If you have been following the articles and blogs about the enforcement of anti-corruption laws, or participated in anti-corruption conferences of events, you will have likely come across a reference to the unexplained wealth order (UWO) which was recently introduced into UK legislation under the 2017 Criminal Finances Act. This measure became effective in the UK as of January 2018 and it offers a new tool in the arsenal of UK investigators and prosecutors to allow them to go after the proceeds of corruption in the UK.
A frequent challenge in recovering proceeds of international corruption cases is that for conviction-based asset recovery, you need either a criminal conviction in the country in which the corruption offense took place or – if there’s no conviction in that country – you need jurisdiction over the public official involved (or allegedly involved). But public officials often enjoy immunity while abroad or they benefit from impunity in political systems in which corruption offenses are only enforced very selectively, or not at all.
For non-conviction based in rem forfeiture, which has a lower standard of proof than criminal proceedings, the prosecution generally has to provide evidence for a link between an asset located in one country and an underlying crime that was typically committed in another country. In practice, establishing this link between an asset that is suspected of having been purchased with proceeds of corruption and the underlying crime can be challenging, as success is highly dependent on good cooperation between investigative agencies in both countries.
Time therefore for a closer look at the unexplained wealth order. The tool, which is sometimes called the “McMafia Law” after a popular BBC TV show, is unusual in that it requires the holder of the asset in question against whom a UWO is issued to provide evidence for legitimate sources of funds. The UWO has retrospective effect, meaning that property or assets purchased prior to January 2018 can be subject of a UWO.
The UWO can be applied to a natural or legal person if a number of conditions are met:
The person is reasonably suspected of involvement in, or of being connected to person involved in the commission of a serious crime (in the UK or elsewhere); or the person is a politically exposed person (PEP) from outside the European Economic Area - or is associated with such a person (e.g. a family member); and
The value of the property is in excess of £ 50.000; and
There are reasonable grounds to suspect that the respondent’s known sources of lawfully obtained income is insufficient to allow the person to obtain the property in question.
If these conditions are met, only those agencies defined as an “enforcement authority” can request the High Court to issue an unexplained wealth order. In England and Wales, these agencies are the National Crime Agency, HM Revenue and Customs, Financial Conduct Authority, the Serious Fraud Office, or the Crown Prosecution Service (the public prosecutor). For Northern Ireland, it is the Director of Public Prosecutions for Northern Ireland.
It is important to point out that the unexplained wealth order is an investigative measure. Contrary to what many believe, it is not an asset forfeiture order to confiscate any unexplained wealth – though it may be the first step in a process to do so.
The enforcement agency that is requesting the unexplained wealth order may, at the same time, request an interim freezing order to prevent the respondent from dealing in the property to avoid possible frustration of any subsequent asset recovery order.
The order requires the respondent to provide information on the nature and extent of their interest in the property in respect of which the order is made and explain how they obtained the property - including, in particular, the source of funds used to purchase the property. The order may also require the respondent to produce certain specified documents. These requirements ostensibly affect the presumption of innocence of the person against whom a UWO is issued.
Since the UWO can only be requested by an enforcement authority, other agencies can only obtain the requested information by referral of their case to one of the specifically defined agencies.
If the respondent fails to provide the requested information, that failure may give rise to a presumption that the property in question is recoverable using civil recovery proceedings. Unlike most other investigative legal tools that are overseen by the criminal courts, or by criminal courts sitting in a civil capacity, the UWO is overseen by the civil courts.
If, while purporting to comply, the respondent makes a statement that he or she knows to be false or misleading, the person is guilty of a criminal offence punishable with up to two years imprisonment. However, because of the human right protecting persons against self-incrimination, information provided pursuant to an unexplained wealth order cannot later be used in a criminal prosecution against the respondent - though they may of course be used in court against other persons. However, the law makes a distinction between different types of information: while statements cannot be used as evidence in a criminal prosecution against that person, this protection does not apply to documents that are produced by the respondent during the UWO process.
The first person against whom an unexplained wealth order has been issued is Zamira Hajiyeva, the wife of Jahangir Hajiyev, who was the chairman of the International Bank of Azerbaijan, the largest bank in the country. The bank was originally fully state-owned and after a gradual privatization process the Ministry of Finance retained a controlling interest at all times while Mr. Hajiyev was chairman. In 2016, he was jailed for 15 years for a major fraud and embezzlement scheme involving the bank’s assets. The National Crime Agency applied for an unexplained wealth order against her, arguing that the husband’s employment as a state employee from 1993-2015 would not have allowed him and his wife to amass the wealth traced to them. Her husband’s official net income, according to records cited in the High Court judgment, ranged between US$ 29,000 in 2001 and $70,650 in 2008, plus shared that generated around $90,000 in dividends in 2008. Yet the couple’s properties reportedly include a £11.5 million house in London (now worth £15 million), a £10.5 million Golf Club near Ascot, a £16 million shopping spree at Harrods over the course of 10 years, a £1.2 million diamond ring, and a £31 million Gulfstream G550 jet. To pay for her Harrods purchases, she allegedly used over 30 different credit cards issued by the bank that was chaired by her husband. The couple set up complex corporate structures to hold their real estate properties, which include a British Virgin Islands company and trusts in Guernsey.
Zamira Hajiyeva launched a legal challenge against the order, arguing that her husband was not in fact a state employee performing public functions and does not qualify as a PEP. Her lawyers referred to him as a “fat-cat international banker” whose wealth comes from his commercial activities. Her lawyers further argued, inter alia, that the UWO offended Ms. Hajiyeva’s rights under rights under article 1, protocol 1 of the European Convention on Human Rights (right to peaceful enjoyment of property). The court disagreed and dismissed her application to discharge the order, ruling, respectively, that the International Bank of Azerbaijan is a state-owned enterprise and both Jahangir Hajiyev and his wife are PEPs, and that the interference in their right to peaceful enjoyment of their property on account of the UWO is “proportionate” and “strikes a ‘fair balance’.”
The judgment also considered the issue of self-incrimination since Mrs. Hajiyeva argued that the order offends her privilege against self-incrimination. But the court did not agree, reasoning that the disclosure of information under the UWO about the property does not create “a real and appreciable risk” of further criminal prosecution for Mrs. Hajiyeva or her husband in the UK or in Azerbaijan. Notably, the Justice also took the view that in creating the UWOs, the UK parliament “necessarily intended that the privileges be abrogated” (referring to self-incrimination and spousal privileges). [See National Crime Agency v Hajiyeva (Rev 1)  EWHC 2534 (Admin)]
We would like to thank Jon Mack (Serious Fraud Office, UK) for his insightful comments on this Spotlight piece.