"The authorities have long been aware that the route to preventing ‘dirty money’ being laundered in the UK is to disrupt criminals’ access to professional advisers"
Corporates are undoubtedly versed in complying with anti-money laundering regulations but increasingly Unexplained Wealth Orders (UWOs) should be on our radar too.
With their ability to pierce the corporate veil and their powerful extra territorial reach, UWOs should be taken very seriously.
In short, a UWO can compel any politically exposed persons (PEP) or those suspected of serious criminality (and those connected to them) to explain the origin of assets that appear to be disproportionate to their known income.
At the time of writing (14th April 2020) there have only been four targets of a UWO; one of whom still remains anonymous. In May 2019, UWOs were issued against an unnamed PEP relating to three London properties purchased for £80 million by offshore entities in Anguilla, Panama and Curacao. In March of this year, we learnt that the target of those UWOs was Mr Rakhat Aliyev, now deceased, who had been a high-profile Kazakhstani national and part of the country’s ruling elite. Mr Aliyev’s son now lives in one of the London properties, a super mansion on ‘Billionaires Row’ in Hampstead. The UWO was disputed on the basis that the funds for the properties came not from Mr Aliyev, but from his former wife, Dariga Nazarbayeva, who is independently wealthy and whose father was the President of Kazakhstan for over thirty years. Last week, the High Court (Mrs Justice Lang) overturned the Orders, concluding that "the National Crime Agency’s (NCA’s) assumption" that Rakhat Aliyev was the source of the money used to buy the three properties was "unreliable". The NCA has indicated that it will appeal that ruling: watch this space.
Why should corporates worry?
What is particularly interesting in this case is the criticism that the NCA has made of Andrew Baker, the President of the two Panamanian foundations that own one of the London properties. The NCA claimed that there was reasonable cause to believe that Mr Baker, a British financial adviser and solicitor based in Lichtenstein, assisted in the laundering of tens of millions of pounds; the High Court disagreed.
A previous target of a UWO was Mrs Hajiyeva, whose London property was owned by a company incorporated in the British Virgin Islands. Although in that case the company did not dispute her ownership, it is clear from these cases that UWOs are designed to capture information about offshore funds used to purchase UK property.
In both PEP cases, the NCA have demonstrated their willingness to target high profile individuals and their funds, as well as their offshore financial advisers and service providers. Although the UWOs mentioned have focussed on PEPs, other orders have also been granted on the basis of suspicion of serious criminality, such as drug dealing, firearm offences and associated money laundering offences. Tax evasion is also a ‘serious criminal offence’ for the purposes of the UWO legislation and so advisers will want to be familiar with the scheme and any judicial comments lest it should become an aspect of any future order.
The authorities have long been aware that the route to preventing ‘dirty money’ being laundered in the UK is to disrupt criminals’ access to professional advisers who might assist them in their endeavours, giving their transactions the veneer of respectability and masking the source of funds. Last week, the High Court held that the NCA had not shown reasonable grounds for suspecting the offshore entities’ involvement in serious crime. It was central to the NCA’s case that Mr Aliyev ultimately owned the properties in question and it was clear NCA believed that the offshore companies had laundered those funds. In trying to make its case, the NCA had considered whether the offshore entities did so knowingly and/or what procedures and checks were in place. No one wants to be the subject of such scrutiny.