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Zoya Burbeza discusses the rise of UWOs to be expected in Fraud Intelligence

17 Oct 2019


Have UWOs lived up to the hype?

Zoya Burbeza

This article was originally published in Fraud Intelligence and can be accessed here

To appreciate the impact of important domestic changes it can sometimes help to see how they are reported through an international prism. The New York Times explained such a development last year: ‘The British authorities, who have been trying to clean up Britain’s reputation as a haven for ‘dirty money,’ now have a tool to find the answer: an unexplained wealth order.’ This perfectly encapsulates how unexplained wealth orders (UWOs) are perceived outside Britain.

The British media have adopted a similar line with considerable journalistic effort being put into the reporting of UWOs since they were first introduced in January 2018. They have been widely labelled as the ‘McMafia’ law because their introduction coincided with McMafia, a BBC television crime drama series centred on the British-raised son of a Russian mafia boss living in London whose father is trying to escape from the world of organised crime.

This helped UWOs to capture the public attention, not least because they chimed with sensational allegations of vast wealth hidden behind the doors of some of Britain's most exclusive properties, as exemplified by the BBC drama.

Government security minister Ben Wallace said that the success of McMafia would be used to raise awareness of corruption, warning that UWOs might be used to target Russian oligarchs. In an interview with The Times, he was uncompromising: ‘When we get to you, we will come for you, for your assets and we will make the environment that you live in difficult.’ He said that ministers wanted to exploit the success of the drama to raise public awareness of corruption, adding that, ‘McMafia is one of those things where you realise that fact is ahead of fiction.’

Overnight, UWOs were catapulted into the public consciousness, further championed by commentators as a way of stemming the flood of dirty money coming into the UK. They fuelled the widely held view that London and some of the wealthier parts of the country are home to hundreds, if not thousands, of individuals whose wealth is mostly derived from nefarious activities fed the imagination of newspapers and the public alike. Now there was an answer to the problem: UWOs would be deployed to prevent the proliferation of those criminals who use property to secrete and launder their ill-gotten gains.

But the collective excitement of journalists, readers and government ministers was not immediately matched by an obvious flurry of activity from those agencies (enforcement authorities) that are empowered to apply for UWOs: the National Crime Agency, HMRC, the Financial Conduct Authority, the Serious Fraud Office, and the Crown Prosecution Service. Indeed, in the first year that they were available, the controversial civil recovery legislation, which reverses the burden of proof, resulted in only one UWO being issued. 

So what exactly are UWOs? The GOV.UK website provides the following definition: ‘A UWO requires a person who is reasonably suspected of involvement in, or of being connected to a person involved in, serious crime to explain the nature and extent of their interest in particular property, and to explain how the property was obtained, where there are reasonable grounds to suspect that the respondent’s known lawfully obtained income would be insufficient to allow the respondent to obtain the property.’

UWOs were introduced under the Criminal Finances Act 2017, and have been available to law enforcement agencies since 1st February 2018. In essence, a UWO is a civil power: an investigation order that is issued by the High Court which needs to satisfy a number of tests.

But it is not, of itself, a power to recover assets, although it does require the respondent to provide information on their lawful ownership of a property, and the means by which it was obtained. It is therefore a gateway into a civil recovery order, which allows the authorities to confiscate property. When a UWO is granted, temporary asset freezes on the suspect’s properties are obtained separately so that they cannot be sold or transferred while an investigation is ongoing.

A UWO can also be applied to politicians or officials from outside the European Economic Area (EEA), or those who are associated with them i.e. Politically Exposed Persons (PEPs). Notably, a UWO made in relation to a non-EEA PEP does not require suspicion of serious criminality.

When it was eventually announced - nearly six months after being introduced - the first UWO did not disappoint journalists or their readers. It was used to seize the London home, valued at £12m, together with a Berkshire golf course belonging to Zamira Hajiyeva, the wife of a jailed Azerbaijani banker, Jahangir Hajiyev.

The media lapped up the minutiae of the Hajiyeva story, in particular the catalogue of very conspicuous consumption. Even the normally conservative BBC News splashed with the headline: ‘Zamira Hajiyeva: How the wife of a jailed banker spent £16m in Harrods.’ The report that followed dwelt on the detail of her extravagant spending - Boucheron jewellery: £3.5m; Cartier jewellery: £1.4m; and The Harrods perfume counters: £160,000.

UWOs were big news. But it would be some time before another UWO was issued. Although NCA Director Donald Toon had stated in April 2018 that his agency was considering UWOs as an investigative tool in ‘100s of cases’, it was not until May 2019 that the second UWO case was announced against ‘an unnamed foreign official’. The case involved the purchase of London properties believed to have been purchased by fraudulent activities. Three London homes worth more than £80m were frozen by the High Court.

More recently, things have picked up speed. Within days of each other, two more UWOs were announced in July. The first involves a businessman from the North of England whose £10 million property business has been seized by the NCA until he can explain exactly how it was funded. According to the NCA, that this was the first UWO in the UK which was specifically targeted at a suspected serious organised criminal. The NCA provided further detail in a statement about the suspect – ‘a businessman in the north of England, whose property empire is suspected of being funded by criminal associates involved in drug and firearms trafficking.’

The second recent UWO involves a named individual - Donna Grew, a woman from Northern Ireland, whose properties are estimated to be worth around £3.2 million. The NCA stated that Grew has ‘suspected links to serious organised crime’ and has been ‘ordered to explain how she financed the purchase of six properties’ – two in London and four in Northern Ireland. The NCA added that it ‘believes the woman is associated with criminals involved in paramilitary activity and cigarette smuggling’.

These two recent cases show that UWOs are being used effectively to disrupt domestic organised crime, whereas the focus of the two previous orders was on non-European PEPs. While they have inevitably taken time to get underway, the increased use of UWOs also demonstrates that the NCA and other UK law-enforcement agencies are becoming much more comfortable in undertaking the type of complex and detailed investigations which are inevitable in UWOs when pursuing cases against those suspected of serious organised crime.

Nevertheless, deploying UWOs in order to seize assets when someone fails to explain his or her source of wealth is a lengthy, expensive and complicated process. Notwithstanding their increased use, there is a conspiratorial theory which suggests that there has been intense lobbying by the UK financial services and property sectors in particular. These are very significant elements of the UK economy which share an understandable desire: that UWOs are used sparingly in relation to wealthy foreign individuals, whose assets are assiduously courted by UK financial and property companies and vigorously competed for by other wealth centres around the world.

Against this background, a further dramatic increase in the use of UWOs can be widely anticipated - both in relation to organised domestic crime suspects and international PEPs with property and other assets in the UK. But for all the media hype surrounding UWOs, the vast majority of international businesses and private clients based in the UK, but who have wealth overseas, need not be fearful that they will be used against them.

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