The Promise and Reality of Unexplained Wealth Orders
How the UK's "McMafia Orders" Are Slowly Changing Asset Recovery
When Unexplained Wealth Orders (UWOs) were introduced in the UK in 2018, they were hailed as a revolutionary tool for combating corruption and money laundering. Dubbed "McMafia orders" by the media, these civil powers would force suspected criminals to explain their wealth or risk losing it.
Five years later, the reality of UWO enforcement has been more complex than the initial promises suggested. While the orders have achieved some notable successes, their use has been far more limited than advocates hoped.
Understanding Unexplained Wealth Orders
UWOs represent a significant departure from traditional criminal law. Instead of requiring prosecutors to prove that assets are proceeds of crime, UWOs shift the burden of proof to the respondent, who must explain how they lawfully obtained their wealth.
The orders can be obtained against:
- Politically Exposed Persons (PEPs) who appear to own assets worth more than £50,000 that exceed their known legitimate income
- Individuals suspected of serious crime who own assets worth more than £50,000
If the respondent cannot adequately explain their wealth, the assets can be subject to civil recovery proceedings.
The Early Cases
The first UWO was obtained in 2019 against Zamira Hajiyeva, wife of the former chairman of the International Bank of Azerbaijan. The case targeted her lavish spending, including the purchase of a £15 million house in Knightsbridge and over £16 million spent at Harrods.
The Hajiyeva case demonstrated both the potential and the challenges of UWO enforcement. While the order was successfully obtained, the subsequent legal proceedings were lengthy and complex. In August 2024, the High Court finally ordered the forfeiture of the properties, but the case took five years to resolve.
Limited Usage
According to the National Crime Agency's official reporting, UWO usage has been more limited than initially anticipated. The 2023-2024 annual report indicates that only two UWOs were applied for during that reporting period, with one obtained.
This limited usage reflects several practical challenges:
High Legal Costs: UWO cases often involve sophisticated legal challenges that can cost millions of pounds to defend, creating financial risks for enforcement agencies.
Complex Asset Structures: Wealthy individuals often hold assets through complex international structures that make it difficult to establish clear ownership and control.
Appeal Processes: Respondents have the right to challenge UWOs, leading to lengthy legal proceedings that delay asset recovery.
Resource Constraints: The National Crime Agency has limited resources for pursuing complex civil recovery cases.
Recent Developments
Despite the challenges, there have been some notable developments in UWO enforcement:
In July 2024, the NCA secured a UWO targeting £10 million worth of properties in London and the South East. This case demonstrates continued commitment to using the powers, albeit selectively.
The 2024 resolution of the Hajiyeva case, with the court ordering forfeiture of 70% of the property values, shows that UWOs can ultimately succeed in recovering assets, even if the process is lengthy.
The Deterrent Effect
While the number of UWOs obtained has been limited, their existence may have broader deterrent effects that are difficult to measure. The possibility of UWO enforcement may discourage some individuals from investing suspicious wealth in UK assets.
Intelligence sources suggest that some high-net-worth individuals with questionable wealth sources have avoided UK investments specifically because of UWO risks. However, quantifying this deterrent effect is inherently difficult.
International Comparisons
The UK's experience with UWOs reflects broader challenges in civil asset recovery. Similar powers in other jurisdictions, such as Australia's unexplained wealth laws and Ireland's Criminal Assets Bureau powers, have also seen mixed results.
The most successful civil asset recovery programs tend to combine multiple tools—criminal prosecutions, civil recovery, taxation powers, and administrative measures—rather than relying on any single mechanism.
Systemic Impact
Beyond individual cases, UWOs have contributed to broader changes in how financial crime is approached:
Enhanced Scrutiny: The existence of UWO powers has increased scrutiny of high-value assets held by PEPs and suspected criminals.
Professional Services: Banks, lawyers, and estate agents are more cautious about clients who might be subject to UWO investigation.
International Cooperation: UWO cases often involve international assets, promoting cooperation between different jurisdictions' law enforcement agencies.
The Future of UWO Enforcement
Several factors will likely influence the future effectiveness of UWOs:
Resource Allocation: Increased funding for civil recovery could enable more aggressive UWO enforcement.
Procedural Reforms: Streamlining legal procedures could reduce the time and cost of UWO cases.
International Coordination: Better cooperation with other jurisdictions could make it harder for respondents to move assets beyond reach.
