UK cracks down on offshore banking fraud

Since the end of January 2018, UK authorities have been able to use Unexplained Wealth Orders (UWO) to crack down on financial fraud. Incorporated into law as part of the Criminal Finances Act 2017, it’s a specific order issued by a British court to force someone to reveal the sources of their ‘unexplained wealth’. It’s part of a wider push by the Government to combat fraud within legacy and offshore banking.

Combating fraud in offshore banking fraud

The first UWO to be issued under s362A (1) has just been upheld in the High Court, after it was challenged by the respondent. The first UWO was for Mrs Zamira Hajiyeva, who was asked to explain her wealth. The 55year-old woman is married to a jailed banker who owns the Mill Ride Golf Club in Ascot and went to the High Court to try to keep her identity hidden. This was denied by the High Court.

The order demands a statement from the respondent to explain various aspects of their finances. First, they must set out the nature and extent of their interest in a property, explain how they obtained it, reveal whether it is held by trustees of a settlement and give any other information under the order. If the respondent doesn’t comply within a specific timeframe, then the property in questions is deemed recoverable. The order can only be issued by the Crown Prosecution Service, HM Revenue & Customs, the FCA or the National Crime Agency (NCA).

Offshore incorporated business

The property in the order was bought in 2009 by a company called Vicksburg Global Inc. The business was incorporated in the British Virgin Islands and bout the property for £11.5 million. Three years ago, the respondent told the Home Office in her application for ‘indefinite leave to remain’ that she is the beneficial owner of Vicksburg. This was later confirmed by the British Virgin Islands police.

Mr Hajiyeva is the respondent’s husband and was formerly the chairman of the International Bank of Azerbaijan. Between 2001 and 2015 when he resigned his position, he was on a salary of £54,000. Later in 2015, he was arrested and charged with abuse of office, large-scale fraud and embezzlement in connection with his former bank. In 2016, he was sentenced to 15 years in prison and forced to pay the bank about $39 million.

The NCA convinced the courts that both Mr Hajiyeva and his wife are PEPs (politically exposed persons). Under the European Union’s newest Money Laundering Directive, PEPs come under various categories, including supervisory bodies of enterprises owned by the state.

Respondent contested order

The respondent argued that the UWO shouldn’t apply on eight different grounds, including that her husband isn’t a PEP, and that the NCA misrepresented his role to the courts. However, Mr Justice Supperstone of the High Court rejected all of her arguments and said he was satisfied that the Bank of Azerbaijan is a “state-owned enterprise”.

This judgement led to the anonymity order surround Mrs Hajiyeva to lapse. The NCA further suspects that illegal cash funded the purchase of a property called Mill Ride, which was bought through an offshore company based in Guernsey. The Judge says that the respondent’s spending habits appeared to corroborate the fraud allegations against her husband. The court pointed to the £16.3 million that was spent by the defendant between 2006 and 2016 at Harrods in London.

The NCA has identified approximately £4.4 billion of suspicious money in the UK. It wants to use UWOs more rigorously to target potential sources and users of illegal money. The NCA’s Director of Economic Crime has said that he wants to target money-laundering through buying and selling of prime real estate in London. The overall aim is to reduce the appeal of the UK as the ideal destination for money laundering and fraud.

James Turner, Managing Director of Turner Little Limited says: “Although UWOs are a civil matter, only law enforcers can use these orders. It’s likely that they will become more common in the ongoing fight against financial fraud. At the moment, the proceeds of any unexplained wealth are confiscated in accordance with the Proceeds of Crime Act. It’s not clear, however, how law enforcement agencies will determine the origins of stolen money. It’s also not clear whether the agencies will be fighting to return the money to the victims.

“There is a fear that UWOs are too little, too late and that it will mean agencies respond more slowly to initial reports of fraud.

About Turner Little

Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.