Unexplained Wealth Orders in the UK: What Will This Year Bring?

When it comes to unex­plained wealth orders (UWOs), the UK’s much-vaunt­ed tool to tack­le crim­i­nal wealth, 2020 was a rollercoaster.

Pound.

It saw the National Crime Agency’s (NCA) first fail­ure to defend in court the issuance of sev­er­al UWOs against prop­er­ties owned by a polit­i­cal­ly con­nect­ed Kazakh fam­i­ly, but also its first suc­cess in con­fis­cat­ing £10 mil­lion worth of real estate from an alleged organ­ised crime fig­ure who was com­pelled to explain his wealth.

Now that UWOs have moved from the realm of the­o­ry to prac­tice, their poten­tial and lim­i­ta­tions are increas­ing­ly appar­ent, although still wide­ly mis­un­der­stood. It is inevitable that more UWOs will fol­low this year, and clar­i­ty about what they are and what they do is key to keep­ing both suc­cess­es and set­backs in prop­er perspective.

HOW DO UWOS OPERATE?

A com­mon mis­con­cep­tion is that a UWO requires the per­son on whom it is served – the respon­dent – to prove the legit­i­mate ori­gins of one’s assets or face their con­fis­ca­tion. This is only some­times the case.

To begin with, there are sev­er­al require­ments that must be sat­is­fied for a UWO to be issued, as laid out in the Proceeds of Crime Act 2002. These include there being a prop­er­ty worth over £50,000 whose prove­nance is unex­plained, in that there are ‘rea­son­able grounds for sus­pect­ing that the known sources of the respondent’s law­ful­ly obtained income would have been insuf­fi­cient’ to obtain it.

The respon­dent must be either a high-rank­ing pub­lic offi­cial (‘polit­i­cal­ly exposed per­son’) from out­side the European Economic Area or be sus­pect­ed of links to organ­ised crime.

Once issued, a UWO com­pels the dis­clo­sure of cer­tain infor­ma­tion about how the respon­dent could afford the prop­er­ty. In case of non-com­pli­ance, the prop­er­ty is pre­sumed to be liable to civ­il recov­ery, the UK’s term for con­fis­ca­tion in the absence of crim­i­nal con­vic­tion. In that sense, the bur­den of prov­ing the legit­i­mate ori­gin of the prop­er­ty shifts onto the respon­dent.

Crucially, an uncon­vinc­ing response does not amount to non-com­pli­ance. The leg­is­la­tion states that ‘pur­port­ed com­pli­ance’ is to be treat­ed as com­pli­ance, and when pressed on the mean­ing of this admit­ted­ly abstruse pro­vi­sion in Parliament, Baroness Williams, then min­is­ter of state at the Home Office, explained: ‘Given the severe con­se­quences of not com­ply­ing, it is right that this rebut­table pre­sump­tion should not apply to a per­son who pur­ports to pro­vide a response’.

As bar­ris­ter James Mather notes, not every­thing can be por­trayed as pur­port­ed com­pli­ance, and ‘sim­ply serv­ing a blank doc­u­ment on time’ will not fly, but beyond that it remains to be seen where the courts will draw the bound­ary.

One must of course bear in mind that pro­vid­ing false infor­ma­tion in response to a UWO is a crim­i­nal offence, but con­vic­tion will require prov­ing the offence beyond rea­son­able doubt, where­as the rai­son d’être of UWOs is pre­cise­ly to facil­i­tate law enforce­ment action where lit­tle evi­dence is oth­er­wise avail­able.

The UWO is there­fore any­thing but a straight­for­ward means of enabling the con­fis­ca­tion of crim­i­nal pro­ceeds. It is much rather like a hybrid beast with the head of a dis­clo­sure order and the body of a civ­il recov­ery tool.

In fact, the Home Office’s Code of Practice calls it ‘an inves­ti­ga­tion tool … intend­ed to assist in build­ing evi­dence’. It also sug­gests the law enforce­ment agency should con­sid­er ‘whether alter­na­tive tools of inves­ti­ga­tion could be used in obtain­ing any rel­e­vant doc­u­ments and infor­ma­tion’, which is hard­ly the lan­guage one would use about an instru­ment expect­ed to pro­duce a seis­mic shift in the country’s response to eco­nom­ic crime.

