Explaining The U K S Unexplained Wealth Order

Leaders of orga­nized crim­i­nal groups, dic­ta­tors who steal from their peo­ple, crooked offi­cials, and oth­er shady char­ac­ters have become adept at hid­ing their mil­lions in Western capitals.


The con­vo­lut­ed cor­po­rate net­works, hid­den bank accounts, and sophis­ti­cat­ed proxy schemes that under­lie these finan­cial flows are large­ly beyond the grasp of all but the most ded­i­cat­ed spe­cial­ists. But there’s one sec­tor where the cor­rup­tion takes phys­i­cal form, turn­ing cities like London into vir­tu­al show­cas­es of taint­ed for­eign wealth: Real estate.

Sherlock Holmes’ icon­ic address on Baker Street is owned by struc­tures con­nect­ed to the daugh­ter of for­mer Kazakhstani dic­ta­tor Nursultan Nazarbayev. In state­ly and ele­gant Belgrave Square sits a ten-bed­room man­sion belong­ing to a Ukrainian oli­garch who is accused of steal­ing bil­lions from a bank he owned. The city hosts so many of these assets that one group of activists was inspired to con­duct “klep­toc­ra­cy tours” to high­light prop­er­ty after ill-got­ten property.

Thanks in part to repeat­ed jour­nal­is­tic exposés, pres­sure has been grow­ing for law enforce­ment to take a hard­er line against cor­rupt for­eign­ers. One new mech­a­nism, intro­duced with some fan­fare in the United Kingdom in 2018, is the unex­plained wealth order (UWO). This pro­ce­dure allows the country’s inves­ti­ga­tors to require that the own­ers of sus­pi­cious­ly large assets show how they paid for them. If they can­not, the pre­sump­tion is that the assets were obtained unlaw­ful­ly, mak­ing it pos­si­ble for the author­i­ties to seize them.

James Mather, a lawyer spe­cial­iz­ing in com­mer­cial fraud, said the UWO was intro­duced “very much in the expec­ta­tion that [it] would trans­form asset recov­ery, per­haps above all by slic­ing through the Gordian Knot of dis­guised own­er­ship struc­tures and shad­owy deal­ings with property.”

Unusually for a tech­ni­cal legal instru­ment, the UWO received wide­spread and favor­able cov­er­age in the main­stream press, which dubbed it the “McMafia law”after a pop­u­lar BBC drama.

In a cou­ple of cas­es, UWOs worked as adver­tised. In January 2021, Zamira Hajiyeva, the wife of a jailed Azerbaijani banker, lost a Supreme Court appeal against the first UWO ever issued, and will now have to jus­ti­fy to inves­ti­ga­tors her pur­chase of two lux­u­ry prop­er­ties. Two months ear­li­er, a UWO in a sep­a­rate case helped the National Crime Agency (NCA) secure the for­fei­ture of sev­er­al prop­er­ties owned by Mansoor Mahmood Hussain, a Birmingham busi­ness­man with alleged ties to orga­nized crime.

But while experts acknowl­edge these suc­cess­es, and laud the ele­va­tion of dirty mon­ey on the pub­lic agen­da, many note that the real­i­ty has not always met expectations.

“There’s quite a bit of a gulf between the pub­lic per­cep­tion and the media por­tray­al of UWOs … and what the law actu­al­ly says,” says Phil Taylor, a lawyer who spe­cial­izes in finan­cial crime. “It was nev­er intend­ed … to be some kind of mag­ic bul­let. It’s an inves­tiga­tive tool which has a lim­it­ed purpose.”

To date, the NCA remains the only agency to have pur­sued a UWO, though vir­tu­al­ly all enforce­ment bod­ies have the pow­er to do so. And when UWOs are used, the opac­i­ty of the finan­cial struc­tures being inves­ti­gat­ed — the very prob­lem they were meant to over­come — make it dif­fi­cult to gath­er the evi­dence that will ensure they stand up in court.

Jon Lennon, a U.K. bar­ris­ter who spe­cial­izes in seri­ous crime and cor­po­rate wrong­do­ing, went so far as to describe UWOs as “some­thing of a damp squib.” Since their intro­duc­tion two years ago, only a small num­ber have been pur­sued by U.K. law enforce­ment. The 15 issued so far apply to just four cases.

🔗Could Trump Be Asked to “Explain” His Scottish Golf Resorts?


In February 2021, the Scottish Parliament debat­ed the pos­si­bil­i­ty of bring­ing UWOs against two golf cours­es owned by for­mer U.S. President Donald Trump.

