Asset Seizure Regimes and Unexplained Wealth Orders: How do Recent Developments Affect the CAB?

In a recent deci­sion of the Court of Justice of the European Union, that court ruled that EU law does not pre­clude Member States from hav­ing civ­il pro­ceed­ings for con­fis­ca­tion which are unre­lat­ed to a find­ing of a crim­i­nal offence. This deci­sion high­lights the valid­i­ty and use of civ­il for­fei­ture regimes in EU coun­tries.  In con­sid­er­ing this case and the UK regime, we review the cur­rent state of play for Ireland’s Criminal Asset Bureau.

In a recent case of the Court of Justice of the European Union (“CJEU”),1 BP a senior exec­u­tive of a Bulgarian bank was sub­ject to crim­i­nal pro­ceed­ings for hav­ing incit­ed oth­ers to mis­ap­pro­pri­ate funds belong­ing to the bank of around €105 mil­lion. Aside from the crim­i­nal pro­ceed­ings, the Bulgarian Commission respon­si­ble for the com­bat­ting of cor­rup­tion and for the con­fis­ca­tion of assets found that BP and his fam­i­ly had acquired assets of con­sid­er­able val­ue whose ori­gin could not be established.

The Bulgarian Commission brought civ­il pro­ceed­ings before the Sofia City Court to con­fis­cate ille­gal­ly obtained assets. That court in turn asked the CJEU whether EU law pre­clud­ed Member States laws allow­ing con­fis­ca­tion with­out a find­ing of a crim­i­nal offence or the impo­si­tion of a crim­i­nal conviction.

The CJEU ruled that EU law,2 does not pre­clude nation­al leg­is­la­tion by which a court may order the con­fis­ca­tion of ille­gal­ly obtained assets fol­low­ing pro­ceed­ings which are not sub­ject either to a find­ing of a crim­i­nal offence or the con­vic­tion of the per­sons accused. This impor­tant rul­ing cop­per­fas­tens the legit­i­ma­cy under EU law of the activ­i­ty of agen­cies such as the Irish Criminal Assets Bureau (“CAB”).

Ireland’s CAB has strong pow­ers which it employs reg­u­lar­ly, and is seen by many coun­tries as a leader in the asset seizure regime.   However, Ireland has been crit­i­cised in the past by the inter­na­tion­al Financial Action Task Force (“FATF”). In its mutu­al eval­u­a­tion report of 2017 it stat­ed that “while asset con­fis­ca­tion ini­tia­tives have strong polit­i­cal and nation­al sup­port, the val­ue of crim­i­nal pro­ceeds con­fis­cat­ed and for­feit­ed appear mod­est for a juris­dic­tion that pur­sues con­fis­ca­tion of crim­i­nal pro­ceeds as a nation­al pri­or­i­ty and oper­ates a post-con­vic­tion based and non-con­vic­tion based regime.” A fol­low up report in 2019 not­ed exten­sive improve­ments and cor­re­spond­ing upgrades to Ireland’s com­pli­ance sta­tus.  However, it not­ed that minor defi­cien­cies remain.

The UK’s more recent asset freezing/seizure regime of Unexplained Wealth Orders (“UWOs”) is now reap­ing sub­stan­tial rewards. UWOs were first intro­duced in the UK in 2018 by the Criminal Finances Act 2017. The orders allow inves­ti­ga­tors to freeze assets if they sus­pect the mon­ey invest­ed in them is the pro­ceeds of mon­ey laun­der­ing or obtained from crim­i­nal activ­i­ties. The National Crime Agency (“NCA”) is the gov­ern­ment agency empow­ered to seek UWOs. The law allows the NCA to seek an order from the court to freeze assets and places the bur­den on own­ers to dis­close the source of funds for their assets. The back­ground to this leg­is­la­tion is wide­spread crit­i­cism of the UK being used as a haven for wealthy over­seas investors who tar­get the UK to invest dirty mon­ey and the pro­ceeds of crime, par­tic­u­lar­ly invest­ments in prop­er­ty. The orders have been lim­it­ed in num­ber so far, but the NCA has been suc­cess­ful in freez­ing very sub­stan­tial assets. High pro­file cas­es have revolved around for­eign politi­cians and offi­cials and their families.

