Unexplained Wealth Orders: Prepare Yourself for Scrutiny

February 24, 2020

The UK Government in January 2018 passed the Criminal Finances Act 2017 (the “Act”). The Act introduced Unexplained Wealth Orders (“UWOs” or “Orders”) as part of its strategy to tackle UK money laundering, corruption and terrorist financing. UWOs empower all the significant investigating authorities to compel individuals to provide information about assets they own in the UK and, in successful cases, will make it easier to confiscate those assets.1 The National Crime Agency (“NCA”) brought the first case in February 2018. The NCA’s case against Zamira Hajiyeva (“ZH”),2 and ZH’s subsequent appeal,3 is a good example of how investigators use UWOs to exert real pressure on High Net Worth individuals (“HNWs”) implicated by the Act. So far, the NCA has utilised their powers against four individuals, including ZH, to seek information regarding assets totalling over £115.2 million.

This OnPoint – following Dechert’s 2017 “Dirty Money” Trilogy on the UK Criminal Finances Act 2017 – examines the lessons learned from ZH’s case, and considers the implications for HNWs with assets in the UK. Dechert has also been quoted in the national press discussing this issue.4

Executive Summary

An individual or company served with a UWO faces onerous requirements placed on it to explain the source of their UK assets as well as potentially significant reputational damage. HNWs should seek advice now to protect their position in the event of an application for a UWO which affects their property. Dechert can advise on the appropriate next steps.

Unexplained Wealth Orders: A Refresher

The authorities will apply for UWOs if they believe there is a disparity between the value of a person’s assets and their lawfully obtained income. When applying for an Order, investigators will have to show that the person named in the Order is either:

a) a Politically Exposed Person (“PEP”), which is defined as –

           i.  an individual who is or has been entrusted with prominent public functions by an international organisation or a State outside the European Economic Area;

           ii.  a family member of an individual within paragraph (i);

           iii.  a close associate of an individual within paragraph (i); or

           iv.  any person otherwise connected with an individual within paragraph (i); 


b) involved (or has been involved) in serious crime, or is connected to someone who has been involved in serious crime.5

The definition of a “close associate” of a PEP includes (but is not limited to):

