Unexplained Wealth Order
Posted on 16th October 2018
Perhaps better known as Mrs A – Zamira Hajiyeva will now be required to reveal how she came to own £22m worth of London property following an unsuccessful challenge by her to the granting of an Unexplained Wealth Order. She must also explain her ownership of a golf club. The court also subsequently lifted the order protecting her identity.
These orders, the latest tool in the arsenal to fight fraud and organised crime (or rather to assist in the recovery of illegitimate assets), came into force earlier this year by virtue of the Criminal Finances Act 2017. This Act retrospectively inserts sections 362A-362I into Chapter 2 of Part 8 of the Proceeds of Crime Act 2002.
The UWO itself is only a requirement for the provision of information as to how that property was purchased. Seems reasonable you may think for an enforcement agency to seek such information. The orders are not designed to force Mrs Hajiyeva to reveal the source of her extravagant spending (£1.6m / year) in Harrods though.
However, the issues of the debate will arise from the basis of the application and more importantly whether the respondent does, in fact, provide the information sought. Any such application for an order must satisfy four conditions:
- The Respondent must ‘hold’ the property;
- The property must be valued in excess of £50,000;
- There are reasonable grounds for suspecting that the known sources of the respondent’s (lawful) income would be insufficient for the purchase of the property;
- Any one of the following:
A) The respondent is a politically exposed person or PEP;
B) There are reasonable grounds to suspect that the respondent is, or has been, involved in serious crime;
C) Any person connected with the respondent is or has been, involved in serious crime.
Therefore if the Respondent is not a PEP then all that is required are reasonable grounds to suspect that the property was obtained with means beyond that of the Respondent and that they, or a person connected to them, may have been involved in serious crime. This is, in reality, a very low threshold – lower than the standard in criminal and civil trials. Indeed if the Respondent is a PEP (from outside of the EEA) then there is not even a requirement to show any reasonable suspicion that the person (or associated persons) may have been involved in serious crime.
We can, therefore, expect, given the relatively low threshold, that there will be a rise in the applications for these orders.
However – what is the difference between these new orders available under the revised POCA 2002 Act and those which are already there? An enforcement agency can obtain a disclosure order as part of a Restraint Order or a Property Freezing Order so why create the UWO if only for disclosure purposes? The answer most likely lies behind non-compliance.
Mrs Hajiyeva is being treated as a PEP. She is the wife of a former chairman of an Azerbaijan state-controlled bank (therefore outside the Economic European Area). Mr Jahangir Hajiyev himself faces criminal charges in Azerbaijan for fraud and embezzlement. The London property was purchased nearly 10 years ago by a company formed in the British Virgin Islands. The NCA argue that the property could never have been afforded on her husband’s salary alone.
So on the face of it, this would appear to be a perfect test case – the legislation could have in fact been written to fit Mrs Hajiyev’s situation.
So what happens with non-compliance of the order? Well, a cynical observation may be that this is what the authorities are hoping for and why the legislation is drafted in the way it is.
If a Respondent fails without reasonable excuse to provide the information requested then: “The property is to be presumed to be a recoverable property for the purposes of any proceedings taken in respect of the property under Part 5 [of POCA], unless the contrary is shown”.
So if the Respondent fails to comply then there is a presumption that the property would be recoverable under the Proceeds of Crime Act and the burden of proof would be with the Respondent to demonstrate that the property is not recoverable. This may well cause some respondents difficulty.
However, if the Respondent does comply, or purports to comply, then the applicant authority only gains information and must then decide whether to bring an alternative enforcement action in the normal way.
Purporting to comply will itself no doubt give rise to clarification by the courts in the near future as this is rather an ambiguous language and very much open to interpretation. Providing false or misleading information in purported compliance of the order may result in separate criminal proceedings for perjury.
So as it stands Mrs Hajiyev, unless she is prepared to accept the inevitable recovery proceedings which will follow, will need to provide the information which will be set out in the UWO. This judgement is a significant boost to the enforcement agencies and will give encouragement to make the applications. Whether they will do so remains to be seen. Mrs Hajiyev has however sought leave to appeal the order and so we may have to wait a little longer to see the outcome of the first use of this new power.
The enforcement agencies that can apply for a UWO are the NCA, HMRC, CPS, FCA, SFO & DPP.
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