By 14 April, 2020 0 Comments Read More →

Fresh Unexplained Wealth Orders granted following new Court of Appeal ruling

A recent ruling from the Court of Appeal encouraged the National Crime Agency to push forward with its use of Unexplained Wealth Order applications.

The Court of Appeal dismissed an appeal by Zamira Hajiyeva who must now divulge the source of funds used to purchase properties or risk their seizure. In this, first case, brought by the Agency, the BVI authorities informed it that the beneficial owner of Mrs Hajiyeva’s properties was in fact her husband Mr Hajiyev, who is imprisoned in Azerbaijan for fraud and embezzlement.

The Crime Agency is likely to have been pleased with this confirmation which proved the effectiveness of Unexplained Wealth Orders as a useful tool to fight corruption.

Unexplained Wealth Order against Kazakh elite

Unexplained Wealth Orders were then brought against three properties thought to be beneficially owned by Nurali Aliyev the grandson of the former Kazakh president Nursultan Nazarbayev (who is currently Chairman of the Security Council of Kazakhstan) and against Mr Aliyev’s mother who is a leading political figure in Kazakhstan, Dariga Nazarbayeva.

The properties being challenged are estimated to be worth in the region of £80 million, consisting of:

  • a high-security mansion with an underground swimming pool on Bishops Avenue, a highly desirable street in London locally known as ‘billionaires row’;
  • a set of luxury apartments in Chelsea; and
  • a mansion in Highgate with expansive views over London.

The Crime Agency alleged that all three properties were acquired as a means of laundering the proceeds of unlawful conduct by Mr Aliyev’s father, Rakhat Aliyev, who had been accused of crimes including murder before being imprisoned in Austria, where he died in February 2015 (awaiting trial for murder).

In an interesting turn of events the English High Court handed down judgment on 8 April 2020 discharging the Orders and relating interim freezing orders. Due to COVID-19 the hearing was conducted by videolink.

Background to Unexplained Wealth Orders

The United Kingdom, in the 2017 Criminal Finances Act, gave its enforcement agencies new powers to apply for the Orders. The Orders, as shown in the above cases, are usually supported by interim freezing orders, which prevent the dissipation of assets and require disclosure of information on the source of funds used the purchase the properties to be provided to the relevant authorities.

What is the process?

In order to obtain an Unexplained Wealth Order the relevant authority must make an application to the High Court. In England and Wales the authorities able to do so are:

  • The Crime Agency;
  • Her Majesty’s Revenue and Customs;
  • the Financial Conduct Authority;
  • the Serious Fraud Office; and
  • the Crown Prosecution Service.

In practice, it has been the Crime Agency which has brought all applications to date. The Orders will usually be applied for without notice being given to the respondent. This means the responsibility is on the authorities to make full and frank disclosure to the Court – not doing so will create grounds for a challenge to the Unexplained Wealth Order.

Who can such Orders be served against?

People who own property which is valued above £50,000 where there is an obvious gap between the value of the asset and the known income of the person who owns it.

Unexplained Wealth Orders are aimed at: (i) politically exposed persons, such as politicians and those connected closely to them (who are deemed to be at higher risk of corruption due to their position and influence); or (ii) suspects of crime, whether in the UK or abroad.

The Orders extend to connected persons. This is broadly defined by the Corporation Tax Act 2010 and includes relatives, spouses, or companies controlled by the individual in question. This means that joint interests in property, such as those of married couples, where the asset may have been placed in a wife’s or husband’s name, will be caught by the provisions of the Orders.

Requirements of Unexplained Wealth Orders

The Orders require the owner of an asset to explain how they were able to afford it. The Orders have been described by Sir Vince Cable, leader of the Liberal Democrat Party, as requiring “oligarchs [to] explain in writing, with detailed documentation, just how they obtained their fortunes“.

An individual served with such an Order will be required to provide such explanations, including:

  • the type and extent of their interest in a particular property; and
  • how the property was purchased – where their known, lawfully-obtained income would be insufficient to allow such a purchase.

There is no fixed time limit for the explanation to be provided but the High Court has power to impose the time limits it considers necessary.

Targets for Unexplained Wealth Orders

The list of nationalities suspected of money laundering in the UK is long, but so far the focus of these provisions has turned towards Russian-speaking individuals from the CIS. Due to an aggressive stance by enforcement agencies toward money laundering, there is a clear shift away from the relatively low-regulation financial culture that until recently meant London has been considered an attractive place to conduct business, particularly by wealthy individuals from the former Soviet Union.

Transparency International (a group which combats corruption in the UK) has recently published a report which identifies more than 140 properties in London worth a total of £4.2 billion that they say “were bought by individuals with suspicious wealth“.

It is important for those in that position to remember that if, in response to an Unexplained Wealth Order, they provide an adequate, not false or misleading, statement on the source of their wealth relevant to a property, the burden of proving any offence remains with the authority which sought the Order. For example, a businessperson may be able to point to public business interests, such as interests in a manufacturing business or a stake in a public company. Careful compliance with the Orders is therefore key.

It will also be important, if served with such an Order, to review whether full and frank disclosure was provided to the Court when the application for such an Order was made. If not, this may have had an impact on the success of the application and it may be possible to make submissions to the Court to contest the order.

Where an individual has been incorrectly served with an Unexplained Wealth Order, they have a statutory right of compensation if they can show a loss, and that there was a “serious default” on the part of the authority that applied for the order.

Action

Should you have been served with an Unexplained Wealth Order or think that you might be served with one, it is important to seek immediate legal advice. Specialist legal representatives will be able to advise you of your rights and how to best protect your assets.

Conclusion

The Crime Agency has said it will appeal the High Court’s ruling discharging the Unexplained Wealth Orders against Mr Aliyev. It is clear the Crime Agency wishes to push forward by using Unexplained Wealth Orders as a tool for fighting money laundering and cleaning up the UK’s image as being hypocritical in complaining of corruption abroad but indulging it ‘at home’. In order to do so, it will need to cement its position with these cases which will be used as a precedent for further action. In the circumstances, it remains to be seen the ultimate outcome.

James Collins, Yuri Botiuk, Ben Wells
Partners at CANDEY Law Firm, London

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