  • anyone who has joint beneficial ownership of a company or other legal arrangement with a PEP;
  • anyone who has sole beneficial ownership of a company or legal arrangement set up for the benefit of a PEP; or
  • any other person with close business ties to a PEP.6
In practice this means that, as well as public officials, anyone involved at a high level in state (or state controlled) business, individuals with commercial interests connected to state business, and those who have conducted business with someone who is or has been accused of being involved in serious crime could be affected.
Use of UWOs in 2019
Since the ZH case in 2018, the NCA has continued to use UWOs throughout 2019, securing UWOs against 17 properties with a total estimated value of £93.2 million. The NCA also obtained interim freezing orders over the properties to prevent their dissipation or transfer.
The UWOs relate to:
  • three properties worth over £80 million at the time of purchase held by offshore companies said to be linked to a politically exposed person who the NCA believes is involved in serious crime;7
  • eight properties worth £10 million owned by a property businessman, which the NCA believes were purchased using funds from the supply of firearms, armed robberies, and drug trafficking. This is the first UWO that was obtained solely based on an individual’s alleged involvement in serious organised crime;8 and
  • six properties worth £3.2 million that the NCA believes belong to a Northern Irish woman suspected of association with criminals involved in paramilitary activity and cigarette smuggling.9
HNWs and PEPs with a significant of amount of cash and valuable assets in the UK should take note that their circumstances may pique the interest of the authorities and loss of assets could result.  
The Zamira Hajiyeva Case
ZH is married to Jahangir Hajiyeva (“JH”), former chairman of the state-controlled International Bank of Azerbaijan (the “Bank”). In 2015, after a trial in Azerbaijan, JH received a fifteen year prison sentence for fraud and embezzlement of more than £100 million during his tenure as chairman of the Bank. In February 2018 the NCA commenced proceedings against ZH. When applying for the UWOs, the NCA argued that, as the wife of a former state official (the chairman of a state bank), ZH was a PEP. Although the NCA referred to JH’s criminal conviction in the application, it chose to pursue ZH as a PEP, rather than as a person connected to someone involved in serious crime. As a result, the High Court granted the NCA interim (temporary) UWOs relating to two properties (the “Orders”).
The Orders require ZH to provide information about her home in Knightsbridge (the “Knightsbridge Order”), which she bought for £11.5 million in 2009, and Mill Ride Golf Club, which the NCA believes ZH owns jointly with JH and purchased for £10.5 million in 2013 (the “Properties”). The NCA asserted that both Properties were purchased using funds obtained by or connected to JH’s fraud.
The High Court also granted interim freezing orders over the Properties. The freezing orders prevent ZH from selling, transferring or otherwise dissipating the Properties until the conclusion of the case. As the Orders were made without notice (i.e. in private), ZH only became aware of the UWOs and freezing orders after the High Court had granted them. The High Court also attached a “penal notice” to the Orders, warning ZH that if she fails to provide the information requested, she could be held in contempt of court. Contempt of court is a criminal offence carrying a maximum sentence of two years in prison. Consequently, if ZH fails to provide the requested information, she may be prosecuted, fined, and even imprisoned.
At the start of the proceedings, reporting restrictions prevented the media from publishing the identities of ZH and JH, but in October 2018 the High Court lifted those restrictions. The High Court held that, according to the normal rules of open justice, there was no good reason for keeping the identities of ZH and JH confidential. As a consequence, details of ZH’s property and spending habits have been widely reported.
ZH appealed the without notice Knightsbridge Order to the High Court to have it discharged.10 ZH argued, inter alia, that (i) her husband, JH, was not a PEP, (ii) the NCA had not established the income requirement to the relevant standard, and (iii) the NCA was wrong to rely on JH’s conviction. On 3 October 2018, the High Court dismissed ZH’s appeal and upheld the Knightsbridge Order. As a result of the proceedings, ZH’s personal financial information was widely reported.
ZH subsequently appealed against the High Court’s order to comply with the UWO to the Court of Appeal. ZH submitted arguments that the High Court judge’s interpretation of a PEP and determination of the satisfaction of the income requirement were wrong, and that the UWO was a wrong and disproportionate exercise of the High Court’s discretion. However, on 5 February 2020, ZH’s appeal was dismissed. ZH must now comply with the Orders and explain the source of her money used to purchase the assets. If ZH fails to do so, she could go to jail.
Separately, prosecutors in Azerbaijan sought to extradite ZH to Azerbaijan on charges of embezzlement. In September 2019, Westminster Magistrates’ Court blocked ZH’s extradition on the grounds that ZH would not receive a fair trial in Azerbaijan.
Key considerations for HNWs affected by UWOs
The case highlights a number of issues which will concern HNWs with assets in the UK.
  1. The imprecise definition of PEP
    The definition of PEP comes from EU legislation11 and is imprecise and broad in order to capture the PEP, their family and associates. The definition includes board members of central banks and members of the management or supervisory bodies of state-owned companies, and their family members. Applying that definition, the Courts had no difficulty in finding that ZH, as the wife of a former chairman of a majority state-owned bank was a PEP. ZH was not involved in any criminal conduct and is not a public official herself.

  2. Information provided will be used to confiscate assets
    Using relevant information, if the investigator proves on the balance of probabilities (i.e. that it is more likely than not) that the property is (or has been purchased using) criminal property, having been obtained through unlawful conduct, the property will be confiscated.

    If the subject of the Order fails to provide the information requested in a UWO without a reasonable excuse, the High Court will assume that the asset is criminal property, unless the subject of the Order proves (again, on the balance of probabilities) that the property was financed lawfully. By assuming the asset is criminal property, the High Court effectively shifts the burden of proof from the investigator to the owner.

  3. Information provided could incriminate HNWs outside the UK
    ZH successfully challenged the application to extradite her to Azerbaijan to face criminal charges of embezzlement. If she had lost that challenge, her responses to the UWOs could have strengthened the evidence against her in any prosecution in Azerbaijan. Although the legislation prohibits using a person’s responses to a UWO against them in criminal proceedings, that prohibition only applies in the UK. A criminal court overseas may not recognise that prohibition, which means prosecutors overseas could use a person’s statements in the UWO proceedings as evidence against them in an overseas prosecution.

