Summary
On 1 December 2022, a 50-strong team from the National Crime Agency (NCA) arrived at a multi-million pound mansion in North London to execute a search warrant related to its investigation of suspected violations of sanctions on Russian oligarch Mikhail Fridman.
This dawn raid of Athlone House was the largest property ever searched by UK law enforcement. The NCA arrested Fridman and seized items including his electronic devices and computers, as well as passports, photographs and documents. Officers also seized assorted cash found in the gatehouse and a safe, along with a bag of cash retrieved from a security guard who was attempting to escape the raid.
While the search made headlines as a strong show of early resolve by the NCA’s new Combatting Kleptocracy Cell (CKC) to tackle sanctions evasion, in July 2023 Fridman approached the court seeking to have the search warrant overturned. His challenge pointed to a number of errors in how the raid was conducted, including technical problems with the search warrant. While the NCA admitted some of these irregularities, Fridman also took issue with the heavy-handed execution of the search.
Fridman was given the green light by the High Court to challenge the search warrant in July 2023, but in September 2023 the NCA dropped its investigation before a final ruling could be made in the case.
Who is Mikhail Fridman and why was he sanctioned?
Mikhail Fridman, a dual Russian and Israeli citizen, is the co-founder and main shareholder of the Alfa Group, a major business conglomerate with business interests in key Russian industries including oil, gas and banking. The group includes Alfa Bank – Russia’s largest non-state bank facing sanctions in the UK, EU and US. Fridman’s net worth is estimated to be over $13 billion.
Fridman was sanctioned by the UK on 15 March 2022 — one month after Russia’s invasion of Ukraine — on the basis that he was “associated” with Putin and that he was a “pro-Kremlin oligarch”. The grounds for Fridman’s designation were subsequently amended to focus on his role in and ownership of the Alfa Group, meaning he “is and/or has been involved in obtaining a benefit from or supporting the Government of Russia”.
Fridman has brought several challenges against the UK government’s exercise of its sanctions powers, including a challenge to the refusal by the Office of Financial Sanctions Implementation (OFSI) to grant him licences for expenses relating to the maintenance and staff at Athlone House.
In early October 2023, Fridman returned to Moscow for the first time since Russia’s full-scale invasion of Ukraine and has said that he plans to live in Israel.
Why does this case matter?
- This case provides a rare insight into the operational activity of the CKC in its early efforts to investigate suspected sanctions evasion. While the NCA claims its new unit has had “significant success investigating potential criminal activity by oligarchs, the professional service providers that support and enable them and those linked to the Russian regime”, the procedural errors and brash execution of the search warrant in this case led the NCA to concede that its search of the property and seizure of items were unlawful. The result is that a high-profile investigation into Fridman for serious crimes – including sanctions breaches and money laundering – did not get off the ground in a serious blow to the CKC’s ability to deliver its remit effectively.
- The botched raid mired the NCA in a costly and time-consuming judicial review of its practices. As one of few sanctions investigations that have come to public attention, the case raises questions about whether the agency’s new CKC is adequately resourced and staffed to carry out effective enforcement of the UK’s growing reliance on sanctions as a tool for tackling kleptocracy. More than two years after the full-scale invasion of Ukraine, the public has yet to see meaningful enforcement of Russia sanctions, with one criminal prosecution by the NCA so far for alleged violations of Russia sanctions.
- While the NCA boasted that by the time of its raid on Fridman’s mansion the CKC had secured “nearly 100 disruptions – actions that remove or reduce a criminal threat – against Putin-linked elites and their enablers”, almost nothing is known publicly about the CKC’s performance or the cases that may, by implication, be in the pipeline. In addition, there is little known about the staff, expertise, budget or needs of the CKC. Without transparency about this basic information, parliament and the public cannot hold the government to account for its follow-through on sanctions or put pressure on decision-makers to get the CKC the resources it needs.