Those in favor point­ed out that the U.K. gov­ern­ment is tech­ni­cal­ly empow­ered to ask author­i­ties to pur­sue a UWO if they believe it to be in the pub­lic inter­est. The prove­nance of Trump’s invest­ment in the Turnberry and Aberdeen golf cours­es has long been shroud­ed in mys­tery, and MPs cit­ed mount­ing inves­ti­ga­tions into Trump’s finan­cial inter­ests in the United States as grounds to scru­ti­nize his hold­ings in the U.K.

The motion was ulti­mate­ly defeat­ed after min­is­ters argued that actu­al­ly enact­ing their abil­i­ty to insti­gate pro­ceed­ings would essen­tial­ly amount to polit­i­cal inter­fer­ence in the inves­tiga­tive process.

Moreover, per­haps the high­est-pro­file of the UWO cas­es — the pur­suit of alleged­ly illic­it wealth acquired by the ex-wife of a top Kazakh offi­cial — was dis­missed in court for insuf­fi­cient proof. And it was an expen­sive set­back: The loss ate up over a third of the NCA inter­na­tion­al anti-cor­rup­tion unit’s annu­al budget.

What does this mean for the future of what was once hailed as a trans­for­ma­tion­al anti-cor­rup­tion mech­a­nism? And what role do UWOs have now, two years lat­er, in the fight against dirty money?

Much of the pop­u­lar mis­un­der­stand­ing about UWOs comes down to the sim­ple truth that they alone would nev­er be enough to fix the U.K.’s woe­ful record on illic­it finance. As one judge said in a recent rul­ing, it’s “impor­tant not to lose sight of the rel­a­tive­ly lim­it­ed pur­pose” for which they were introduced.

In fact, a UWO is lit­tle more than an inves­tiga­tive tool. It enables author­i­ties to gath­er intel­li­gence on the prove­nance of a person’s assets, rather than act­ing as a pun­ish­ment in and of itself. Even if the own­er of a tar­get­ed asset fails to sat­is­fac­to­ri­ly explain how it came into his or her pos­ses­sion, there’s no guar­an­tee it’ll end up being con­fis­cat­ed. Prosecutors might begin civ­il recov­ery pro­ceed­ings in the High Court to seize it, but the own­er can still con­test the pro­posed for­fei­ture before a judge and appeal if things don’t go their way.

“Unexplained Wealth Orders have obvi­ous­ly caught the zeit­geist, gen­er­at­ing a lot of pub­lic­i­ty,” says Rachel Harper, the head of threat response at the National Economic Crime Centre, an NCA unit that brings togeth­er offi­cials from sev­er­al enforce­ment agen­cies to coor­di­nate inves­ti­ga­tions. But they are just one of many tools avail­able — and not nec­es­sar­i­ly inves­ti­ga­tors’ first choice.

If a crime has been iden­ti­fied, and the evi­dence is robust enough, inves­ti­ga­tors might sim­ply pur­sue straight­for­ward crim­i­nal charges. Alternatively, they can apply for an account freez­ing order — which, unlike a UWO, tar­gets finan­cial accounts rather than prop­er­ty or lux­u­ry items.

🔗Account Freezing Orders


Though rel­a­tive­ly lit­tle-known, Account Freezing Orders (AFOs) are used much more fre­quent­ly than UWOs. Unlike a UWO, which tar­gets spe­cif­ic assets, an AFO tar­gets a person’s bank accounts, freez­ing their hold­ings until they’re able to prove that their cash is legit­i­mate. They’re excep­tion­al­ly easy to apply for, require a much low­er thresh­old of evi­dence, and are over­seen by mag­is­trates rather than High Court judges, which means they’re sub­ject to less rig­or­ous judi­cial test­ing. Hundreds are processed every year.

“It’s very much case-by-case, and it always depends on the intel­li­gence avail­able. We build a pic­ture of a giv­en crim­i­nal enter­prise, and then iden­ti­fy the most dis­rup­tive options avail­able to us,” Harper says.

Misconceptions about the scope of UWOs also obscure the dif­fi­cul­ty of pur­su­ing them. Investigators first have to sat­is­fy a judge that the per­son does indeed own the asset, then show either that they’re sus­pect­ed of com­mit­ting a seri­ous crime or that they occu­py a promi­nent polit­i­cal role out­side of the European Economic Area.

Given the com­plex­i­ty of the struc­tures involved, gath­er­ing the nec­es­sary evi­dence can be ardu­ous. It was the noto­ri­ous opac­i­ty of the U.K. finan­cial sys­tem that saw the recent Kazakh case slip through the NCA’s fin­gers. Investigators had applied for UWOs against three lux­u­ry London res­i­dences they sus­pect­ed had been bought with funds earned illic­it­ly by Rakhat Aliyev, a for­mer con­tender for the Kazakh presidency.

