The NCA wins the first round in its application of “McMafia” laws

Upon the High Court lifting reporting restrictions this week, the newspapers have reported details of the extravagant lifestyle of Zamira Hajiyeva, the wife of the former chairman of Azerbaijan’s largest bank, the state-owned International Bank of Azerbaijan, who is currently serving a 15 year prison sentence in his home country, having been convicted in 2016 of fraud and embezzlement in the sum of £2.2billion.

We have learnt that over 10 years Mrs Hajiyeva spent £16million in Harrods on 35 credit cards issued by the bank which included £150,000 spent in one day on Boucheron products and £100,000 spent another day on Cartier products. We are also told that she bought herself a Gulfstream jet for £35m.

This will be encouraging for the National Crime Agency which on 28 February 2018 reported the fact that it had obtained the country’s first unexplained wealth orders (UWOs) to enable it to investigate assets worth £22m believed to be ultimately owned by a PEP (politically exposed person) who we now know to be the jailed Mr Hajiyeva. The assets are the £11.5m Knightsbridge house, which is a stone’s throw from Mrs Hajiyeva’s favourite shop and is registered to a BVI registered company, and Mill Ride Golf Club near Ascot which was purchased for £10.5m through a Guernsey company. This was quick work for the NCA with the power to make UWOs only commencing on 31 January 2018 with the objective of assisting the NCA, as well as HMRC, the FCA, the SFO and the CPS, in cracking down on dirty money being invested in the UK.

At the end of July the Hajiyeva’s legal team challenged the UWOs at a hearing before Mr Justice Supperstone who has now given his ruling upholding the UWOs. This is not, however, the end of the story. A UWO is only an investigation tool which requires a person who is reasonably suspected of involvement in, or being connected to a person involved in, serious crime to explain their interest in particular property worth more than £50,000 – here the Knightsbridge house and the golf club – and how the property was obtained where there are reasonable grounds to suspect that the respondents’ known lawful income would be insufficient to fund the acquisition of the property. A UWO can also be made against a PEP from outside the EEA or those associated with the PEP and a suspicion of serious criminality is not required in these circumstances.

The Hajiyevas challenged the UWOs largely, it appears, on the basis that Mr Hajiyeva was not a PEP as there was no evidence that the state entrusted him with public functions. They argued that he was a “fat cat international banker”, but his salary as chairman of the bank only reached £54,000 in 2008. The NCA argued that the primary condition for making a UWO was that there were reasonable grounds to suspect that the assets could not have been acquired with legitimate income.

As the UWOs have been upheld, the burden of proof has shifted to the Hajiyevas who will now have to provide information to establish their lawful ownership of the property and the means by which it was acquired. Once in receipt of that evidence, the NCA will have to decide whether to pursue criminal or civil proceedings against the Hajiyevas. Failure to respond to the UWOs gives rise to a presumption that property is recoverable in a civil recovery action under Part 5 of POCA 2002. Whether the Hajiyevas respond to the UWOs or not, I expect that the NCA will issue civil recovery proceedings in the High Court in which they will have to establish that the Knightsbridge property and the golf club were obtained through unlawful conduct. Whilst that is likely to take some time to reach a conclusion, the NCA apparently has a number of other applications for UWOs pending in its efforts, in the words of Donald Toon, the NCA Director for Economic Crime, to “reduce the appeal of the UK as a destination for illicit finance”.