Technology: Improved asset tracing capabilities could make it easier to identify targets for UWO investigation.
Broader Anti-Corruption Context
UWOs must be understood as part of a broader anti-corruption framework that includes:
- Enhanced sanctions enforcement
- Beneficial ownership transparency
- Corporate registration reforms
- Anti-money laundering requirements
The effectiveness of UWOs depends partly on how well they integrate with these other measures to create comprehensive pressure on illicit finance.
Lessons Learned
The UK's experience with UWOs offers several lessons for asset recovery policy:
Realistic Expectations: Civil asset recovery is inherently complex and time-consuming. Quick wins are rare.
Resource Requirements: Effective enforcement requires substantial investment in specialized legal and investigative capabilities.
Political Support: Sustained political backing is essential given the lengthy timelines involved in complex cases.
International Dimension: Modern wealth concealment operates across borders, requiring international cooperation for effective enforcement.
Assessment
UWOs represent a valuable addition to the UK's anti-corruption toolkit, but they are not a silver bullet. Their limited usage reflects genuine practical challenges rather than lack of political will or legal authority.
The orders work best as part of a comprehensive approach to economic crime that combines criminal prosecution, civil recovery, regulatory action, and preventive measures. Used selectively and strategically, UWOs can achieve significant results, as demonstrated by the eventual success in the Hajiyeva case.
For organizations working on anti-corruption issues, the UWO experience demonstrates the importance of realistic expectations and sustained commitment. Legal reforms create opportunities, but realizing those opportunities requires long-term investment in enforcement capabilities and political support for complex, lengthy cases.
The true measure of UWO success may not be the number of orders obtained, but whether their existence helps create an environment where holding unexplained wealth in the UK becomes sufficiently risky to deter criminal investment. That broader impact, while difficult to measure, may be the orders' most significant contribution to the fight against corruption and money laundering.
References
- Spotlight on Corruption. (2024). NCA forfeits over £17 million in luxury properties from first-ever McMafia order. Available at: https://www.spotlightcorruption.org/nca-forfeits-mcmafia-order/
- Russell-Cooke. (2024). Banker's wife forfeits £14 million Knightsbridge home and Ascot golf club following National Crime Agency investigation. Available at: https://www.russell-cooke.co.uk/news-and-insights/news/banker-s-wife-forfeits-14-million-knightsbridge-home-and-ascot-golf-club-following-national-crime-agency-investigation
- Gherson LLP. (2024). Press release: Settlement with the National Crime Agency in respect of proceedings involving the first Unexplained Wealth Order. Available at: https://www.gherson.com/blog/we-are-pleased-to-announce-that-our-client-mrs-zamira-hajiyeva-has-reached-a-settlement-with-the-national-crime-agency-in-respect-of-proceedings-involving-the-first-unexplained-wealth-order-2/
- Irwin Mitchell. (2024). Unexplained Wealth Orders: A powerful tool against financial crime. Available at: https://www.irwinmitchell.com/news-and-insights/expert-comment/post/102jgzn/unexplained-wealth-orders-a-powerful-tool-against-financial-crime
- National Crime Agency. (2020). Court dismisses UWO appeal by Zamira Hajiyeva. Available at: https://www.nationalcrimeagency.gov.uk/news/court-dismisses-uwo-appeal-by-zamira-hajiyeva
- Lexology. (2024). Unexplained Wealth Orders: A powerful tool against financial crime. Available at: https://www.lexology.com/library/detail.aspx?g=d5e7f24e-8f4c-4197-a88e-112dfabf3d70
- Spotlight on Corruption. (2024). Lessons from the frontline: Was Britain's first McMafia order really a success? Available at: https://www.spotlightcorruption.org/lessons-from-frontline-mcmafia-order/
- Macfarlanes. (2024). NCA forfeiture success: do Unexplained Wealth Orders finally have lift off? Available at: https://www.macfarlanes.com/what-we-think/102eli5/nca-forfeiture-success-do-unexplained-wealth-orders-finally-have-lift-off-102jfpz/
- Spotlight on Corruption. (2022). From Hajiyeva to Aliyev: Where Next for Unexplained Wealth Orders? Available at: https://www.spotlightcorruption.org/from-hajiyeva-to-aliyev-where-next-for-unexplained-wealth-orders/
- Fulcrum Group Services. (2022). Unexplained Wealth Order. Available at: https://fulcrumchambers.com/unexplained-wealth-order/
