UW … Oh: The first successful challenge to an Unexplained Wealth Order exposed the National Crime Agency’s failings

UW … Oh: The first successful challenge to an Unexplained Wealth Order (UWO) exposed the National Crime Agency’s failings

In the first successful challenge to the National Crime Agency’s (NCA) use of a UWO, the High Court in NCA v Andrew Baker, Villa Magna Foundation and Ors [2020] EWHC 822 challenged and ultimately disagreed with the assumptions raised by the NCA when applying for three UWOs against three London properties, worth a combined £80m, when it suggested that illicit money had been used to purchase them.

In discharging the UWOs and the related interim freezing orders, the court found that the NCA had relied on “inadequate investigation into some obvious lines of enquiry” and that the NCA had “failed to carry out a fair-minded evaluation of the new information provided [by the respondents and Ultimate Beneficial Owners (UBOs)]”.

The three UWOs were made ex parte by Supperstone J on 22 May 2019 and were granted on the basis that the 3 properties had been acquired using the proceeds laundered from the unlawful conduct of Rakhat Aliyev (RA) a Kazakh national, and former Politically Exposed Person (PEP) who had been convicted of various crimes in Kazakhstan.

The challenge

Attempts had been made to provide “extensive information” by the respondents - Mrs Dariga Nazarbayeva (for properties 1 and 3) and Mr Nurali Aliyev (for property 2)) that the properties were bought without there being any financial connection to RA and his unlawful conduct.  Mrs Nazarbayeva is the ex-wife of RA, with Mr Aliyev being the couple’s son.

The NCA did not relent, which led to the legal challenge in the High Court.

In court

In analysing the UWOs, Mrs Justice Lang said that she was not satisfied that the NCA had proved that the properties were bought with money secured through the unlawful conduct of RA. In her judgment, Mrs Justice Lang noted that that the NCA’s assumptions has been “rebutted by the cogent evidence that [Mrs Nazarbayeva] was the founder of Villa Magna, and the sources of its funds” thereby accepting that Mrs Nazarbayeva was the UBO of property 1. Some of the evidence demonstrated that Mrs Nazarbayeva was a successful businesswoman in her own right who appeared in the Forbes list of the richest people in Kazakhstan in 2013, and that upon his conviction all of RA’s properties were confiscated by the Kazakh government.

In adopting the similar analysis for properties 2 and 3, the court also found that the use of complex corporate structures, which the NCA had sought to rely on as proof that those structures had been used to launder RA’s money, the court noted that the use of such structures does not in itself raise a suspicion that those structures are being used to launder money, and that “there are lawful reasons … why very wealthy people invest their capital in complex offshore corporate structure” and that any suspicions on such structures must be grounded on “additional evidential basis for such belief, going beyond the complex structures used”.

So what happens next?

The NCA has already signalled its intention to appeal the ruling, but pending that, the judgment demonstrates that the system of checks and balances that are built into this relatively new tool will be applied, and, as this challenge demonstrates, are effective. Attempts had initially been made by the respondents and the UBOs to engage with the NCA via detailed representations, but that clearly failed to shift the NCA from the position it took. As a result, the NCA’s assumptions were methodically broken down by the court, which found errors in how those assumptions had been made.

Although this will lead to the NCA considering its approach to future UWO applications, the Director General of the National Economic Crime Centre reiterated the NCA will continue to use “all the legislation at [its] disposal to pursue suspected illicit finance”.

How BLM’s white collar crime team help?

White collar crime is undeniably a spotlight issue, to businesses of all sizes and individuals also facing scrutiny by prosecuting agencies and regulators.

If you are the subject of or indeed conducting an investigation of your own, BLM can help you mitigate the personal, financial or reputational fallout with our partner-led approach.

 

 

Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.