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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Hajiyeva v National Crime Agency [2020] EWCA Civ 108 (05 February 2020) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2020/108.html Cite as: [2020] WLR 3209, [2020] 4 All ER 147, [2020] Crim LR 736, [2020] 2 Cr App R 5, [2020] Lloyd's Rep FC 199, [2020] WLR(D) 75, [2020] 1 WLR 3209, [2020] 2 All ER (Comm) 741, [2020] EWCA Civ 108 |
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ON APPEAL FROM THE QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
The Hon Mr Justice Supperstone
Strand, London, WC2A 2LL |
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B e f o r e :
LORD CHIEF JUSTICE OF ENGLAND AND WALES
THE RT HON LORD JUSTICE DAVIS
and
THE RT HON LORD JUSTICE SIMON
____________________
ZAMIRA HAJIYEVA |
Appellant |
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and |
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NATIONAL CRIME AGENCY |
Respondent |
____________________
Jonathan Hall QC and Tom Rainsbury (instructed by the NCA) for the Respondent
Hearing date: 12 December 2019
____________________
Crown Copyright ©
The Lord Burnett of Maldon, Lord Justice Davis and Lord Justice Simon:
Introduction
The statutory and regulatory scheme for UWOs
(1) The High Court may, on an application made by an enforcement authority, make an unexplained wealth order in respect of any property if the court is satisfied that each of the requirements for the making of the order is fulfilled.
(2) An application for an order must -
(a) specify or describe the property in respect of which the order is sought, and
(b) specify the person whom the enforcement authority thinks holds the property ("the respondent") (and the person specified may include a person outside the United Kingdom).
(3) An unexplained wealth order is an order requiring the respondent to provide a statement -
(a) setting out the nature and extent of the respondent's interest in the property in respect of which the order is made,
(b) explaining how the respondent obtained the property (including, in particular, how any costs incurred in obtaining it were met),
(c) where the property is held by the trustees of a settlement, setting out such details of the settlement as may be specified in the order, and
(d) setting out such other information in connection with the property as may be so specified.
(4) The order must specify -
(a) the form and manner in which the statement is to be given,
(b) the person to whom it is to be given, and
(c) the place at which it is to be given or, if it is to be given in writing, the address to which it is to be sent.
(5) The order may, in connection with requiring the respondent to provide the statement mentioned in subsection (3), also require the respondent to produce documents of a kind specified or described in the order.
(6) The respondent must comply with the requirements imposed by an unexplained wealth order within whatever period the court may specify (and different periods may be specified in relation to different requirements).
(7) In this Chapter 'enforcement authority' means -
(a) the National Crime Agency,
…
(1) These are the requirements for the making of an unexplained wealth order in respect of any property.
(2) The High Court must be satisfied that there is reasonable cause to believe that -
(a) the respondent holds the property, and
(b) the value of the property is greater than £50,000.
(3) The High Court must be satisfied that there are reasonable grounds for suspecting that the known sources of the respondent's lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property.
(4) The High Court must be satisfied that -
(a) the respondent is a politically exposed person, or
(b) there are reasonable grounds for suspecting that—
(i) the respondent is, or has been, involved in serious crime (whether in a part of the United Kingdom or elsewhere), or
(ii) a person connected with the respondent is, or has been, so involved.
…
(7) In subsection (4)(a), 'politically exposed person' means a person who is -
(a) an individual who is, or has been, entrusted with prominent public functions by an international organisation or by a State other than the United Kingdom or another EEA State,
…
(8) Article 3 of Directive 2015/849/EU of the European Parliament and of the Council of 20 May 2015 applies for the purposes of determining -
(a) whether a person has been entrusted with prominent public functions (see point (9) of that Article),
(b) whether a person is a family member (see point (10) of that Article), and
(c) whether a person is known to be a close associate of another (see point (11) of that Article).
Whereas:
…
(4) Money laundering and terrorist financing are frequently carried out in an international context. Measures adopted solely at national or even at Union level, without taking into account international coordination and cooperation, would have very limited effect. The measures adopted by the Union in that field should therefore be compatible with, and at least as stringent as, other actions undertaken in international fora. Union action should continue to take particular account of the FATF Recommendations and instruments of other international bodies active in the fight against money laundering and terrorist financing. With a view to reinforcing the efficacy of the fight against money laundering and terrorist financing, the relevant Union legal acts should, where appropriate, be aligned with the International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation adopted by the FATF in February 2012 (the 'revised FATF Recommendations').
…
(12) There is a need to identify any natural person who exercises ownership or control over a legal entity. In order to ensure effective transparency, Member States should ensure that the widest possible range of legal entities incorporated or created by any other mechanism in their territory is covered. While finding a specified percentage shareholding or ownership interest does not automatically result in finding the beneficial owner, it should be one evidential factor among others to be taken into account. Member States should be able, however, to decide that a lower percentage may be an indication of ownership or control.
…
(22) The risk of money laundering and terrorist financing is not the same in every case. Accordingly, a holistic, risk-based approach should be used. The risk-based approach is not an unduly permissive option for Member States and obliged entities. It involves the use of evidence-based decision-making in order to target the risks of money laundering and terrorist financing facing the Union and those operating within it more effectively.
…
(31) It should be recognised that certain situations present a greater risk of money laundering or terrorist financing. Although the identity and business profile of all customers should be established, there are cases in which particularly rigorous customer identification and verification procedures are required.
(32) This is particularly true of relationships with individuals who hold or who have held important public functions, within the Union or internationally, and particularly individuals from countries where corruption is widespread. Such relationships may expose the financial sector in particular to significant reputational and legal risks. The international effort to combat corruption also justifies the need to pay particular attention to such persons and to apply appropriate enhanced customer due diligence measures with respect to persons who are or who have been entrusted with prominent public functions domestically or abroad and with respect to senior figures in international organisations.
