Courts uphold 'ground breaking' UK first unexplained wealth order

It has now emerged that the order was granted against Mrs Zamira Hajiyeva, wife of Jahangir Hajiyev, a former banker imprisoned for fraud and embezzlement in Azerbaijan, after the court lifted reporting restrictions originally placed on the judgment. Under the terms of the UWO, Hajiyeva must disclose to the NCA how she could afford £22 million worth of UK real estate.

Civil fraud and asset recovery expert Alan Sheeley of Pinsent Masons, the law firm behind Out-Law.com, described the order as "a ground breaking step in law enforcement's fight against crime and a leap in the right direction to clean up the UK's image of being a place where fraudsters can hide large sums of ill-gotten gains".

"However, it is important to realise that although UWOs are a civil remedy, only law enforcement agencies can apply for these orders," he said. "With continuing government cutbacks, only time will tell whether these orders will become a common tool in the fight against fraudsters more generally."

"At present, the proceeds of any unexplained wealth will be confiscated under the Proceeds of Crime Act (POCA). What is not clear, however, is how hard law enforcement agencies will fight to determine where the stolen money has come from in the first place or whether they will fight to return the proceeds to the true victims of the crime. With the Serious Fraud Office (SFO) not seeking a single compensation order last year, down from ten in 2016-17, the NCA will have to strive to demonstrate to the world that it is fighting crime and returning the money to the victims," he said.

"Further, this remedy is an 'after the horse has bolted' remedy – therefore, there is a fear that law enforcement agencies may reduce the speed of response once a fraud has been reported in respect of restraining or freezing the direct proceeds of a fraud, thinking they can use this type of order to repatriate the assets back after the conviction. Despite the UWO, it is still critically important to move as quickly as possible to freeze assets. Therefore, the self-help remedies available to victims of fraud, such as freezing orders, search and seize orders and disclosure orders, that do not require law enforcement intervention and can be obtained immediately by the victim of a fraud, should still be a victim's first port of call if they want to maximise their chances of recovering the stolen money," he said.

UWOs were first introduced in the UK in January, under the 2017 Criminal Finances Act. Once granted by the court, an UWO compels a person to explain the nature and extent of their interest in particular assets worth £50,000 or more; explain how they obtained the assets, especially how they were funded; and to disclose any other information specified in the order. Failure to comply with a UWO creates a presumption that the assets have been obtained through unlawful conduct, and they are therefore vulnerable to civil recovery proceedings.

In February, the NCA secured its first two UWOs against two properties valued at approximately £22m. Interim freezing orders were also granted, as a result of which these assets cannot be sold, transferred or dissipated while subject to the UWOs. Hajiyeva challenged the UWOs in the courts on a number of grounds, including that her husband was not a 'politically exposed person' (PEP) against whom a UWO could be granted and that the NCA had incorrectly relied on his unfair trial in Azerbaijan as evidence that he had been involved in serious crime.

As the court hearing progressed, it emerged that the NCA had already identified a number of details relating to the case which they regarded as suspicious. These included the complex corporate structures used to hold the properties, which feature a British Virgin Islands company and trusts in Guernsey. The NCA also presented evidence of Hajiyeva spending millions of pounds over the course of ten years at Harrods, including tens of thousands of pounds worth of purchases in some weeks.

Dismissing Hajiyeva's challenges to the UWO, High Court judge Mr Justice Supperstone found that as the former chair of a state-owned bank, Hajiyev was a PEP from a non-EEA country against whom a UWO could be granted. Hajiyeva, as his wife, was herself a PEP, he found.

"The NCA contends that there are reasonable grounds for suspecting that Mrs Hajiyeva's lawfully obtained income would have been insufficient to obtain the property," the judge said. "Further, the NCA contend that there are reasonable grounds to suspect that any monies originating from Mr Hajiyev were not lawfully obtained."

"[One of Hajiyev's lawyers] raises serious concerns against the fairness of Mr Hajiyev's trial. However, I do not consider that the NCA is required at this investigative stage to determine issues that may arise at a later stage, such as the fairness of Mr Hajiyev's trial, depending on any action that the NCA may decide to take ... Independent of [Hajiyev's] conviction there is evidence which provides some corroboration for the allegations made against him relating to the misuse of the bank's funds of which he was found guilty," he said.

Later, making his decision to lift the anonymity order, the judge said that the identification of Hajiyev, Hajiyeva, the non-EEA country involved and the state-owned enterprise that employed Hajiyev were "all matters of very real public interest".

"I am satisfied that the public interest in publishing a full report of these proceedings concerning the first unexplained wealth order outweighs any concerns that [Hajiyeva] may have about herself or her husband," he said. "As I have made clear in my judgment, the requirements relating to PEPs are of a preventive and not criminal nature, and should not be interpreted as stigmatising PEPs as being involved in criminal activity."

Ben Wells of Pinsent Masons said that one of the debates around the introduction of UWOs concerned the fact that, once granted, they effectively "reverse the burden of proof" from the investigating authority onto the person under investigation.

"Usually, the authority would have to prove that the individual had done something wrong, but what they are saying in this instance is 'right, you prove to me how you got this money and that its source is all above board'," he said. "In essence this has got people worried, especially Russian, Chinese, Nigerian and other investors who are bringing money into the country and purchasing high value assets such as real estate."