In a statement on 15 July, the NCA said this was the final element of a civil recovery investigation which focussed on assets of Gregory Candy-Wallace, which it argued were being used by an organised crime group diverting Pay as You Earn (PAYE) and National Insurance Contribution (NIC) payments away from HMRC.

In December 2020 the NCA submitted to the court how the organised crime group had diverted more than £50m of PAYE/NIC payments away from HMRC by offering outsourcing services to third party companies, but then failing to pay the appropriate sums to HMRC.

These funds were initially moved through a complex network of UK accounts with the majority of the funds then moved to accounts held in Hong Kong and Taiwan.

The case was due to go to trial at the High Court this month but on 19 June 2024 a settlement was reached with Mr Candy-Wallace and companies he controlled. The NCA recovered a residential property near Eastbourne valued at approximately £1.7million which was held in the name of an offshore company incorporated in the British Virgin Islands, and the balances of five further UK company bank accounts totalling approximately £1.2m.

Two further settlements had previously been reached with companies whose bank accounts had been used as part of the money laundering network; Foxton Wren Ltd and Moneo Solutions Ltd. A combined sum of approximately £1.7m was recovered from these companies bringing the total value of assets recovered as a result of this investigation to approximately £5.8m.

Adrian Searle of the National Economic Crime Centre at the NCA said: “The abuse of UK and offshore company accounts to facilitate money laundering represents a significant threat to the UK economy, adding costs to our financial system and threatening the UK’s reputation as a world financial centre. The NCA uses all the powers at its disposal, both criminal and civil, to pursue the laundered assets and bring those involved to justice.”

The scheme saw would-be investors approached to purchase apartments off-plan with offers of high guaranteed rental income.

The projects were never completed resulting in up to 100 investors losing nearly £8m ($9.9m, €9.1m). The NCA did not state what happened following the arrests.

The arrests were part of Operation Henhouse, which funded by the National Economic Crime Centre (NECC) – part of the NCA.

The operation was the result of the collaboration of multiple police forces in the UK, consisting of 43 forces and eight regional organised crime units (ROCUs) – including the City of London Police.

Across the UK, Operation Henhouse saw in total 290 arrests made across different types of fraud offences, which included romance fraud, banking and insurance fraud, as well as money laundering and perverting the course of justice. The operation also saw in excess of £6.2m in assets seized, which included high-value jewellery and watches, cryptocurrency, cash, gold and luxury sports cars.

This was the second iteration of Operation Henhouse with plans to repeat it later this year.

‘Protect the public from the scourge of fraud’

Adrian Searle, director of the NECC, said: “Fraud accounts for more than 40% of all reported crime. Henhouse is a good example of what can be achieved when the NCA and partners in policing and wider law enforcement come together to target the fraudsters.”

Nik Adams, commander at the City of London Police, added: “Operation Henhouse was the culmination of months of hard work. As the national lead police force for fraud, we coordinated policing activity by working with regional forces and specialist economic crime units, which was then replicated across other partners under the leadership of the NECC and NCA.

“It’s through activity like Operation Henhouse, as well as ongoing collaboration with other law enforcement agencies and the private sector, that we are able to make significant inroads into tackling organised crime activity and protect the public from the scourge of fraud.

“We will look to build on the success of Operation Henhouse over the next 12 months, so momentum in disrupting fraudulent activity continues.”

NCA investigators believe the fraud, primarily offering false investments, was being carried out on a mass scale before it was closed down in September 2022.

Three Romanian nationals were detained during a series of searches by NCA investigators and Romanian police officers at apartments in north Bucharest.

Since September, work has been underway to identify victims of the fraud. So far, a potential 700 plus UK victims have been identified and a further 4,000 overseas. While work continues to identify more of the victims, the NCA is keen that potential victims come forward so that appropriate advice and support can be provided.

