Unexplained wealth orders are new weapon in war on illicit assets

Britain is trying to turn round its reputation as a haven for ill-gotten gains

Oligarchs falling foul of British law include Elena Kotova, a dis­graced banker, and Mukhtar Ablyazov, accused of embez­zle­ment, ALAMY

In their pri­vate man­sions dot­ted in the Surrey hills and lux­u­ri­ous apart­ments in upmar­ket London mews, dozens of oli­garchs enjoy the trap­pings of British wealth.

Their chil­dren go to the most expen­sive schools, their spous­es wear design­er clothes and they dri­ve the best cars. They invest in uni­ver­si­ties and oth­er respectable insti­tu­tions to bol­ster their rep­u­ta­tions, which are fierce­ly guard­ed by PR com­pa­nies on eye-water­ing retainers.

Some are Russians grown fat from the spoils of President Putin’s regime. Others are busi­ness­men with links to Middle Eastern dic­ta­tors or drug traf­fick­ers from Nigeria. In many cas­es their mon­ey comes from bribery and corruption.

Britain, and its prop­er­ty mar­ket in par­tic­u­lar, has long been known as a safe haven for ill-got­ten gains. Transparency International claims that it has iden­ti­fied £4.4 bil­lion of prop­er­ty that it sus­pects was sourced from illic­it wealth, and the National Crime Agency warned in 2015 that prop­er­ty pur­chas­es using laun­dered mon­ey were dri­ving up house prices.

Britain has a poor record of recov­er­ing illic­it­ly obtained prop­er­ty not only from out­right crim­i­nals but also from politi­cians and busi­ness fig­ures sus­pect­ed of cor­rup­tion. Campaigners hope that this might change as pow­ers are intro­duced allow­ing police to seize prop­er­ty much more easily.

Unexplained wealth orders (UWOs), which came into force this week, will require indi­vid­u­als sus­pect­ed of seri­ous crime or involve­ment in bribery or cor­rup­tion to explain the source of prop­er­ty val­ued at more than £50,000. For the first time the law also extends recov­ery pow­ers to cov­er “polit­i­cal­ly exposed per­sons”, although they have to be from non-EU countries.

The National Crime Agency (NCA) is under­stood to be con­sid­er­ing two test cas­es with sev­er­al oth­ers poten­tial­ly to fol­low. Although UWOs can apply to all nations, Russians are expect­ed to be a spe­cif­ic target.

The yacht-lov­ing Sergei Pugachev hid mil­lions of pounds, GETTY IMAGES; ALAMY

If a High Court judge is sat­is­fied that there are rea­son­able grounds to sus­pect that a tar­get is a crim­i­nal, a UWO can be issued. If the sus­pect refus­es to explain the source of their wealth, the author­i­ties can move to seize the prop­er­ty under the Proceeds of Crime Act. To com­plete this process they will have to prove that the prop­er­ty was obtained ille­gal­ly — poten­tial­ly a dif­fi­cult task.

Even under the old regime some oli­garchs had their prop­er­ties con­fis­cat­ed. They include Mukhtar Ablyazov, a Kazakh busi­ness­man accused of embez­zling bil­lions of dol­lars, whose coun­try estate was sold for £25 mil­lion. He was con­vict­ed of con­tempt of court in 2012 after a High Court judge found that he had breached an order freez­ing his assets. After he fled Britain his lux­u­ry home, which had an indoor swim­ming pool, was seized and sold.

In 2016 a £1.5 mil­lion Mayfair apart­ment belong­ing to a dis­graced Russian banker was seized by the NCA along with £230,000 that she held in two bank accounts. Elena Kotova, for­mer exec­u­tive direc­tor of the European Bank for Reconstruction and Development (EBRD), was ordered by the High Court to com­ply with a civ­il recov­ery order to sur­ren­der sus­pect­ed crim­i­nal assets. She was a diplo­mat­ic rep­re­sen­ta­tive sent to the EBRD to rep­re­sent Russia.

Ms Kotova, who lived in London while at the bank, now lives in Moscow. Police said that if she were to return to Britain she would be arrest­ed on sus­pi­cion of bribery and cor­rup­tion offences.

Numerous Russians have also tus­sled with the High Court over their affairs. They include Sergei Pugachev, an oli­garch who a judge ruled in October had hid­den mil­lions of pounds in five “sham” trusts. The Financial Times said that the trusts includ­ed prop­er­ties in Battersea and Chelsea in London.

Senior law enforce­ment offi­cials described UWOs as a use­ful weapon rather than a sil­ver bul­let in the fight against crime and cor­rup­tion. One senior source said: “The UWO is an inves­tiga­tive tool, it is an order requir­ing some­one to pro­vide an expla­na­tion — it is not with­out its dif­fi­cul­ties and it is not a panacea.”

Rachel Davies Teka, head of advo­ca­cy at Transparency International, said that there was “lots of low-hang­ing fruit” to be seized. “We are com­plic­it as a coun­try in glob­al cor­rup­tion. Money is being tak­en out of health and edu­ca­tion in coun­tries around the world because we have this sys­tem which hides wealth,” she said. “Hopefully with UWOs the UK can become a more hos­tile envi­ron­ment for cor­rupt wealth.”

Fiona Hamilton (Crime and Security Editor),  Sean O’Neill (Chief Reporter)

Unexplained wealth orders are new weapon in war on illic­it assets

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