NCA v Baker 
In May 2019, the NCA applied for UWOs in relation to five homes located in affluent areas of London, worth in excess of £80million (the “Properties”). The NCA argued during an ex parte hearing that the Properties were purchased as a means of laundering the proceeds of unlawful conduct of the late Mr Rakhat Aliyev (“RA”), a former senior official in the government of Kazakhstan. Based on the limited evidence before the judge, the UWOs were granted without notice to the Respondents.
In each case, the UWO named the Foundations which held the Properties as the Respondents. In August 2019, the Respondents voluntarily disclosed the Ultimate Beneficial Owners (“UBOs”) of the Properties to the NCA (the ex-wife and son of RA – Dariga Nazarbayeva (“DN”) and Nurali Aliyez (“NA”)) and provided them with what the court later referred to as “extensive information” regarding the purchase of the Properties. However, the NCA refused to withdraw the UWOs.
The Respondents duly appealed the UWOs on the grounds that the NCA made errors in law and approach in its applications, including material non-disclosures during the ex parte hearing, and that the information now available demonstrated that the UWOs were sought and made on a flawed basis.
The judgment was handed down on 8 April, 2020.
The argument by NCA was that RA was the founder of the three Respondent Foundations, that he had provided the Respondents with funds which were used to purchase the Properties and that such funds derived from his previous criminal conduct. The NCA further argued that the Properties were “handled in the same way”, which they said showed a financial link between the Respondent Foundations and RA.
The NCA also placed significant weight on the complex and secretive manner in which the Properties were obtained and subsequently “handled”.
The High Court found that the case which the NCA presented was “flawed by inadequate investigations into obvious lines of enquiry”. Mrs Justice Lang was critical of the NCA for not considering a breakdown in marriage when assessing the likelihood of an ex-spouse laundering suspected proceeds of criminal conduct. Both DN and NA had legitimate and publicly-known business interests which would have been sufficient to acquire the assets concerned and can be considered wealthy in their own right. The respondents had provided sufficient evidence of this to the NCA, of which they failed to carry out a “fair minded evaluation” despite the absence of any link between RA and the Foundations.
This case has highlighted a number of points which may be relevant to wider application for cases concerning UWOs.
Notably, the High Court cautioned against over-reliance on the use of complex corporate and offshore structures of property holding as itself being grounds for suspicion of money laundering. It was acknowledged that there are a multitude of lawful reasons for such structures, including privacy, security and tax mitigation.
In addition, the judge stressed that similarities in the “handling of” the Properties were not necessarily evidence of a financial link with RA and that they are unsurprising, given that the Properties have the same, or related, UBOs.
Lessons for the future
This decision highlights that going forward there will be an expectation on the NCA to ensure that it carries out adequate investigations prior to making an application for a UWO, so that they are only utilised where it is proportionate to do so and can be justified based on the facts available.
It also underscores that suspicions of illegal conduct can be settled by the production of adequate explanations and evidence and, on this basis, the High Court may be required to discharge the UWOs. This will no doubt be a welcome thought for those faced with responding to UWOs. The respondents in this case were able to produce evidence that their own lawful income was sufficient to have obtained the properties. In this scenario, the “unexplained” wealth effectively becomes “explained”.
Property lawyers handling high value property transactions are very familiar with seemingly complex structures being employed by purchasers for all sorts of legitimate reasons. That fact appears to have escaped the investigations of the NCA. It may be that this case will provide them with the basis for ensuring that the rationale for such structures are properly evaluated rather than simply being characterised as suspicious or with criminal intent behind them.
This is the first successful appeal against a UWO since their inception, so it will be interesting to see whether there is a lasting impact for future cases. The High Court was extremely critical of the NCA with regard to almost every argument they pursued; it found the NCA’s suspicions and assumptions to be unreliable and rebutted by cogent evidence provided by the Respondents.
The NCA have already issued a press release which makes clear their intention to appeal this decision. The basis of such an appeal is currently unclear.
The potentially dire consequences for those respondents targeted by a UWO means that this remains a key area for development over the coming months and years. HNWIs, PEPs and their advisors should keep a close watching brief and seek specialist legal advice if they have any concerns that they might be of interest to the NCA, SFO or other agencies with the power to obtain a UWO.
The civil recovery regime that UWOs are part of is a highly specialised area of law involving complex High Court litigation. It is only practised effectively by a small number of lawyers and requires experience and specialist expertise. We excel in the legal field that UWOs are part of and we believe that they will become increasingly common. And this will mean that many more people will need to know precisely how to respond to them.
Our background in challenging restraint orders and freezing orders issued under POCA – to freeze a person’s assets before a legal attempt is made to confiscate them – leads us to believe that UWO’s could well see many innocent people fighting to retain their assets. Contesting any aspect of a UWO will make all the difference to an individual’s ability to retain what is rightfully theirs.