Suzanne Foster, branch commander of NCA’s complex financial crime team, said: “The impact of this fraud on victims, both financially and psychologically, is significant. Losses are already over £1m ($1.2m, €1.13m). This figure will grow as we identify more victims.

“Tackling fraud is a priority for the NCA. Our global reach and strong relationships with international partners means we can target fraudsters wherever they are in the world. If you think you may have been a victim of this fraud, please be assured that there is support available and you can make a report to Action Fraud.”

Tactics

The NCA said the gang targeted victims they knew would be vulnerable and desperate to get their money back. They would initiate contact by pretending to call from the Financial Conduct Authority (FCA) or other regulatory bodies, claiming they would be able to recover the victims’ losses.

They used similar tactics to recovery and advance-fee fraud, which asks for an upfront payment. Once the victims paid, the money was quickly transferred into a crypto wallet and all communication would be ended.

The apartments raided were rented solely for the purpose of running call-centres where the callers scoped out targets, and reinitiated contact with victims already defrauded through a separate investment scheme.

Officers seized material that indicated a script was followed to make calls to victims and false referrals to the ‘FCA Crypto Department’.

High value crypto currency wallets were identified but on examination were found to be false and suspected to have been used to demonstrate to victims that recovered funds were available to repay their initial investment losses.

These orders have the power to compel an individual – either a politically exposed person (PEP) or a person who is suspected of involvement in, or association with, serious criminality – to explain the origin of assets that appear to be disproportionate to their known income.

They are a powerful weapon in the National Crime Agency’s (NCA) investigatory arsenal, writes Rachel Cook, senior associate at Peters & Peters Solicitors.

London, Liechtenstein and Panama

Andrew Baker, a British financial adviser and solicitor based in Liechtenstein, is the president of Panamanian foundations that own relevant properties in London.

In its application to the court for a UWO, the NCA had said that there were reasonable grounds to suspect that Mr Baker conducted himself in a way that was likely to facilitate the commission of serious criminal offences in England and Wales, and that he was suspected of assisting in the laundering of over £10m ($12.4m, €11.4m).

The NCA’s suspicions were based on its assumption of who the ultimate beneficial owner was, with reference to the complexity of the corporate structure holding the London properties.

UWOs so far

To date, the NCA has targeted just four individuals with UWOs, with each subject initially remaining anonymous.

The first known subject was Mrs Hajiyeva, a PEP and wife of an Azerbaijani banker convicted of various offences, including fraud – she famously spent £16m in Harrods.

In February 2020, we learnt the identity of a second target, Mansour Hussain, who is accused of laundering money for gangsters based in the Leeds/Bradford area.

In March 2020, we not only found out the identity of the third individual, the late Rakhat Aliyev, but also the details and alleged criticisms of a financial adviser and solicitor, Baker.

This third set of UWO litigation is markedly different.

While the first two orders were successful, the High Court overturned the Aliyev/Baker UWOs in a comprehensive judgment in April 2020.

These UWOs were initially issued in May 2019, against a then unnamed PEP, relating to London properties (purchased for a total of £80m) – several of which were owned by Baker’s Panamanian foundations.

Aliyev was a high-profile Kazakhstani national who was part of the ruling elite before his fall from grace.

In 2015, he was found dead in an Austrian prison cell awaiting trial for the alleged murder of two bankers.

A look at Aliyev’s family tree gives some insight into the broader implications of this litigation.

He was the estranged former son-in-law of Nursultan Nazarbayev – president of Kazakhstan for over 30 years – who remains a very powerful figure in the country.

Aliyev’s ex-wife, Dariga Nazarbayeva, is a senior Kazakhstani politician, current chair of the Kazakhstan senate and a suggested future president.

Aliyev and Nazarbayeva’s son, Nurali Aliyev, now lives in one of the three relevant London properties.

The NCA sought to pierce the corporate veil in alleging that the three properties were bought using Aliyev senior’s ill-gotten gains.

