Asset Seizure Regimes and Unexplained Wealth Orders: How do Recent Developments Affect the CAB?
In a recent decision of the Court of Justice of the European Union, that court ruled that EU law does not preclude Member States from having civil proceedings for confiscation which are unrelated to a finding of a criminal offence. This decision highlights the validity and use of civil forfeiture regimes in EU countries. In considering this case and the UK regime, we review the current state of play for Ireland’s Criminal Asset Bureau.
In a recent case of the Court of Justice of the European Union ("CJEU"),1 BP a senior executive of a Bulgarian bank was subject to criminal proceedings for having incited others to misappropriate funds belonging to the bank of around €105 million. Aside from the criminal proceedings, the Bulgarian Commission responsible for the combatting of corruption and for the confiscation of assets found that BP and his family had acquired assets of considerable value whose origin could not be established.
The Bulgarian Commission brought civil proceedings before the Sofia City Court to confiscate illegally obtained assets. That court in turn asked the CJEU whether EU law precluded Member States laws allowing confiscation without a finding of a criminal offence or the imposition of a criminal conviction.
The CJEU ruled that EU law,2 does not preclude national legislation by which a court may order the confiscation of illegally obtained assets following proceedings which are not subject either to a finding of a criminal offence or the conviction of the persons accused. This important ruling copperfastens the legitimacy under EU law of the activity of agencies such as the Irish Criminal Assets Bureau ("CAB").
Ireland’s CAB has strong powers which it employs regularly, and is seen by many countries as a leader in the asset seizure regime. However, Ireland has been criticised in the past by the international Financial Action Task Force (“FATF”). In its mutual evaluation report of 2017 it stated that “while asset confiscation initiatives have strong political and national support, the value of criminal proceeds confiscated and forfeited appear modest for a jurisdiction that pursues confiscation of criminal proceeds as a national priority and operates a post-conviction based and non-conviction based regime." A follow up report in 2019 noted extensive improvements and corresponding upgrades to Ireland’s compliance status. However, it noted that minor deficiencies remain.
The UK’s more recent asset freezing/seizure regime of Unexplained Wealth Orders (“UWOs”) is now reaping substantial rewards. UWOs were first introduced in the UK in 2018 by the Criminal Finances Act 2017. The orders allow investigators to freeze assets if they suspect the money invested in them is the proceeds of money laundering or obtained from criminal activities. The National Crime Agency ("NCA") is the government agency empowered to seek UWOs. The law allows the NCA to seek an order from the court to freeze assets and places the burden on owners to disclose the source of funds for their assets. The background to this legislation is widespread criticism of the UK being used as a haven for wealthy overseas investors who target the UK to invest dirty money and the proceeds of crime, particularly investments in property. The orders have been limited in number so far, but the NCA has been successful in freezing very substantial assets. High profile cases have revolved around foreign politicians and officials and their families.
The first orders in 2018 concerned multi-million pound assets belonging to a former high ranking Azerbaijani state bank executive, Jahangir Hajiyeva, who was in prison in Azerbaijan for embezzlement from the state bank. Orders were obtained against his wife, Nursultan Zamira, who had substantial assets in London, and was reported as spending £16.3m in the London department store Harrods. Ms Zamira recently lost her appeal against the UWO and will now have to explain how she could afford the properties and her spending.
The most recent UWO case in 2020 involves Nurali Aliyev, the grandson of former President Nazarbayev of Kazakhstan. The NCA had secured a freezing order on a multimillion-pound mansion, which is occupied by Mr Aliyev, his wife Aida, and their children. The NCA argued that the wealth used to buy them was linked to Rakhat Aliyev, Mr Aliyev’s father and the former president’s son in-law, who died in an Austrian jail in 2015 after being charged with the murder of two bankers in 2007. Recently in the High Court, the two offshore companies that own the properties applied to have the orders quashed. Clare Montgomery QC, acting on the companies’ behalf, said the NCA’s grounds for the UWO were “tissue paper thin”. She said the funding for the properties came from Mr Aliyev’s mother, Darga Nazarbayeva, who was economically independent. Judgment was given on 8 April 2020 when the NCA faced a setback. The High Court discharged the UWOs and interim freezing orders. After assessing the substantial evidence which had been filed in rebuttal, the judge stated that the NCA case at the original ex parte hearing had been flawed by inadequate investigation and that that it had failed to carry out a fair-minded evaluation of the new information which had been provided in relation to the ownership of the properties and absence of links between the offshore companies and Rakhat Aliyev. The NCA is to appeal.
There has also been an interesting settlement under the new powers of the NCA. In December 2019, the NCA agreed to accept over £190m, (held in the UK), from one of Pakistan’s wealthiest businessmen, Malik Riaz Hussain, in order to cease an investigation into the assets. The NCA did not disclose the allegations that had led to the freezing orders on the assets but confirmed that this was a civil, rather than a criminal matter
As post-Brexit Ireland increasingly becomes the investment choice of businesses and wealthy individuals around the world, there will be an bigger risk of some of the investors turning out to be politically exposed persons, tax evaders and illicit offshore structures. Questions will inevitably arise as to whether Ireland will use its statutory powers to target this potentially wider pool of illicit investors as has been done in the UK? Without doubt, asset confiscation orders in substantial amounts issued against high profile and wealthy targets should have a deterrent effect on those thinking of choosing Ireland as their new target for the investment of illegal wealth.
- Case C 234/18.
- Council Framework Decision 2005/212/JHA of 24 February 2005.
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.