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The Aliyev fraud case shows that financial advisors could get caught up in criminal probes ǀ View

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Unexplained Wealth Orders (UWO) have existed for just over two years. Brought in by the Criminal Finances Act 2017, they were heralded as a new dawn in the British state's ability to crack down on money laundering, tax evasion and financial crime.

Widely understood as targeting the wealthy beneficiaries of state corruption in Russia and the countries of the former Soviet Union, a recent case suggests that they may also be used against a completely different set of individuals: the independent professionals who advise the wealthy. This is a significant development in the way UWOs are being used by law enforcement which anyone working in an advisory role in this field would be wise to understand fully.

On 8 April 2020, the High Court discharged three UWOs and related interim freezing orders relating to three London properties connected to relatives of Kazakhstan's former dictator Nursultan Nazarbayev. The properties, which were worth a reported £80 million and included a Hampstead mansion, were alleged by the National Crime Agency (NCA) to have been bought using proceeds of crime provided by Mr Nazarbayev’s son-in-law, Rakhat Aliyev, a former senior official in Kazakhstan's government.

According to media reports of the case, among the individuals required to provide information to the court was a solicitor, named as Andrew Baker, who was said to be the president of two Panamanian foundations which owned two of the houses in question. Baker was “connected” to Nurali Aliyev's now deceased father, the NCA reportedly alleged. He reportedly responded that there was no evidence to suggest that he was “anything other than a lawyer of utmost integrity.” The High Court’s discharge of the UWO exonerated Mr Baker.

While not unexpected (I and others specialising in this type of work have been predicting this development for some time), this is the first reported case in which a legal advisor has become personally entangled in a UWO.

In September 2018, Donald Toon, head of the NCA's economic crime unit, warned in a newspaper interview that he would use the legislation to come after what he called the “professional enablers” of financial crime. “Do we have concerns about the effectiveness of... customer due diligence in parts of the legal profession and accountancy sector? Yes, we certainly do,” Toon told the Financial Times.

At the time, many lawyers and accountants bridled at Toon's characterisation of their work, and rejected his comments as sabre rattling. But the Aliyev case suggests that he is prepared to follow through on his threat.

UWOs are often viewed as a punishment imposed on wealthy individuals, but this is inaccurate. They are an investigative power requiring those against whom they are issued to provide details of their assets.

UWOs are often viewed as a punishment imposed on wealthy individuals, but this is inaccurate. They are an investigative power requiring those against whom they are issued to provide details of their assets.
Ben Rose
Lawyer

In order to obtain a UWO, a designated enforcement agency (which can, in addition to the NCA, be any UK police force, the Serious Fraud Office or SFO, HMRC tax authorities and so on) needs to satisfy the High Court of four requirements, that:

  1. The person against whom the UWO is sought (the respondent) owns the property in question;
  2. The property is worth more than £50,000;
  3. There are reasonable grounds to suspect the respondent's lawfully-obtained income is insufficient to have paid for the property;
  4. The respondent is either a Politically Exposed Person (PEP), a family member of a PEP, or “… is, or has been, involved in serious crime (whether in a part of the United Kingdom or elsewhere).” In short, those “connected” to PEPs and those involved in serious crime.

Professional advisors may well find that under the terms of the Act, law enforcement takes the view that they are a “connected” person. If so, they too, as Toon predicted, may become the target of a UWO. The consequences for such an individual can be life-altering.

Simply responding to a UWO request is likely to be an onerous, time-consuming and expensive process which may involve reviewing an enormous amount of documentation going back years – potentially decades. There can be complex issues of legal professional privilege and duties of confidentiality to deal with, obligations to clients that continue after the work is finished.

There may also be a risk to the individual’s professional status. Professional regulators (such as the Sollictors Regulatory Authority, or SRA, for the solicitors practicing in England and Wales, accountants bodies such as the Institute of Chartered Accountants in England and Wales, or ICAEW, or the Financial Conduct Authority, or FCA, for financial services professionals) will require regulated individuals against whom an UWO has been made to report that fact to them. Law enforcers may decide to report them to regulators in any event.

The Aliyev case demonstrates that professional advisors may become personally caught up in the UWO issues surrounding work they have done for their high net worth clients.
Ben Rose
Lawyer

Finally, there is the threat of criminal prosecution pursuant to the civil UWO action – something that should remain foremost in minds of anyone engaging with a UWO request.

The NCA has announced that it intends to appeal the High Court’s decision in the Aliyev case. Graeme Biggar, the organisation’s Director General of the National Economic Crime Centre (NECC), said: “We disagree with this decision to discharge the UWOs and will be filing an appeal. These hearings will establish the case law on which future judgments will be based, so it is vital that we get this right. The NCA is tenacious. We have been very clear that we will use all the legislation at our disposal to pursue suspected illicit finance and we will continue to do so.”

This should be taken as a clear statement of intent that UK law enforcement is prepared to exploit the full potential of these powerful new measures.

The Aliyev case demonstrates that professional advisors may become personally caught up in the UWO issues surrounding work they have done for their high net worth clients. Those professionals would be well-advised to take great care to protect themselves from unfounded allegations of being the enablers of high-end criminal conduct. This may involve a variety of measures before, during and after the transactions have taken place.

Hickman & Rose
Ben RoseHickman & Rose

Ben Rose is founding partner at Hickman & Rose solicitors in London.

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