EXPERIENCE TO DATE

As of now, 15 UWOs in four cas­es are a mat­ter of pub­lic record. The inau­gur­al UWO case involves Zamira Hajiyeva, whose hus­band used to chair an Azerbaijani state-owned bank and who received con­sid­er­able media atten­tion for report­ed­ly spend­ing £16 mil­lion in Harrods. Her attempts to have the UWOs dis­charged failed, with the Supreme Court refus­ing per­mis­sion to appeal in January 2021. We can expect to see before long whether her response to the UWO – or a fail­ure to pro­vide one – will result in civ­il recov­ery pro­ceed­ings.

In con­trast, Dariga Nazarbayeva, the daugh­ter of Kazakhstan’s ex-pres­i­dent and until recent­ly the chair of the country’s Senate, was more suc­cess­ful in UK courts. In that instance, the NCA obtained UWOs in rela­tion to UK real estate that it thought had been pur­chased by the late Rakhat Aliyev, Nazarbayeva’s ex-hus­band and con­vict­ed crim­i­nal. The UWOs were served on a pro­fes­sion­al trustee and four over­seas cor­po­rate enti­ties that were the legal own­ers of the prop­er­ties.

The NCA received rep­re­sen­ta­tions that Aliyev him­self had lit­tle to do with the prop­er­ties and their ulti­mate ben­e­fi­cial own­ers were Nazarbayeva and her son, but nonethe­less insist­ed on com­pli­ance with the UWOs. In quash­ing the UWOs, the High Court effec­tive­ly ruled that the NCA was wrong to serve them on the pro­fes­sion­al trustee and cor­po­rate enti­ties involved – an issue that can­not be ful­ly explored in this piece but has, in the words of Kennedy Talbot, ‘the capac­i­ty seri­ous­ly to derail the util­i­ty of UWOs in cas­es where they are most need­ed’.

The NCA’s most suc­cess­ful UWO expe­ri­ence so far was with Mansoor Mahmood Hussain, a busi­ness­man in Leeds with report­ed links to organ­ised crime. Having unsuc­cess­ful­ly sought to chal­lenge the UWO, he then sub­mit­ted a 76-page state­ment that ‘inad­ver­tent­ly gave NCA inves­ti­ga­tors clues to make a big­ger case against him’ and prompt­ed him to sur­ren­der assets to the tune of £10 mil­lion in set­tle­ment. One case alone is not rep­re­sen­ta­tive, but RUSI’s Helena Wood has argued cogent­ly why UWOs may con­sis­tent­ly prove more effi­ca­cious in organ­ised crime cas­es than in over­seas cor­rup­tion ones:

[Organised crim­i­nals] are less like­ly [than over­seas politi­cians] to use com­plex struc­tures, they’re less like­ly to need a veneer of respectabil­i­ty as they oper­ate and are less like­ly to want to reveal the kind of greater [expanse] of their crim­i­nal empire, as hap­pened in the Mansoor Hussain case.

WHAT NEXT?

There is no doubt that there are fur­ther UWO cas­es in the pipeline, and we are like­ly to observe three trends. First, when a UWO can be issued will remain a hot­ly con­test­ed top­ic and con­tin­ue to be sub­ject to lit­i­ga­tion. Second, we will, at some point, see courts grap­pling with the mean­ing of fail­ing to com­ply with a UWO, which trig­gers the pre­sump­tion that the prop­er­ty is liable to con­fis­ca­tion. Lastly, not every UWO will result in an attempt to con­fis­cate the assets, which is a fea­ture – not a bug – of the UK’s regime giv­en its focus on ‘infor­ma­tion gath­er­ing’.

In the mean­time, glob­al inter­est in the UK’s UWO pro­vi­sions abroad remains high. The Hudson Institute’s Kleptocracy Initiative rec­om­mends that US Congress con­sid­er intro­duc­ing UWOs, and a sim­i­lar pro­pos­al is pend­ing before the Legislature of the British Virgin Islands. These are worth­while ideas, but cau­tion should be tak­en in select­ing which coun­try to emu­late.

As explained more ful­ly in a report sub­mit­ted to Canada’s Commission of Inquiryinto Money Laundering in British Columbia by this author togeth­er with Helena Wood and Tom Keatinge, the UK’s UWO mod­el is high­ly idio­syn­crat­ic and less intru­sive than com­pa­ra­ble Australian leg­is­la­tion, which makes the UK leg­is­la­tion more human rights-friend­ly but presents effec­tive­ness trade-offs. The Irish approach, anoth­er fre­quent inter­na­tion­al com­para­tor, is also dif­fer­ent in sig­nif­i­cant respects.

The jury is still out on whether the UK got it right, and 2021 will bring us a step clos­er to know­ing the answer.

London Daily

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