When the National Crime Agency (NCA) announced a court settlement this summer with Zamira Hajiyeva it described the outcome of its first-ever McMafia order as a “fantastic” success.
The justification for the claim was that Hajiyeva, who in 2018 had become the first person in Britain to be targeted with an Unexplained Wealth Order (UWO), had agreed in the High Court deal to forfeit her £14 million Knightsbridge home and a Berkshire golf club bought 11 years ago for £10.7 million.
That will allow the agency to recover many millions of pounds of criminal proceeds after many years of tortuous legal wrangling.
It also means that the people of Azerbaijan should eventually see money returned to their country in at least a partial recovery of the vast sums stolen from its state bank, the International Bank of Azerbaijan, by Hajiyeva’s now jailed husband Jahangir during his time as its chairman.
All that is certainly praiseworthy and a reward for the determined and forensic work of the investigators and lawyers involved in pursuing the case against Hajiyeva.
But beneath the surface gloss of the NCA press release there are many troubling features to the outcome of the case.
Share of the spoils
The most obvious is that under the terms of the agreement only 70 per cent of the value of the two properties forfeited by Hajiyeva will be surrendered to the NCA, with Hajiyeva receiving the remaining 30 per cent.
The precise value of her portion will only be certain once the properties have been disposed of, but will be at least £4.2 million from the Knightsbridge home according to the NCA’s valuation and probably many millions more once the golf club and the potentially valuable land it stands on is sold.
At the same time – and unmentioned in the agency’s press release – Hajiyeva will benefit from a separate agreement by the NCA to abandon its efforts at Westminster Magistrates’ Court to secure the forfeiture of her jewellery collection, which includes a £1.2 million Cartier diamond ring and other pieces worth hundreds of thousands of pounds.
The overall value of the collection was estimated during the proceedings to be worth close to £3 million, but could be much more, with court documents showing that many of the items within it were as yet unvalued.
That means that Hajiyeva is likely to end up walking away with as much as £10 million, or even more, despite the NCA’s insistence throughout the case that all of her assets were bought with stolen money given to her by her husband from the proceeds of his crimes.
The NCA’s position didn’t change even after the High Court agreement, setting out in its press release that it believed that Hajiyeva’s two properties “were obtained as a direct result of large-scale fraud and embezzlement, false accounting and money laundering.”
The evidence that had earlier been presented to the court setting out where the money used had come from appeared compelling. So even though the High Court deal resulted in no finding about Hajiyeva’s knowledge of how the properties were paid for, it is deeply unsatisfactory to see so much money of such doubtful provenance remaining in her hands.
Why did it take so long?
The length of time that it took to pursue the case against Hajiyeva through the courts is another obvious concern. It showed how she was able to use her tenacious lawyers to frustrate the NCA in its efforts to recover assets from her, placing a significant drain on the agency’s limited financial and investigative resources.
Significantly too, the protracted legal battle between the agency and Hajiyeva over her jewellery left unresolved the question of whether our courts can deal efficiently with cases where the person whose money paid for the targeted assets – in this instance Hajiyeva’s jailed husband Jahangir – is overseas and either unable or unwilling to take part in proceedings in which they are deemed to be an “interested party”.
In addition, the deal to end the proceedings against Hajiyeva also prevented detailed scrutiny being applied to those professionals – ranging from lawyers to wealth managers and others – who helped in the purchase of her assets. Nor was it possible to learn more about the extent of the anti-money laundering checks, if any, applied by the luxury retailers, private schools and universities who accepted money from Hajiyeva or her husband before his prosecution and jailing in Azerbaijan.
Each of these issues is examined in more detail below in an analysis of the case focusing on the problems it threw up, some potential solutions, and what it says about the future value of UWOs.
Test case for McMafia orders
The saga began when Hajiyeva – who became famed for spending £16 million at Harrods in an extraordinary spending spree – was issued with UWOs in February 2018 targeting her Walton Street home and the Mill Ride golf club.
It was the first use of the new measure since it had become available to law enforcement agencies the previous month and she responded by applying in July the same year for the order against her home to be discharged.
The first argument advanced at the High Court by her barrister James Lewis KC, instructed by solicitors at Gherson, was that Hajiyeva’s husband was not a “politically exposed person” – defined in the new legislation as a person entrusted with prominent public functions by an international organisation or state other than the United Kingdom or another EEA state – and thus outside the scope of the UWO power.
Her lawyers also argued that the NCA had failed to establish reasonable grounds to show that her home had not been acquired from lawful income and put forward further arguments relating to spousal privilege, the privilege against self-incrimination, and her Article 1 ECHR right to peaceful enjoyment of her property.