Aliyev had been accused of fraud, kid­nap­ping and sev­er­al mur­ders — includ­ing that of a promi­nent oppo­si­tion leader — before his 2015 https://www.opendemocracy.net sui­cide in an Austrian prison. In response to the UWOs, the off­shore own­ers of the prop­er­ties sub­mit­ted a let­ter to the NCA dis­clos­ing that they belonged to Aliyev’s son Nurali and ex-wife Dariga Nazarbayeva — her­self the daugh­ter of the for­mer pres­i­dent of Kazakhstan, Nursultan Nazarbayev. They had been pur­chased with Nazarbayeva’s own funds, the let­ter claimed, and as a result had no con­nec­tion with Aliyev’s taint­ed money.

The NCA was not per­suad­ed and kept the UWOs in place, lead­ing the Nazarbayevs to appeal to a high­er court for review. In that case, a judge con­clud­ed that the agency’s argu­ments were “flawed by an inad­e­quate inves­ti­ga­tion into some obvi­ous lines of inquiry,” point­ing out that the NCA did not ful­ly take into account the infor­ma­tion pro­vid­ed by the fam­i­ly. She ruled that the UWOs be dis­missed. A spokesper­son for Nurali Aliyev told OCCRP that the fam­i­ly felt “vin­di­cat­ed” by the result.

While the NCA lost a sub­se­quent appeal against the court’s deci­sion, a jour­nal­is­tic inves­ti­ga­tion pub­lished last November revealed that Nazarbayeva and her son alleged­ly acquired oth­er prop­er­ties in London with funds spir­it­ed out of Kazakhstan through Carribean off­shores. The reporters not­ed that their find­ings raised fresh con­cerns about the mon­ey behind the prop­er­ties tar­get­ed unsuc­cess­ful­ly by the NCA.

Though pur­su­ing the case was cost­ly, and the wide­ly pub­li­cized loss demor­al­iz­ing for trans­paren­cy advo­cates, the infor­ma­tion inves­ti­ga­tors received from the respon­dents was not with­out val­ue. Anita Cliford, a lawyer who spe­cial­izes in finan­cial crime, described the case as “an exam­ple of UWOs doing what they set out to do.”

“Here the NCA was not vic­to­ri­ous,” she said, “But … a large amount of infor­ma­tion was ulti­mate­ly pro­vid­ed by those who held ben­e­fi­cial inter­est in those prop­er­ties. Though … a lot can be said about the tool being inef­fec­tive, I won­der whether it has gained access to infor­ma­tion which oth­er­wise would have remained very secret indeed.”

More broad­ly, Harper said, the NCA’s work in this area has helped the agency raise pub­lic aware­ness of the cor­po­rate struc­tures that make the United Kingdom such a haven for dirty mon­ey, in par­tic­u­lar push­ing the reg­u­la­tion of ben­e­fi­cial own­er­ship reg­istries fur­ther up the pol­i­cy agenda.

Even so, the amount of dirty mon­ey already in the U.K. pos­es its own challenges.

In its explo­sive report on Russian inter­fer­ence in U.K. pol­i­tics and pub­lic life, Parliament’s Intelligence and Security Committee empha­sized that the sheer scale of Russian invest­ment in lux­u­ry res­i­dences makes it dif­fi­cult to use UWOs effec­tive­ly. “The extent to which this mon­ey has now been invest­ed, and rein­vest­ed, calls into ques­tion the effi­ca­cy of the recent­ly intro­duced Unexplained Wealth Orders when applied to the inves­ti­ga­tion of indi­vid­u­als with such long-estab­lished — and to all intents and pur­pos­es now appar­ent­ly legit­i­mate — finan­cial inter­ests in the UK,” the report read.

Resources are anoth­er obsta­cle. UWOs can be chal­lenged on a vari­ety of grounds, and “the kind of respon­dents you’re like­ly to see in these cas­es, by their nature, have access to large teams of high­ly-trained lawyers,” says Taylor, the finan­cial crime spe­cial­ist. By the NCA’s own admis­sion, the agency is at a sig­nif­i­cant dis­ad­van­tage: The Russia Report quot­ed an offi­cial say­ing that “we are, blunt­ly, con­cerned about the impact on our bud­get” of the fight to pur­sue even a sin­gle UWO.

Taylor points out that the prob­lem isn’t unique to the NCA. Funding chal­lenges are “some­thing you’ll find, unfor­tu­nate­ly, across U.K. law enforce­ment quite wide­ly,” he says. As a result, experts say, the coun­try is fail­ing to bring the full force of its arse­nal to bear against unex­plained wealth.

As bar­ris­ter Jon Lennon reflects: “I’m always dis­ap­point­ed at the lack of grit that some of the pros­e­cu­tion agen­cies have with going after what is clear­ly, obvi­ous­ly dirty money.”

OCCRP by  Will Neal and Ilya Lozovsky