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7 November 2018 / by / in

Unexplained Wealth Orders – To Be or Not to Be

The first court ruling on how the UK is going to approach Unexplained Wealth Orders provides invaluable reading. In National Crime Agency v Mrs A [2018] EWHC 2534 (Admin) the High Court made an Unexplained Wealth Order (UWO) against Mrs. A who was eventually identified as Zamira Hajiyeva. She is the wife of jailed Azerbaijani state banker, Jahangir Hajiyev, convicted of fraud and embezzlement in 2006 against the International Bank of Azerbaijan – an organisation of which he was chairman. According to the National Crime Agency (NCA), he was ordered to pay US$36million and received a jail term of a staggering 15 years.

The UWO was made against a London property, valued at over £11million, which Mrs. A lived in and which was purchased by a company registered in the British Virgin Islands. The beneficial owner of this company was, according to the NCA, Mr. A, although in her application for indefinite leave to the UK, Mrs. A claimed to be the beneficial owner.

A particularly controversial part of this judgment is that the court took into account Mr. A’s convictions for fraud and embezzlement in Azerbaijan. This is problematic because there is a fair argument that Mr. A did not receive a fair trial. For example: his lawyers, who provided statements to the High Court, claimed not to be able to cross-examine a number of witnesses, or submit written evidence on Mr. A’s behalf. At his trial Mr. A claimed that any money withdrawn from the bank was for legitimate projects. However, the High Court ruled that it would be impermissible to exclude a foreign conviction, even one obtained in flagrant breach of article 6 ECHR, unless it resulted from a confession obtained through torture.

The effect of this ruling would then presumably allow a UWO to be made on the back of a political show trial, whereby all of the basic protections under article 6 were ignored, perhaps something akin to Franz Kafka’s The Trial. Such a conviction, it seems, would still be considered as relevant to a UK court even if torture was used, provided that there was no resulting confession. This, it is submitted, cannot be right and it is at odds with the duty all UK Courts have by virtue of the Human Rights Act, 1998 to follow the ECHR.

The High Court did cover itself by pointing to the fact that Mrs. A did spend a total of £16,309,077.87 between September 2006 and June 2016 in Harrods through credit cards issued by the International Bank of Azerbaijan. She herself had no income independent of her husband. However, one cannot ignore the argument that surely no English Court should issue a UWO based on an unfairly obtained conviction. The problem with that approach is that it can draw a distinction between those perceived as being genuinely persecuted, and those who are not so perceived. So, for example, Mikhail Khodorkovsky can be seen by many in the West as someone persecuted by Putin’s Russia. He has a number of convictions for corporate and tax fraud, yet no one is serious about issuing a UWO against him.

A further problem is that this case illustrates the complete reversal of the burden of proof. Mrs. A claimed her husband had a successful financial career in the 1990s. However, she could not prove it. This was not just due to the passage of time, but also due to the fact that she had fled Azerbaijan and was now seeking refuge in the UK, and therefore she would not be in a position to readily access paperwork relating to her husband.

Like much of The Proceeds of Crime Act 2002, those who are pursued are very much at a disadvantage. When asset recovery was first devised it was against fraudsters and drug-dealers and it was intended to disgorge from them their criminal profits. UWOs were intended to be a tool to allow rich oligarchs to be held to account. However, like much in life each case depends on its own merits and the problem here is that many of these oligarchs come from countries that do not abide by the rule of law. On that basis there is a real danger the UWO system will in effect import those abuses here; and it is easy to ignore that when just looking at Mrs. A’s receipts from Harrods.

The latest court ruling is significant in that more individuals will find themselves in the crosshairs of those who pursue them. It remains to be seen how useful law enforcement agencies such as the Serious Fraud Office, National Crime Agency and Her Majesty’s Revenue and Customs will find UWOs and how often they will be implemented. So far they have been used to obtain information about the ownership of high value real estate. However banks and other financial institutions will no doubt need to consider the precautions they should take in the event that they are placed on notice that one of their investors is the subject of a UWO.

George Kampanella

Admitted as a solicitor in 1997, George specialises in fraud matters and regularly conducts complex and high profile cases. He has particular expertise in advising clients who find themselves under active investigation by the Serious Fraud Office, Metropolitan Police, HM Revenue and Customs, National Crime Agency and the Police Central e-Crimes Unit. George also acts for individuals facing investigation under Medicines & Healthcare Products Regulatory Agency and health professional regulatory bodies.

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