Newsletters Business Crime & Financial Services 14th Feb 2020

The Court of Appeal upholds the first Unexplained Wealth Order

The first Unexplained Wealth Order (“UWO”) was upheld by the Court of Appeal in the case of Hajiyeva v NCA [2020] EWCA Civ 108. Haddon-Cave LJ granted permission to appeal the substantive Order on the basis that it would be beneficial to have guidance on the scope of the relevant statutory powers. The appeal was before a bench including the Lord Chief Justice, which resoundingly rejected the appeal on every ground. The judgment will undoubtedly bolster the NCA’s confidence in pursuing UWOs.

UWOs were introduced under part 8 of the Proceeds of Crime Act 2002 (“POCA”), by the Criminal Finances Act 2017. S.362A POCA provides for the imposition of a UWO in respect of specified property, requiring the subject of the Order to provide information in respect of that property. If the respondent fails to comply with the UWO within a specified timeframe, the property in question becomes ‘recoverable property’ for the purposes of part 5 POCA.

S.362 POCA sets out the various requirements for making a UWO. The relevant pre-conditions for the purposes of Hajiyeva were:

  • That there are reasonable grounds for suspecting that the known sources of the respondent’s lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property (the ‘income requirement’);
  • That the respondent is a politically exposed person (“PEP”); and
  • That there are reasonable grounds for suspecting that the respondent, or a person connected with him/her, is or has been involved in serious crime, whether in the UK or elsewhere.

The appellant is a national of Azerbaijan, married to Mr Hajiyev. Mr Hajiyev was the Chairman of International Bank of Azerbaijan (“the Bank”) from 2001 to 2015. The Azerbaijan Democratic Republic owns 50.2% of the Bank. Mr Hajiyev was convicted in 2016 of offences involving misappropriation, abuse of office, fraud and embezzlement. The appellant remains ‘wanted’ by Azerbaijan but her extradition was refused.

The relevant property is a property in London SW3 (“the Property”). The Property was purchased in 2009 for £11,500,000 by Vicksburg Global Inc, a company of which the appellant was said to be the beneficial owner.

The grounds of appeal, and the Court’s reasons for rejecting them, were as follows:

Ground 1: The judge erred in his interpretation of the definition of ‘PEP’

PEP is defined as a natural person who is or has been entrusted with prominent public functions, and this includes members of the administrative, management or supervisory bodies of State-owned enterprises (Article 3, Chapter 1, Directive 2015/849/EU).

The appellant sought to draw a distinction between someone merely carrying out a public function in relation to a majority State-owned corporation, and someone having been ‘entrusted’ with that function by the State. The Court in rejecting this submission made clear that the Directive’s requirements are preventative rather than criminal in nature, and its provisions should not be interpreted narrowly. The focus of the statute is on the status of the entrusted person, and not how that person has come to exercise those functions.

Ground 2: The judge erred in finding that the Bank was a ‘State-owned enterprise’

The appellant argued that the Bank was not a ‘State-owned enterprise’, and sought to distinguish a corporation whose shares were owned in part by the State. The Court again refused to interpret the relevant statutes narrowly, and declined to delve into the intricacies of this submission, concluding that the learned judge was entitled to find that the Bank was State-owned. The Court commented that the application of these provisions will ultimately be a matter for English law, and it matters not whether the matter is viewed differently as a matter of local law.

Ground 3: The judge erred in concluding that the ‘income requirement’ had been met

There was complaint that the judge was wrong to conclude that the ‘income requirement’ was met. The respondent relied upon Mr Hajiyev’s convictions, but also upon the common sense point that his legitimate income would have been insufficient to generate the funds used to purchase the Property. Information as to the source of his wealth was deemed ‘vague’, and the Court held the ‘income requirement’ had properly been met.

Ground 4: The judge was wrong to hold that the UWO did not offend the rule against self-incrimination and/or spousal privilege

The appellant submitted that the judge was wrong to hold that the UWO did not offend against self-incrimination and/or spousal privilege, both of which arose as a matter of discretion. The Court, in rejecting this submission, relied on the fact the appellant had not said which answers to which questions might incriminate her or her husband; and on the fact that information disclosed in a UWO may not be used in a criminal prosecution (s.362F(1) POCA). The Court further commented that, in creating UWOs, Parliament had necessarily intended that the privileges be abrogated. The Court rejected this submission on the particular facts, and the question of whether the risk of prosecution could properly override the case for making a UWO, was left open.

UWOs are a novel device, created to deal with the shape-shifting scourges of money laundering and terrorist financing. The very nature of UWOs to some extent reverses where the usual burden of proof falls: but Parliament has made a decision to make those inroads on proper policy grounds. It is clear that the Court of Appeal does not intend to undermine those policy decisions and will interpret the statutory regime widely.


Merry van Woodenberg

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