Corporates are undoubtedly versed in complying with anti-money laundering regulations but increasingly Unexplained Wealth Orders (UWOs) should be on our radar too. With the ability to pierce the corporate veil and their powerful extra territorial reach, UWOs should be taken very seriously.
In short, an UWO can compel any politically exposed persons (PEP) or those suspected of serious criminality (or those connected to them) to reveal the source of their wealth used to purchase property.
At the time of writing (27th March 2020) there have only been four targets of an UWO; two of whom still remain 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. Last week, we learnt that the target 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 is being 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.
Why should corporates worry?
What is particularly interesting in this case is the criticism that the National Crime Agency (NCA) has made of Andrew Baker, the President of the two Panamanian foundations that own one of the London properties. The NCA said that there were reasonable grounds to suspect that Mr Baker, a British financial adviser and solicitor based in Lichtenstein, assisted in the laundering of tens of millions of pounds. Whilst it is unclear whether Mr Baker will be criminally prosecuted, both he and his foundations will likely be subject to further scrutiny.
Additionally, a previous target of an 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’s clear for 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 when it comes to UWOs and so advisers should keep an eye on this as it is possible that this could well become an aspect of an order.
Moving on
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, it was clear that central to the NCA’s case – that Mr Aliyev owned the properties in question – is the NCA’s belief that the offshore companies laundered those funds. If so, the next question will be whether the offshore entities do so knowingly and/or what procedures and checks were in place. No one wants to be the subject of such scrutiny.
Original source: Financial reporter