Unexplained Wealth Orders – can you prove the legitimate provenance of all of your significant assets?

11 October 2018

Whether you can prove the legitimate provenance of all of your significant assets is a question an increasing number of people may have to start asking themselves. In the last week, the High Court has dismissed an appeal to discharge the first Unexplained Wealth Order (‘UWO’) brought by the National Crime Agency (‘NCA’).

This has very much been seen as the NCA’s “test case” and we imagine that this is only likely to give confidence to all of the law enforcement agencies with powers to apply for a UWO. The identity of the subject of the order, initially withheld, was revealed to be Zamira Hajiyeva - the wife of the former Chairman of an Azerbaijani state bank (himself currently serving a sentence of imprisonment for embezzlement). As has been widely reported, she has been served with a UWO and is at risk of losing her £15m Knightsbridge home.

The UK’s use of UWOs is very much in its infancy but we suspect that figures are likely to grow as prosecuting bodies gain confidence using their new tool. In this blog, we answer some of the key questions being asked about UWOs.

What is a UWO?

We have previously written in detail about what UWOs are and how they work. In essence, they are a tool used by law enforcement agencies, which allows them to require an individual to prove that a particular asset was obtained through legitimate means, e.g. that it was purchased with legitimately earned income or inherited from a legitimate source.

Isn’t it the prosecutor’s job to prove wrongdoing?

Generally, yes. However, UWOs represent an anomaly from the usual order of things in criminal litigation, most notably by reversing the burden of proof. Many commentators have highlighted the unfairness, but it is worth bearing in mind that (a) obtaining and (b) enforcing a UWO is not straightforward. To obtain an order, the prosecuting agency must satisfy the court of the following:

  1. That you own property worth at least £50,000; and
  2. That there are reasonable grounds for suspecting that your lawfully obtained income would not have been enough to purchase the asset; and
  3. That you are a politically exposed person (PEP) or a family member, “close associate” or “connected to” a PEP; or
  4. There are reasonable grounds to believe that you (or someone you are “connected to”) are or have been involved in serious crime anywhere in the world.

Obtaining an order, however, does not mean that the asset will be seized. First and foremost, the recipient of the UWO has an opportunity to prove the lawful provenance of the funds used to purchase the asset.

Can anyone be served with a UWO?

You need to fall into one of the two categories of individual eligible to be served with a UWO. However, as you will see from (3) and, in particular, (4) above, the categories are broad.

A) Politically exposed persons? - the definition of a PEP is wider than one might think and goes far beyond those actively involved in government. The law defines a PEP for these purposes as:

“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.”

Zamira Hajiyeva argued that her husband was not a PEP but the court disagreed - he was a “prominent person” within a “state-owned enterprise”.

B) Suspected involvement in serious crime? - the courts are yet to consider a UWO in this context and we are unsure of (a) what a “serious crime” is likely to be in this context and (b) what level of evidence would constitute “reasonable grounds” to suspect such crime. Given prosecuting bodies’ initial caution in applying for UWOs (it is reported that only three UWOs have been applied for in the first six months), it is likely that they will not apply for an order lightly. However, as we have seen with civil recovery schemes, as time passes (and emboldened by past successes), it is likely that law enforcement will seek increasing numbers of orders. 

I am not a PEP or a suspected criminal. Can I still be served with an UWO?

Unfortunately, the answer is yes. A family member of a PEP (which means a spouse, someone “equivalent to a spouse”, children or parents) can be served with a UWO. So too can “close associates” and people “connected to” the PEP – which includes people who jointly own businesses or properties with the PEP, relatives of a PEP or people who have “close business relations” with the PEP.

Similarly, people “connected to” someone suspected of serious crime can be served with a UWO. This may well catch the same classes of contacts as the “close associates” label does for PEPs: relatives and business partners of a suspected criminal, amongst others.

Who can apply for a UWO?

A number of law enforcement agencies can apply for a UWO. Currently, this includes the National Crime Agency, HMRC, the Financial Conduct Authority, the Serious Fraud Office and the Crown Prosecution Service.

Do I have to have a net worth of several million pounds to be served with a UWO?

Given the considerable media attention given to Mrs Hajiyeva’s lavish spending (£16m at Harrods over ten years and the property subject to the UWO is a flat in Knightsbridge supposedly worth £15m), people would be forgiven for thinking that UWOs can only apply to the ultra-wealthy. However, in fact, a prosecuting body can apply for a UWO in respect of any property worth at least £50,000.

At least initially, it is thought to be unlikely that there will be many applications for free-standing orders against such ‘lower value’ assets. But this may well change as prosecuting bodies become more proficient at applying for and enforcing UWOs. Similarly, one would imagine that agencies may well start applying for UWOs alongside or following on from criminal prosecutions (successful or not). In those circumstances, it is easier to imagine agencies applying for UWOs in respect of much lower value assets when a defendant’s known income could not account for their purchase.

Are there particular groups of people “at risk” of being served with a UWO?

There are a number of factors which heighten the risk of being served with a UWO. For example, if you, a family member or a close associate have been flagged by an anti-corruption charity as potentially harbouring the proceeds of corruption or criminal enterprises (such as Transparency International’s list of cases), it would be wise to start taking proactive steps.

Further, in a more general sense, High Net Worth Individuals who receive large portions of their income from sources not known in public are likely to be at higher risk. This is because in order to successfully apply for a UWO, the prosecuting agency has to satisfy the court that it can reasonably expect the asset could not have been purchased from lawfully obtained income – and clearly only income known to the prosecutor will be taken into account here.

Further information

If you or someone you know are or may be affected by a UWO, please contact a member of our criminal team to discuss your concerns. See also our previous blog on UWOs.

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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

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