Each of these claims was rejected in a High Court judgment by Mr Justice Supperstone published in October 2018. The judge found not only that the NCA was entitled to rely on Mr Hajiyev’s conviction in Azerbaijan for embezzlement but that there was also evidence beyond this trial to justify allegations that he had misused his bank’s funds. This included issuing credit cards to his family members and allowing Hajiyeva to run up enormous debts against the bank.
The Court of Appeal upheld this judgment in February 2020, clearing the way for the NCA to prepare to bring civil recovery proceedings at the High Court to permanently seize her house and golf club.
By this time, the agency, which in 2018 and 2019 had separately seized Hajiyeva’s jewellery collection, had already initiated separate “listed asset” forfeiture proceedings at Westminster Magistrates in relation to the jewels, lodging its application in January 2020.
The timescale so far was reasonable and the process of defending the UWOs had gone smoothly enough to raise hopes among campaigners, politicians and others that the measure could prove a useful weapon, as intended, to clean up London’s image as a haven for dirty money.
Bogged down – seizing the assets
But it was here that the problems started as the jewellery case became bogged down in years of legal argument. Firstly, there was the issue of whether Mr Hajiyev, who had been accepted by the court to be an “interested party” in the proceedings, could be served with the relevant court documents in his Baku prison cell and then whether he was able to instruct lawyers to participate in the case.
Many months of negotiations ensued, involving British diplomats in Azerbaijan as well as efforts by NCA officers first to convince the court that Mr Hajiyev had been successfully served with the documents he needed and then, once that hurdle had been painfully overcome, to show that he could instruct a solicitor and take part in the case.
The NCA’s view on all this was set out last year by its barrister Catherine Callaghan when she told the Chief Magistrate Paul Goldspring, who was presiding over the jewellery case, that Hajiyeva was using arguments that amounted to “a sideshow and irrelevance” to distract attention from the “lack of merit” of her application to stop the forfeiture of her jewellery.
Callaghan also told the court that rather than being unable to participate, Hajiyeva’s husband Jahangir Hajiyev had deliberately chosen not to by refusing to communicate via his wife to make his case or to take one of a number of options to instruct a solicitor.
Ominously, she also set out the implications for other cases, pointing out that if the court accepted the claim by Hajiyeva and her husband that they could not have a fair hearing because of his incarceration in an overseas prison cell, then it would be open to others to use the same excuse to avoid enforcement action against them here.
Callaghan said:
“If Mrs Hajiyeva’s argument is accepted it would mean any civil recovery or summary forfeiture proceedings brought by the NCA could be defeated by an affected person’s refusal to take reasonable steps available to them to participate … and/or by the actions of a foreign state. It would amount to an easy means for affected persons to frustrate proceedings.”
A court ruling on this issue was still pending, however, when the settlement with Hajiyeva was agreed in August. At the same time, the proceedings to confiscate the jewellery were abandoned before a scheduled four-day hearing in September 2024 to hear the “abuse of process” claims by Hajiyeva and her husband could take place. The same hearing was also due to consider additional allegations by Hajiyeva’s lawyers relating to disclosure failures by the NCA that threatened to further delay any judgment over the substantive merits of the forfeiture application.
The High Court civil recovery proceedings over the house and golf club were not beset by the same problems because of a ruling by Mr Justice Freedman that Hajiyev had no claim to either property because of the complex method, involving offshore companies and trusts, that he had used to to conceal his involvement in their purchase to the outside world.
Nonetheless, it was clear throughout that the legal challenges that the NCA were facing in the jewellery proceedings were relevant to the agency’s parallel pursuit of Hajiyeva’s properties and a factor in the delay in beginning the civil recovery case. That was particularly so once the claims of disclosure failures emerged with the NCA facing potentially huge costs in the event of an adverse court judgment on the allegations. Hajiyeva’s lawyers were arguing that a breach of its duty of candour to the court by the NCA was egregious – this would have meant that there were real risks that the costs protection the NCA enjoyed in the Magistrates Court would not apply.
There has been no official comment, but sources have indicated that this costs risk over the jewellery proceedings, as well as the lack of any obvious end point to the already resource consuming proceedings in the magistrates’ court, was a critical factor in persuading the NCA to strike its deal this summer with Hajiyeva, despite the agency’s continued insistence that her properties were bought entirely with unlawful funds.
Implications of the case
What it means, of course, is that the NCA can’t be certain that in the future it won’t face similar challenges in any new UWO or related case in which the principal source of the funds is a “politically exposed person” overseas who can use the same type of arguments about the fairness of proceedings as Hajiyeva and her husband have deployed in this case.