Further context: The record of the Combatting Kleptocracy Cell
After the full-scale invasion of Ukraine, the UK rapidly took on the challenge to rid itself of its reputation as a safe haven for Russian cash. But the CKC’s investigation into Fridman shows teething problems in early enforcement efforts which are needed to ensure the effectiveness of the Russia sanctions regime.
On 24 February 2022, the day Russia invaded Ukraine, the UK Prime Minister announced a new unit in the NCA to “target sanctions evasion and corrupt Russian assets hidden in the UK”. While only formally established in 2022, the CKC grew out of a covert unit set up in the wake of the Salisbury poisoning. It is now touted as the UK’s flagship sanctions enforcement unit pursuing the mandate of targeting corrupt elites and their enablers and to tackle criminal sanctions evasion.
While little has been shared publicly about the CKC’s work, the government indicated in November 2023 that £1.36 million was frozen under AFOs or cash detention orders and three people have been charged related to Russia sanctions evasion.
By contrast, the Task Force KleptoCapture set up in the US by President Biden has widely publicised that by March 2024 it has seized, restrained or obtained forfeiture orders against approximately $700 million in assets two years after its formation and has charged more than 70 individuals in relation to sanctions evasion. Like the UK, there is a lack of transparency around enforcement activity in the EU, but several EU countries – such as the Netherlands, Germany and France – have demonstrated more decisive action in response to suspected sanctions evasion.
Details of the UK case
The basis of the NCA’s application for the search warrant was a wide-ranging investigation into a suspected conspiracy to circumvent sanctions involving a loan payment made by Alfa Bank to Fridman’s executive assistant prior to Fridman’s UK designation; suspected money laundering; a suspected conspiracy to defraud the Home Secretary (relating to Fridman’s partner’s application for indefinite leave to remain); and a suspected conspiracy to commit perjury (relating to the address endorsed on the birth certificate of Fridman’s daughter).
In a preliminary hearing before a High Court judge on 27 July 2023, Fridman sought permission to challenge the search warrant on a number of technical grounds relating to failures to follow the legal requirements of its execution. Fridman also alleged that, before the dawn raid, the NCA knew the warrant was misdated and defective (and therefore invalid) but proceeded with the search anyway.
Fridman also challenged the heavy-handed manner in which the NCA executed the warrant. NCA officers dressed in combat gear reportedly tried to force open the property’s gate with a battering ram and scaled a side entrance with ladders before pressing the intercom button to seek entry to the property.
Fridman’s lawyer also criticised the basis on which the search warrant was obtained, claiming the NCA “grossly violated its duty of candour to make a full and frank disclosure to the judge”. The warrant was granted by a judge at Southwark Crown Court after the NCA cited a 15-year old report based on what Fridman’s lawyer described as “classic kompromat”, including unsubstantiated allegations that Fridman had funded Russian organised crime, laundered money for a Colombian drug cartel, and was involved in the murder of two journalists.
The NCA conceded many of the grounds put forward by Fridman, acknowledging in its court submissions that “failures on its part led to the search of the property and the seizure of items being unlawful”. The NCA also accepted that Fridman is entitled to damages for trespass to land and goods as a result of the botched raid, but insisted the agency had acted in good faith.
The majority of the items seized during the raid were returned to Fridman, but at the time of the court challenge the NCA argued that it should be permitted to retain material not yet returned, pending determination of an application to the Crown Court under separate and undisclosed proceedings.
In September 2023, the NCA confirmed it would be taking no further action against Fridman based on the defective warrant, dropping its investigation into allegations of sanctions evasion, money laundering, immigration fraud and perjury. Meanwhile, Fridman left London in September 2023 with the intention of settling in Israel but reportedly moved back to Moscow in October 2023.
Court documents
High Court
- R (on the application of Mikhail Fridman) v National Crime Agency and Another, application for judicial review permission hearing on 27 July 2023
Court documents can be requested by emailing info@spotlightcorruption.org.
