Knowledgebase

Unexplained Wealth Orders and AML

Unexplained Wealth Orders

What are Unexplained Wealth Orders?

Introduced in the United Kingdom in 2018, unexplained wealth orders (UWO) have become a powerful tool in the fight against money laundering. UWOs are court orders, issued by the UK High Court, that compel their targets to reveal the source of unexplained wealth to financial authorities. If the authorities are not satisfied with the target’s explanation for their wealth, they have the power to seize the relevant assets or funds. 

Intended to combat a trend of dirty money flowing into the UK to be laundered on the property market, UWOs are used primarily in money laundering investigations against foreign politically exposed persons (PEP). Given that they confer asset seizure powers on financial authorities, UWOs have significant legal consequences for the individuals that they target.

How Do Unexplained Wealth Orders Work?

UWOs are implemented when a UK law enforcement agency suspects that an individual is attempting to launder money via the property market.

Under legislation set out in the Criminal Finances Act 2017, when an enforcement agency finds that an individual has acquired property that does not match their income level, it may apply for a UWO from the High Court. If the application is successful, the UWO freezes the asset (to prevent its sale or disposal) and imposes an obligation on the owner to explain how they acquired it. If that explanation is unsatisfactory or not forthcoming, the enforcement agency can then apply for a civil order to seize the property in order to recover the proceeds of crime. 

It is important to note that a UWO reverses the normal burden of proof by making it necessary for the subject of the investigation to demonstrate to the authorities that they are not involved in criminal activity. The enforcement agency does not need to notify the target of their investigation when they make an application for a UWO. 

The UK agencies able to apply for UWOs are the National Crime Agency, the Financial Conduct Authority, the Serious Fraud Office, the Crown Prosecution Service and HMRC. The High Court will grant UWO applications if the enforcement agency shows that the following criteria have been met:

  • The individual targeted in the investigation owns property with a value over £50,000.
  • There are reasonable grounds to suspect that the value of the property is disproportionately higher than the target’s income.
  • The target of the investigation is a PEP from outside the EEA or is reasonably suspected to be involved in serious criminal activities or, similarly, is connected to persons that fall into either of those categories. 

The High Court can issue UWOs without any preexisting criminal conviction or civil judgment against the target of the investigation. When it issues a UWO, the High Court also sets a compliance deadline for the target individual. 

The Zamira Hajiyeva Case

The UK’s first unexplained wealth order was issued in 2018 against Zamira Hajiyeva, wife of Jahangir Hajiyev, former chairman of the International Bank of Azerbaijan. Jahangir Hajiyev was found guilty of financial crimes in 2015, including defrauding his bank of up to £2.2 billion. While her husband was committing those crimes, Zamira Hajiyev was found to have spent around £16 million in London department stores over a period of 10 years and purchased a £11.5 million property in the city and a golf course in Berkshire. 

In pursuing its money laundering investigation, the NCA argued that Zamira Hajiyev had used proceeds from her husband’s crimes to purchase her UK properties via an offshore company in the British Virgin Islands. The NCA was able to obtain a UWO against Zamira Hajiyeva when she was unable to explain the source of her finances: after her appeal was unsuccessful in February 2020, the NCA confiscated her property in London.

The impact of unexplained wealth orders on AML enforcement has been significant. Since the Zamira Hajiyeva case, two more UWOs have been issued against PEPs who own property in London. 

UWO Legal Consequences

While a targeted individual must comply with a UWO in order to retain ownership of their property, their response may be used to inform further investigations, which could lead to further asset seizures and criminal charges. While statements that targeted individuals make in response to UWOs cannot be used against them, evidence that they disclose can. Similarly, authorities can use statements made in response to a UWO to pursue investigations against other individuals. 

Accordingly, responses to UWOs should be carefully considered. Some individuals may be able to demonstrate that they were not involved in the serious criminal activities that the UWO alleges or, alternatively, demonstrate that foreign allegations against them are politically motivated or spurious. Targeted individuals may also cite human rights protections: Article 1 of the Human Rights Act confers a right to protection of property while Article 2 confers a right to private and family life.

As a relatively new addition to the AML landscape, the legal effectiveness of UWOs is yet to be determined. The UWO’s reverse burden of proof dynamic has attracted criticism from legal observers, but the Zamira Hajiyeva case has demonstrated their usefulness and impact in money laundering investigations. As use of UWOs becomes more widespread, the involvement of banks and financial institutions is also likely to fall under closer scrutiny: accordingly, those institutions should ensure their PEPs screening mechanisms continue to deliver the level of AML compliance they expect.

Get Started Now

Identify risks before they become threats and protect your business. Screen against the world’s only dynamic global database of Sanctions and Watchlists, PEPs and Adverse Media, in consolidated, structured profiles.

0

Comments

Share your thoughts and start a conversation.

Leave a Reply

Related articles:

PEPs definitions
April 20, 2016

Politically Exposed Person (PEPs) Definitions

Key Definitions For Politically Exposed Person (PEPs) The following definitions are based on the latest FATF…
Read More
Red Flags PEPs Politically Exposed Persons
April 20, 2016

Detecting Misuse of the Financial System by PEPS

Detecting Misuse Of The Financial System By PEPs: Red Flags & Indicators For Suspicion Many…
Read More
RCAs Relatives and Close Associates
October 14, 2019

RCAs: Relatives And Close Associates

What Are RCAs: Relatives And Close Associates? As part of their customer due diligence obligations,…
Read More
Politically Exposed Persons Canada PEPs
October 17, 2019

PEPs in Canada

Politically Exposed Persons in Canada Canada’s AML regulations require banks and financial institutions to check…
Read More
Politically Exposed Person PEP
November 21, 2019

Politically Exposed Persons (PEPs)

Politically Exposed Persons (PEPs): The 4 Quadrants of Risk Politically exposed persons (PEPs) status does…
Read More
special interest person
December 23, 2019

Special Interest Persons (SIPs) And Special Interest Entities (SIEs)

What Are Special Interest Persons (SIPs) And Special Interest Entities (SIEs)? As part of customer…
Read More
declassification of peps
May 14, 2020

Once a PEP, Always a PEP?

Once a PEP, Always a PEP? (Do You Declassify a Former PEP?) PEP screening is…
Read More
beneficiaries of life insurance policies
May 14, 2020

PEPs and Life Insurance

PEPs and Life Insurance Policies: Things You Should Be Aware Of Politically exposed persons (PEPs)…
Read More
foreign peps vs domestic peps
June 9, 2020

Foreign PEPs vs. Domestic PEPs

Foreign PEPs vs. Domestic PEPs: Should They Be Treated The Same? Politicians and other high-profile…
Read More
Share:

To make sure you get a great experience on our website, we use cookies. To confirm you consent to this, please click below. Read more about our Cookie Policy

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close