Baker’s lawyers successfully contested the UWO, arguing that the statutory test had not been fulfilled and that the NCA did not have reasonable cause to believe that Aliyev senior’s wealth was used to buy the property.

The offshore entities argued that the source of the wealth was Nazarbayeva’s legitimate income acquired after her divorce from Aliyev, together with their son’s (Nurali Aliyev) income.

Even though the orders were resisted; Baker, as president of the Panamanian foundations, found himself centre stage in this dispute and, while the High Court judgment exonerates him, the NCA has (now publicly) been scathing in its criticism.

Hard stance on offshore income

This was not the first time that we have seen the use of a UWO against an offshore entity that owns London property.

In Mrs Hajiyeva’s case, the property was owned by a company incorporated in the British Virgin Islands, although in that case the company did not dispute her ownership.

Clearly, both the Hajiyeva and Aliyev applications highlight the NCA’s hard-line stance on offshore income.

To date, the NCA has carefully selected its UWO respondents, and this latest application appeared to further demonstrate a focused approach.

In targeting a prominent family who are actively involved in a foreign government, its signal was clear: where there is a UK nexus, no one is beyond its reach.

But for the readers of this publication, what will perhaps be of greater interest is the clear signal that scrutiny of financial advisers and service providers – the gatekeepers of these offshore entities – is key to the NCA’s strategy of recovering the proceeds of crime and making the UK an unattractive option for the laundering of these ill-gotten gains.

A setback for the NCA?

This most recent judgment is, however, undoubtedly a setback for the NCA.

For a court to issue a UWO, it must be satisfied that there are reasonable grounds for suspecting that the known sources of the subject’s lawfully obtained income would have been insufficient for the purpose of buying the property – the ‘income requirement’ test.

The NCA had considered whether Baker’s personal income was likely to be insufficient to have purchased the properties.

However, the High Court found that Baker did not ‘hold’ the properties and so the ‘income requirement’ was not met – a point that is likely to be appealed by the NCA.

Obtaining information about offshore structures’ ownership of UK property was central to the intention of parliament when introducing UWOs and, if the income requirement cannot be met because of the corporate structures, it would arguably undermine the purpose of the legislative scheme.

The court was also critical of the NCA’s assumption that a complex holding structure was automatically suspicious, which, it said, was not necessarily the case.

Moreover, while the NCA believed that Baker was linked to Aliyev senior – a suspected criminal – it did not follow that Baker must therefore be a ‘money launderer’ or a person associated with serious criminality, not least because Baker had only joined the foundations after Aliyev’s death and after the properties were purchased.

Nevertheless, and whatever the outcome of any appeal by the NCA, the Aliyev applications are a stark reminder that financial advisers and service providers, of both offshore and onshore entities, could become caught up, or even central to, expensive and highly publicised litigation concerning their role in the management of their clients’ assets – even if their involvement comes long after the conduct principally complained of.

This aticle was written for International Adviser by Rachel Cook, senior associate at Peters & Peters Solicitors.

The UWO means the mansion cannot be sold or disposed of pending a high court hearing on 10 March 2020.

The property is owned by two offshore companies, Manrick Private Foundation and Alderton Investments incorporated in Curacao and Anguilla, respectively, according to British broadcaster BBC News.

A UWO allows investigators to freeze assets if they suspect the money invested in them had been laundered or obtained from criminal activities.

The National Crime Agency (NCA) can use the enforcement tool to require owners to disclose how they got the money to purchase the assets in question.

International links

The property was bought by the two firms in 2014, and mortgage documents show that its occupiers are Nurali and Aida Aliyev.

The former is the grandson of the ex- ‘president for life’ of Kazakhstan, Nursultan Nazarbayev, who stood down last year after three decades in power.

According to public information, Aliyev is the founder and a shareholder of Capital Holdings, a Kazakhstan-based private investment firm.

This is the third UWO the UK has issued, all of which relate to London properties reportedly worth more than £80m ($104.8m, €91.7m) in total.