(33) The requirements relating to politically exposed persons are of a preventive and not criminal nature, and should not be interpreted as stigmatising politically exposed persons as being involved in criminal activity. Refusing a business relationship with a person simply on the basis of the determination that he or she is a politically exposed person is contrary to the letter and spirit of this Directive and of the revised FATF Recommendations.
(6) 'beneficial owner' means any natural person(s) who ultimately owns or controls the customer and/or the natural person(s) on whose behalf a transaction or activity is being conducted and includes at least:
(a) in the case of corporate entities
(i) the natural person(s) who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity, including through bearer shareholdings, or through control via other means, other than a company listed on a regulated market that is subject to disclosure requirements consistent with Union law or subject to equivalent international standards which ensure adequate transparency of ownership information.
A shareholding of 25% plus one share or an ownership interest of more than 25% in the customer held by a natural person shall be an indication of direct ownership. A shareholding of 25% plus one share or an ownership interest of more than 25% in the customer held by a corporate entity, which is under the control of a natural person(s), or by multiple corporate entities, which are under the control of the same natural person(s), shall be an indication of indirect ownership. This applies without prejudice to the right of Member States to decide that a lower percentage may be an indication of ownership or control. Control through other means may be determined, inter alia, in accordance with the criteria in Article 22(1) to (5) of Directive 2013/34/EU of the European Parliament and of the Council;
…
(9) 'Politically exposed person' means a natural person who is or who has been entrusted with prominent public functions and includes the following:
(a) heads of State, heads of government, ministers and deputy or assistant ministers;
(b) members of parliament or of similar legislative bodies;
(c) members of the governing bodies of political parties;
…
(g) members of the administrative, management or supervisory bodies of State-owned enterprises;
(h) directors, deputy directors and members of the board or equivalent function of an international organisation
No public function referred to in points (a) to (h) shall be understood as covering middle-ranking or more junior officials.
1. Member States shall ensure that obliged entities take appropriate steps to identify and assess the risks of money laundering and terrorist financing, taking into account risk factors including those relating to their customers, countries or geographic areas …
Where a politically exposed person is no longer entrusted with a prominent public function by a Member State or a third country, or with a prominent public function by an international organisation, obliged entities shall, for at least 12 months, be required to take into account the continuing risk posed by that person and to apply appropriate and risk-sensitive measures until such time as that person is deemed to pose no further risk specific to politically exposed persons.
Grounds 1 and 2
43. Mr Lewis submits the 2015 Directive is aimed at money laundering by private institutions, whereas Parliament added the extra words concerning entrustment because the domestic law is different in purpose.
44. Further, Mr Lewis submits that the additional phrase cannot have been intended only to exclude those States because that analysis does not address the alternative basis on which a person may be 'entrusted', that is 'by an international organisation'. The words of the statute, he submits, are clear.
45. The obvious inference is that heads of State and heads of government, for example, who fall within Article 3(9)(a) of the 2015 Directive, have been 'entrusted with prominent public functions'. However, no such inference can be drawn, Mr Lewis submits, in relation to members of the administrative, management or supervisory bodies of SOEs (who fall within Article 3(9)(g)).
46. Mr Lewis refers to the many well-known sovereign wealth funds which are very substantial state-owned funds that invest in the global financial markets like private equity and hedge funds. For example, the Dorchester Hotel is owned by the Brunei Investment Agency, an arm of the Ministry of Finance of Brunei, and the Qatar Investment Authority holds investments in Sainsbury's. Mr Lewis suggests that, adopting the NCA approach, directors of the Dorchester are PEPs (Brunei being a non-EEA state with a majority shareholding). In the UK Channel 4 is a publicly owned corporation whose board is appointed by Ofcom, in agreement with the Secretary of State for Culture, Media and Sport. Does it follow, Mr Lewis asks, that Channel 4 would be considered to be a SOE and the Chairman of the Board a PEP for the purposes of Article 9(g) of the 2015 Directive.
47. I do not accept this submission.
(a) 'foreign politically exposed persons' means natural persons who are or have been entrusted with prominent public functions by a third country;
(b) 'domestic politically exposed persons' means natural persons who are or who have been entrusted with prominent public functions.
At all material times the Government of the non-EEA Country had a majority shareholding in the Bank and had ultimate control of the Bank.
In our view he was right to do so.
Ground 3
I am not persuaded that [Mr Layijov] demonstrates a flagrant denial of [Mr Hajiyev's] Article 6 rights so as to require the NCA, and this court to ignore his conviction at this investigation stage.
In any event [Mr Hajiyev's] conviction was only one of a number of factors relied upon by the NCA, and I am satisfied that the income requirement is satisfied, irrespective of any reliance on the conviction.
As a state employee between 1993 and 2015, it is very unlikely that such a position would have generated sufficient income to fund the acquisition of the Property.
Ground 4
A statement made by a person in response to a requirement imposed by an unexplained wealth order may not be used in evidence against that person in criminal proceedings.
(1) The right of a person in any legal proceedings other than criminal proceedings to refuse to answer any question or produce any document or thing if to do so would tend to expose that person to proceedings for an offence or for the recovery of a penalty -
(a) shall apply only as regards criminal offences under the law of any part of the United Kingdom and penalties provided for by such law; and
(b) shall include a like right to refuse to answer any question or produce any document or thing if to do so would tend to expose the spouse or civil partner of that person to proceedings for any such criminal offence or for the recovery of any such penalty.
Ground 5
Conclusion
For the reasons set out above, the appeal must be dismissed.