced with a robust defence spearheaded by a team of expert lawyers, diverting resources away from other more easily achievable targets, potentially resulting in the UWO being overturned and a costly legal bill. On the other hand, the NCA may see this approach as 'high risk, high reward', and will expect to recover more assets than it might have to pay out in legal costs where there are successful appeals.

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