  4. Failure to comply can be a criminal offence
    Anyone who deliberately or recklessly makes a materially false or misleading statement in response to a UWO commits an offence and, if found guilty, can be sentenced to a fine or imprisonment of up to two years. Separately, if the investigator or the High Court believes that a person has deliberately or wilfully failed to comply with the UWO, the investigator may ask the High Court (or the High Court may decide itself) to prosecute that person for contempt of court. If found guilty, the sanction is either a fine or imprisonment of up to two years.

  5. Interim Freezing Orders prevent dealing with affected assets
    Alongside the UWOs, the High Court in ZH’s case and subsequent 2019 cases also made interim freezing orders. An interim freezing order is a temporary order which prevents the person named in the order from selling or otherwise dealing with the affected assets pending the outcome of the UWO application. An interim freezing order also prevents anyone with knowledge of the freezing order from helping to dispose of the asset. Anyone who knowingly breaches an interim freezing order can be held in contempt of court, fined or imprisoned and have their assets seized.

  6. Adverse publicity
    ZH’s case makes clear that HNWs will need to have a cogent reason for keeping cases private. The High Court prevented the media publishing ZH’s identity at the outset of the proceedings because the NCA applied for the Orders in private. When ZH could not demonstrate grounds for keeping the case private the High Court lifted the reporting restrictions, applying the general rule that court proceedings in England should be public. Consequently, ZH’s personal spending habits, details of her and JH’s assets in the UK, together with details of her extradition proceedings and JH’s prosecution in Azerbaijan, have all been widely publicised.

Conclusion: Prepare for Scrutiny

HNWs need to be prepared to respond quickly to a UWO where it affects their property in the UK. Where HNWs do not legally own the property, i.e. if the property is owned by a company or trust (registered in the UK or overseas), that property is vulnerable. Timely legal advice (before any proceedings are issued) will maximise the strategic options available, and limit the risk of adverse publicity if any court proceedings are made public.
Dechert is confident that the investigating authorities will bring more and increasingly sophisticated applications for UWOs. HNWs should prepare themselves now for enhanced scrutiny, or risk very public potential embarrassment, and possibly even criminal exposure.
How Dechert Can Assist
Dechert has considerable experience of advising individuals and companies in connection with interactions with UK investigating authorities and the courts.
Dechert can assist you by ensuring that you are adequately prepared to respond promptly to a request for information regarding your property in the UK. Dechert can advise you on the risk of an investigator applying for a UWO which affects your property and guide your response if a UWO is served on you. Dechert can represent you in court and defend your interests in any application for a UWO, whether you are the person named in the Order, or someone with an interest in the property. Dechert can also help you to manage the risk of any adverse publicity as a result of such proceedings.
If you have any questions or you want to discuss the issues in this alert with one of our experts, please contact Matthew Cowie on +44 20 7184 7417 or Timothy Bowden on +44 20 7184 7598.
  1. They are the National Crime Agency; HM Revenue & Customs; the Financial Conduct Authority; the Serious Fraud Office; and the Crown Prosecution Service.
  2. National Crime Agency v Mrs. A [2018] EWHC 2534; [2018] All ER (D) 21 (Oct).
  3. Zamira Hajiyeva v National Crime Agency [2020] EWCA Civ 108.
  4.  “Are unexplained wealth orders the cure for Britain’s reputation as a haven for dirty money?” by Henry Foy and Barney Thomson, Financial Times, 30 April 2018.
  5. “Connected Person” is defined widely and includes relatives, business partners, fellow directors and connected companies. The full definition of “connected person” is set out in footnote 11 of our previous OnPoint on Unexplained Wealth Orders.
  6. The full definition of “close associate” is set out in footnotes 10 and 11 of our previous OnPoint on Unexplained Wealth Orders.
  7. NCA secures Unexplained Wealth Orders for prime London property worth tens of millions,” National Crime Agency, 29 May 2019.
  8. NCA secures first serious organised crime Unexplained Wealth Order for property worth £10 million,” National Crime Agency, 18 July 2019.
  9. NCA secures Unexplained Wealth Order against properties owned by a Northern Irish woman,” National Crime Agency, 31 July 2019.
  10. The implementation of the Order relating to the Mill Ride Golf Club was stayed pending the resolution of the Knightsbridge Order proceedings.
  11. European Union Fourth Anti-Money Laundering Directive 2015/849.

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