We’ve previously reported on the National Crime Agency (“NCA”) securing the UK’s first two Unexplained Wealth Orders (“UWOs”), which were issued by the High Court in February this year against (at the time) the anonymous wife of a non-EEA PEP (whose name was also anonymised). Bar her spending habits at a high-end department store, very little was known about the subject of the UWO. However, following a recent challenge of her anonymity, she can now be identified as Zamira Hajiyeva (“ZH”).
By way of a recap, a UWO is an investigative tool that compels a class of person holding certain property to provide relevant information about the acquisition of that property.
The two UWOs against ZH concerned two properties (“Properties”); one in Knightsbridge, which was bought by a British Virgin Island incorporated entity, and a golf course in Berkshire, which was purchased by a Guernsey-based entity both of which were purchased for a combined £22m. It was the NCA’s argument that at the time of applying for the UWOs, ZH’s purchase of the Properties, via these entities, was at odds with ZH’s known sources of income.
At the High Court in July, ZH applied to discharge the UWO relating to one of the Properties. In a judgment handed down on 3 October, the court considered and subsequently dismissed that application. We explore below some of the arguments that were raised during the hearing.
Politically Exposed Person
The court heard arguments about whether ZH should have been classed as a Politically Exposed Person (“PEP”) – an important condition for the granting of a UWO. In considering the submissions from ZH and the NCA, the court focussed on ZH’s husband (identified as Jahangir Hajiyev (“JH”)) who was ZH’s sole source of income. JH was the former chairman of a bank (“Bank”) in Azerbaijan, which the NCA argued was a state-owned enterprise. In arriving at its decision, the court referred to an expert’s report on the Bank (which had been signed off by JH) and found evidence that the Azerbaijani state had a “majority shareholding … and had ultimate control of the [Bank]”. In agreeing with the NCA and concluding that the Bank was a state owned enterprise, which therefore meant that JH was a PEP, ZH was also (due to her relationship with JH) placed in that category of person.
ZH’s lawyers also argued that the NCA failed to satisfy that there were reasonable grounds for suspecting that ZH’s lawfully obtained sources of income were insufficient for the purpose of enabling ZH to purchase one of the Properties. The focus once more, centred on JH’s income.
The court dismissed ZH’s argument, and noted that failing ZH providing evidence that she was in receipt of significant income from a source independent of JH, “as a state employee between 1993 and 2015, it is very unlikely that [JH’s] position would have generated sufficient income to fund the acquisition”.
In finding against ZH, although the court did not place reliance on JH’s foreign conviction (JH had been convicted of and sentenced for fraud and embezzlement in Azerbaijan), it cited those proceedings, and evidence used in the proceedings when considering the income requirement.
One of the more interesting decisions of the court concerned the penal notice that was attached to the UWO, which warned ZH that “if you disobey this order you may be held to be in contempt of court and may be imprisoned, fined, or have your assets seized”.
ZH’s lawyers argued that Parliament had exhaustively set out the consequences of non-compliance with a UWO, which would result in property that is the subject of a UWO being presumed to be recoverable property. It was therefore wrong, ZH’s lawyers contended, for a penal notice to be attached to the UWO, given that the Proceeds of Crime Act 2002 provides a “complete code” which deals with the effects of non-compliance (or purported compliance) with a UWO and makes no reference to the adding of a penal notice.
In dismissing the argument, the court concluded that the Proceeds of Crime Act 2002 only deals with the effect of non-compliance with a UWO, not the “general consequences” of non-compliance, and that there was strong public interest to ensure that orders were not disobeyed at the option of a party. The court noted that if the opposite were true, and that Parliament intended to “oust the court’s jurisdiction to control its own proceedings by contempt; one would [have] expected Parliament to have said so”.
What this means for you
The public will be forgiven for thinking (based on ZH’s circumstances) that UWOs only apply to high net worth individuals holding assets valued in the millions. In ZH’s case, there was much media interest on her lavish spending at a well-known department store, where expensive items, including high-end jewellery were purchased using store cards. In fact, subject to other conditions, any property that is valued at a minimum of £50,000 could be the subject of an application from a prosecuting authority, particularly where the provenance of the income that was used to purchase the asset is unknown.
UWOs are likely to be a powerful investigative tool in a prosecuting authority’s armoury, which, as the Financial Times recently reported, is designed to help “stem the tide of hundreds of billions of pounds in “dirty money” [washing] through the UK”. Although ZH has signalled her intent to appeal the High Court’s decision, this judgement has given us a first glimpse of how that tool will be used by prosecuting agencies (and interpreted by the courts) to clamp down on the proceeds of crime entering the UK.
While this is the UK’s first UWO it certainly won’t be the last. ZH is unlikely to be alone in being caught up in the application of the provisions of UWOs to real life situations. We will be following developments closely.