Can your state now recover your money?
There have been many previous examples of ex-presidents or ministers robbing their country’s treasury and taking the proceeds offshore. The UK is one popular destination and property in the UK is particularly popular.
Of course, if you (i.e. your present administration) know of assets in the UK bought with ill-gotten gains or if the miscreant is in the UK you can sue direct and apply to freeze the assets meanwhile. But suing direct depends on one of those factors and the miscreant is likely to have taken steps to hide the assets in trusts/multiple companies/by entrusting them to associates.
The UK has, like many other countries, introduced legislation to penalise money laundering and to attempt to reduce it. But London is reputed to be the “money laundering capital” of the world.
Last year, the UK went one stage further. It enacted legislation facilitating Unexplained Wealth Orders (“UWOs”).
What is a UWO?
It is a court order compelling a person with substantial assets (at least £50,000, but in practice likely to be millions or billions) to explain how they have the money to buy the assets. A UWO is likely to be served together with a freezing order to prevent disposal pending investigation. The combined effect of the UWO and the freezing order does not transfer the asset to anyone: they simply preserve the position for a limited period until the wealth is explained or a further order is obtained.
What evidence is required?
Not much. All that is required is reasonable grounds for suspecting that the respondent’s lawful income is not enough.
The recent UWOs against Jahangir Hajiyev and Zamira Hajiyeva, as reported in the press, revolve around levels of expenditure which appear wholly disproportionate to the respondents’ lawful income. He was the former chairman of the state-owned International Bank of Azerbaijan and she is his wife , but is reported to have no source of income other than interest on her British bank accounts (the reported expenditure is more than £80 million on three properties, all in London and personal expenditure by Mrs Hajiyeva of £16 million at Harrods over ten years etc.)[Distinguish another recently reported example of wealth: the divorce settlement of Jeff Bezos and his wife, Mackenzie, resulted in her acquiring wealth of $36 billion. (If she were to spend £100 million on properties in London, that might raise an eyebrow but the source of the wealth would not be unexplained.)]
- UWO and freezing order. No property is transferred from anyone or to anyone. Stage 1 just freezes the property pending investigation.
- The property may be forfeited if the respondent fails to comply fully with the UWO and a Civil Recovery Order (“CRO”) can be made. In Stage 2, the property is transferred away from the miscreant. However, it does not necessarily go back to you.
How do UWOs affect your ability to recover the money?
Basically, not at all. UWOs do not prevent you from suing direct and the existence of UWOs as a weapon in the anti-money laundering armoury of the UK may deter some people from laundering money at all (or at least laundering it through the UK) but otherwise there is no direct benefit to you with one possible exception.
The reasons UWOs do not help you are these:
- You can’t apply for a UWO; only the UK criminal regulatory authorities and inland revenue can apply;
- UWOs do not transfer the asset away from the respondent let alone back to you – a further application is needed for that; and
- If there is any recovery of the tainted assets, that money goes first to the enforcement authorities in the UK.
The intention behind the UWOs do not appear to restore the stolen funds to the country from which they were stolen. We refer to the quotation from Hansard when Ben Wallace MP said that “we can then take the money and redistribute it back to the people who need it, either the law enforcement agencies or back to the countries from which they might have stolen it” (you seem to come last in the line). One section (section 280 of Proceeds of Crime Act 2002) governs the application of realised proceeds but under this section they go to those involved in the UWO and CRO process but not to the victim of theft. Under a relatively short section 281 (in this very long piece of complex legislation, the “victims” are referred to directly only three times) there is a provision for an application to the court by a person who claims that the property belongs to him. This must apply to you as a victim state but you have to do the applying.
At present it seems clear that the robbed country is unlikely to benefit and will have to take its chance on bringing direct proceedings or persuading the court on making a CRO to direct a repayment.
Many react adversely to the suggestion that conspicuous expenditure equates with criminal suspicion or guilt. Others argue that money laundering must be impeded as far as possible and UWOs are a useful addition to the anti-money laundering armoury. Little concern has been expressed for the ultimate victims, namely the states robbed, whose often impoverished citizens would no doubt clearly welcome a return of their stolen funds. Perhaps it will take a highly publicised application by a victim state to bring about a positive change in policy so that any recovered funds primarily benefit not the UK but the state from which they were originally stolen.