The absence of a ruling in the jewellery proceedings, coupled with the lack of other UWO case law, means that the NCA cannot be confident of how the courts will respond in any similar cases targeting corrupt actors abroad in corrupt states. That appears an obvious deterrent to taking action and certainly won’t make it easy for the NCA to pursue future litigation of this sort.
The Hajiyeva case also shows that the UWO power – when combined with an interim freezing order – has the advantage of allowing property to be frozen on the basis of “reasonable grounds for suspecting” that a person’s lawful income is insufficient for them to obtain that property. Although this appears easier to sustain than the requirements for a conventional property freezing order – which are on the basis of a law enforcement body having a “good arguable case” that the property was obtained through unlawful conduct – pursuing someone this way is unlikely to result in an easy win.
One reason is that securing the UWO and defeating any challenges to it doesn’t bring forfeiture of the property any closer – unless the owner of the property provides no response whatsoever. Civil recovery proceedings still have to follow at which the NCA must be able to show to a court’s satisfaction that the funds used to buy the asset were unlawful on the balance of probability.
That is unlikely ever to be simple in cases involving politically exposed persons from overseas because whatever money was used in the purchase will inevitably have already been laundered, often via complex chains of offshore shell companies, before entering the financial system in this country. The logic is that any future UWO case will require an “all in” commitment of resources from the NCA, which is doubtless one reason why few such cases have been brought, despite the initial hopes engendered when the power was introduced as part of the Criminal Finances Act of 2017.
One solution could be for new legislation to make clear, if the courts won’t, that any person not holding a property or other asset in their own name is unable to claim to be an “interested party” in any forfeiture or civil recovery proceedings. That would prevent people using the claim of being the hidden beneficial owner behind a corporate structure to secure “interested party” status in future cases and encourage greater transparency of property ownership, as well as removing an opportunity for any who want to use claims of beneficial ownership to frustrate law enforcement.
In a similar vein, another option would be to implement a reform under which those who have used corporate structures to conceal their ownership of a property and avoid tax or other legal obligations would forfeit their rights to be considered as an “interested party” with a right to contest forfeiture or civil recovery proceedings. There might be protests about unfairness, but the response could be that those who don’t play by the tax and similar rules can’t expect to benefit from the protection offered by those rules.
What about the professionals?
Meanwhile, the final unsatisfactory result of the settlement of the cases against Hajiyeva is the public will be denied an opportunity to learn more about the role of the white collar professionals who helped in the purchase of her now forfeited properties.
The limited number of court documents that did emerge disclosed that those involved included law firm Mishcon de Reya, which carried out the conveyancing on the Walton Street home when it was bought by a nominee acting without its knowledge for Mr Hajiyev, and Herbert Smith Freehills, which assisted Mr Hajiyev in his purchase of the Mill Ride Golf Club. It did so after receiving a recommendation from Werner Capital, a London company providing family office services to Mr Hajiyev and his family, “to consult Wikipedia if it wanted evidence that his wealth was legitimate and after obtaining a letter from a “close colleague” of Mr Hajiyev at the International Bank of Azerbaijan where he was still working at the time, before his arrest and conviction.
Both Mishcon and Herbert Smith Freehills told the Evening Standard that they had not engaged in any wrongdoing with Mishcon adding that it had abided by the relevant money laundering requirements at the time of the Walton Street purchase.
Others involved in assisting Mr Hajiyev would doubtless say the same. But it remains disappointing that further scrutiny will not be possible to see exactly how money that the NCA has subsequently argued is unlawful was able to make its way into this country’s financial system and whether, despite subsequent tightening of some regulations, weak points remain that the Hajiyeva case might have exposed.
Similarly, there will now be no access to court documents that would shed more light on the educational establishments – including Harrow School and unnamed universities – that took money from Mr Hajiyev, or the other luxury retailers, beyond those already named, that also cashed in from his unlawfully acquired wealth. That means the public, and politicians, won’t get the chance to examine whether further regulatory reforms are needed to ensure that proper laundering checks are carried out.
Hajiyeva, who told the High Court in a witness statement that her husband made his money legitimately in the “Wild West” conditions that prevailed in Azerbaijan following the collapse of the Soviet Union, insisted throughout that she had not been guilty of any wrongdoing. She emerged too with the court settlement making no finding about her knowledge of her husband’s crimes and was said by her lawyers to want to return to a private existence with her family. She is doubtless already enjoying exactly that, free from the burden of the court proceedings that had previously hung over her for so long.
But while she will leave the spotlight, the issues raised by her case remain important and will need confronting if UWOs are to become a more frequently used and effective tool in the ongoing struggle to tackle Britain’s dirty money problem.
In his job as Home Affairs Editor for the Evening Standard Martin Bentham reported on the National Crime Agency’s case against Zamira Hajiyeva from its start in 2018 until its conclusion this summer.