The first orders in 2018 con­cerned mul­ti-mil­lion pound assets belong­ing  to  a for­mer high rank­ing Azerbaijani state bank exec­u­tive, Jahangir Hajiyeva, who was in prison in Azerbaijan for embez­zle­ment from the state bank. Orders were obtained against his wife, Nursultan Zamira, who had sub­stan­tial assets in London, and was report­ed as spend­ing £16.3m in the London depart­ment store Harrods. Ms Zamira recent­ly lost her appeal against the UWO and will now have to explain how she could afford the prop­er­ties and her spending.

The most recent UWO case in 2020 involves Nurali Aliyev, the grand­son of for­mer President Nazarbayev of Kazakhstan. The NCA had secured a freez­ing order on a mul­ti­mil­lion-pound man­sion, which is occu­pied by Mr Aliyev, his wife Aida, and their chil­dren. The NCA argued that the wealth used to buy them was linked to Rakhat Aliyev, Mr Aliyev’s father and the for­mer president’s son in-law, who died in an Austrian jail in 2015 after being charged with the mur­der of two bankers in 2007. Recently in the High Court, the two off­shore com­pa­nies that own the prop­er­ties applied to have the orders quashed. Clare Montgomery QC, act­ing on the com­pa­nies’ behalf, said the NCA’s grounds for the UWO were “tis­sue paper thin”.  She said the fund­ing for the prop­er­ties came from Mr Aliyev’s moth­er, Darga Nazarbayeva, who was eco­nom­i­cal­ly inde­pen­dent.  Judgment was giv­en on 8 April 2020 when the NCA faced a set­back. The High Court dis­charged the UWOs and inter­im freez­ing orders.   After assess­ing the sub­stan­tial evi­dence which had been filed in rebut­tal, the judge stat­ed that the NCA case at the orig­i­nal ex parte hear­ing had been flawed by inad­e­quate inves­ti­ga­tion and that that it had failed to car­ry out a fair-mind­ed eval­u­a­tion of the new infor­ma­tion which had been pro­vid­ed in rela­tion to the own­er­ship of the prop­er­ties and absence of links between the off­shore com­pa­nies and Rakhat Aliyev. The NCA is to appeal.

There has also been an inter­est­ing set­tle­ment under the new pow­ers of the NCA. In December 2019, the NCA agreed to accept over £190m, (held in the UK), from one of Pakistan’s wealth­i­est busi­ness­men, Malik Riaz Hussain, in order to cease an inves­ti­ga­tion into the assets. The NCA did not dis­close the alle­ga­tions that had led to the freez­ing orders on the assets but con­firmed that this was a civ­il, rather than a crim­i­nal matter

As post-Brexit Ireland increas­ing­ly becomes the invest­ment choice of busi­ness­es and wealthy indi­vid­u­als around the world, there will be an big­ger risk of some of the investors turn­ing out to be polit­i­cal­ly exposed per­sons, tax evaders and illic­it off­shore struc­tures. Questions will inevitably arise as to whether Ireland will use its statu­to­ry pow­ers to tar­get this poten­tial­ly wider pool of illic­it investors as has been done in the UK? Without doubt, asset con­fis­ca­tion orders in sub­stan­tial amounts issued against high pro­file and wealthy tar­gets should have a deter­rent effect on those think­ing of choos­ing Ireland as their new tar­get for the invest­ment of ille­gal wealth. 

  1. Case C 234/18.
  2. Council Framework Decision 2005/212/JHA of 24 February 2005.

Original source: McCann FitzGerald