The issue of money laundering through prime real estate in London and elsewhere has been a growing political issue for some years now and measures to combat the flow of illicit “dirty money” into the UK have been become ever higher profile as the government encourages enforcement agencies to tackle this area of crime. As part of this, new powers, under the Criminal Finances Act 2017,
came into force on 31st January 2018: unexplained wealth orders (UWOs). UWOs are designed to assist the recovery of property when it is suspected that it was obtained using the proceeds of crime or is owned by holders of an overseas public office (“politically exposed persons”) who appear to own property substantially beyond their means. The enforcement agencies that have the power to apply for such orders are the Financial Conduct Authority, the Serious Fraud Office, HM Revenue and Customs, the Crown Prosecution Service, and the National Crime Agency (NCA). It was reported in February 2018 that the NCA had lost no time in making an application to the High Court and the new powers had been used to grant an UWO. And in October 2018 the High Court dismissed the challenge to the order requesting the wife of a former banker, accused of fraud in a foreign country, to disclose how she could afford ownership of substantial assets in the UK.
On 10th October 2018 the BBC reported that Zamira Hajiyeva had lost her legal battle to stay anonymous as the first target of the new anti-corruption laws. She reportedly spent £16 million at Harrods in a decade as well as buying a golf club and private jet. She has lived in London for over a decade in her £15m Knightsbridge house. Her husband is the former chairman of the International Bank of Azerbaijan who was jailed in 2016 for 15 years for defrauding the bank out of £2.2 billion. During her unsuccessful challenge to the UWO Mrs Hajiyeva claimed her husband had become legitimately wealthy through a number of successful businesses before becoming chairman of the bank. The NCA, on the other hand, said that he had been a state employee between 1993 and 2015 and as such would not have had the means to accumulate substantial wealth.
The purpose of the new orders is to require a person to account for the origin of their assets. A UWO is made by the High Court and once served on the respondent it requires them to provide information about how they acquired the assets referred to in the order. A freezing order may apply over the property so it cannot be sold. Failure to respond with an explanation within a given timeframe, or providing unsatisfactory evidence, will mean that it is presumed the assets constitute “recoverable property” for the purposes of a civil recovery under the Proceeds of Crime Act. A statement that is recklessly or knowingly misleading is an offence punishable by up to two years’ imprisonment or a fine, or both.
To obtain a UWO, the enforcement agency must demonstrate a reasonable belief that the respondent holds the property, that the person is a politically exposed person, or that there are reasonable grounds to suspect that the respondent, or a person connected with the respondent is or has been involved in a serious crime. In addition, it must be demonstrated that the property is worth more than £50000 and there are reasonable grounds for suspecting that the known sources of income would be insufficient to obtain the property.
The NCA’s director of economic crime reportedly has said that if the High Court rules that Mrs Hajiyeva has used fraudulently obtained funds to acquire property monies it could be returned to her native country. He also suggested there were eight other people currently being pursued by the agency who originally came from Russia, former Soviet Union states, Africa and South Asia. This may be the tip of the iceberg if Transparency International’s estimate of hundreds of British properties amounting to £4.4 billion are linked to “politically exposed persons” is correct.
What does it mean?
UWOs are potentially far-reaching. A politically exposed person’s family members or business associates may be caught by an order even if there is no suspicion they are involved in a criminal offence. Interestingly, UWOs reverse the burden of proof from the investigators to the owners of the assets with the corresponding need to comply with the Human Rights legislation concerning, for example, the right to privacy.
If a UWO is served it is important that the recipient acts quickly if they wish to mount a challenge and the freezing order that accompanies it. If an individual fails to comply without reasonable excuse, this may result in the property being subject to recovery proceedings.
There are also implications for advisers. Financial advisers, for example, were always expected to comply with anti-money laundering regulations. It is important they must remain mindful of their regulatory duties or they may risk sanctions. A suspicious activity report should be considered if there are concerns as to the legitimate funding of an asset. The failure to report suspicions or “tipping off” a client is a criminal offence. Banks may become involved with a UWO if a customer is subject to a UWO accompanied by a freezing order. In such circumstances, the bank may wish to re-visit the adequacy of their procedures and whether they have satisfied themselves that the customer has a legitimate source of wealth.
Mark Kelly Fraud Defence Barrister in London, UK
Serious fraud and financial crime are a substantial part of my specialist defence barrister practice. If you find yourself under investigation for fraud, money laundering or a UWO, you will need the best professional legal advice. My experience, approachability and expertise means I can provide you with the best possible defence. I have a track record second to none, consistently obtaining the most favourable outcomes. Based in London, I also serve Manchester, Birmingham, Leeds, and Bristol as well as the rest of the UK. If you have any queries about any issues raised in this blog or any other related matters, please do not hesitate to get in touch with me directly on +44 020 8108 7186 or fill out a contact form and I will get back to you as soon as possible.