The decision of the High Court to uphold an Unexplained Wealth Order (UWO) against Zamira Hajiyeva has been trumpeted as a huge success for the National Crime Agency (NCA). We examine the circumstances in which a UWO can be made and the implications for HNWs.
What is an UWO?
A UWO will be granted against the owner of property if an enforcement authority (such as the HMRC, NCA or SFO) satisfies the High Court that:
- The property concerned is valued at £50,000 or more;
- There are reasonable grounds for suspecting that the known sources of the owner's lawfully obtained income would be insufficient for the purposes of enabling them to obtain the property; and
- The owner is a "PEP" (politically exposed person, i.e. an individual who is, or has been, entrusted with prominent public functions by an international organisation or non-EEA state, or someone connected to such an individual); or
- There are reasonable grounds for suspecting that the owner is, or has been, involved in serious crime (anywhere in the world) or a person connected with owner is, or has been, so involved.
A UWO can be made without notice, so an owner of property is unlikely to have the opportunity to argue against an application. Once a UWO is granted, the burden of proof shifts, putting the owner in the position where they must prove that they purchased the property using lawfully obtained funds. If the owner fails to provide the necessary evidence the property can be confiscated.
What are the potential issues?
The threshold for granting a UWO is comparatively low. All that the enforcement authority must demonstrate is that there are reasonable grounds for their suspicions (this could, for example, be based on uncorroborated evidence from an informant). PEPs are vulnerable to UWOs being granted with little evidence of wrongdoing, by reason of their status alone and HNWs may find themselves in receipt of a UWO merely because of an alleged relationship with someone suspected of a crime somewhere in the world.
Once a UWO is granted, a property owner is forced into a position where they must prove the source of their wealth in order to retain their legitimately acquired property. This is likely to entail the disclosure of complex and confidential financial information and to incur significant costs. The granting of a UWO also has the potential to inflict reputational damage.
The UWO against Ms Hajiyeva was the first to be issued but the NCA is understood to be preparing a number of other applications. HNWs who have acquired their wealth entirely legitimately but who have either held public office or who are in some way connected to someone who either held public office or is suspected of criminality (or both – we can't choose our relatives) may decide against investing in the UK and this may have an impact on the attractiveness of the UK as a destination for investment.
The court of appeal has lifted a veil of secrecy to allow the publication of details of the UK’s first unexplained wealth order (UWO), in which the National Crime Agency alleges that stolen funds were used to buy a £11.5m, five-bedroom property in Knightsbridge, 100 yards from the doors of Harrods. The court heard that Hajiyeva spent £16.3m at Harrods between 2006 and 2016.