Case Briefing: Unexplained Wealth Order

This year has seen the introduction of the new Unexplained Wealth Order (“UWO”) regime. The purpose of the regime is to provide the UK’s enforcement authorities with an investigative tool to obtain information and trace the proceeds of international crime with the ultimate aim of confiscating those assets using their powers.

As we reported back in February 2018, UWOs require a respondent to disclose what interest they have in specified property and how that property was acquired (including the costs incurred of obtaining that property). A UWO can only be made where there are “reasonable grounds” for suspecting that the respondent did not obtain the property in question with lawfully obtained income.

However, given the apparently vast amounts of property in the UK alleged by the likes of Transparency International to have been obtained through monies of suspicious origin, it remains to be seen how effective or prevalent an addition to the UK enforcement authorities’ powers UWOs will be to intercept and recover the ill-gotten proceeds of serious organised crime.

The first case to test the UWO jurisdiction was reported in early October 2018. National Crime Agency (“NCA”) v Mrs A was a notable success for the criminal investigative authorities. The NCA had obtained a UWO against Zamira Hajiyeva (referred to as “Mrs A”) in February 2018.

Mrs A, a non-EEA national, was the beneficial owner of a company incorporated in the BVI. That company purchased a property for £11.5m in 2009. The NCA successfully obtained the UWO on the basis that Mrs A’s sole source of income was from her husband, Mr A, and that Mr A (who had been the Chairman of a bank in Azerbaijan) was a politically exposed person (“PEP”) who had been convicted of fraud and embezzlement in that country.

Mrs A appealed the UWO including on grounds that Mr A was not a PEP. The case highlights some interesting judicial observations on:

1. the definition of a PEP (where Mr A was an officer of an enterprise in which the Azerbaijan state held a majority shareholding);
2. the Court’s reliance on a conviction in Azerbaijan (notwithstanding that it was accepted that there was evidence of violations of Mr A’s human rights and serious deficiencies in the criminal justice system in Azerbaijan);
3. the protection of privilege against self-incrimination and spousal privilege (where it was concluded that Mr and Mrs A were unlikely to face prosecution in the UK); and
4. the attachment of a penal notice to the UWO (which meant that Mrs A’s non-compliance with the order could result in contempt of court and possible committal proceedings). Although the legislation under which the UWO was made does not provide for a penal notice to be attached to the order, the Court concluded that there is a strong public interest in ensuring that such orders are complied with and that there may be an ‘enforcement gap’ should no notice be attached.

Although the judgment considered the extent to which the UWO might interfere with Mrs A’s quiet enjoyment of her property (and concluded that such interference would be minimal), it did not discuss the impact of the very onerous disclosure obligations which were heavily placed on Mrs A by virtue of the order.

In judgment, the Court was satisfied that in this case the statutory criteria were met under section 362B of the Proceeds of Crime Act 2002 and Mr Justice Supperstone dismissed Mrs A’s appeal in its entirety, setting a high bar for those seeking to discharge a UWO.

Overall, the balance of judicial discretion in NCA v Mrs A tipped in favour of the value of the UWO in assisting the NCA’s investigation over the likely impact on Mrs A or, for instance, the fact that Mr A could not meaningfully participate in the UWO process.

Now that the NCA has laid the groundwork and shown how a UWO can be successfully obtained and upheld, it may be that we see more UWOs on the horizon. Of interest to practitioners and potential litigants will be the extent to which victims may be able to join with the enforcement authorities in order to support and participate in the recovery of property identified under a UWO and what use can be made of the disclosure resulting from a UWO in separate civil asset tracing exercises.

(Note: This article was written by Partners Joel Seager and Zarko Iankov, and Solicitor Katrina Walker.)