Lawyer Monthly Magazine - March 2020 Edition

spouse could be taken into account by a court exercising its discretion. It might reasonably be said, however, that these answers were obvious anyway. The whole point of the concept of PEPs in EU money laundering directives, and the use of an adapted version of it in the UWO system, is to address the risks of public sector corruption: it would have been absurd to have excluded the head of a state-owned bank from that definition on a technicality. On the spousal privilege point, it is abundantly clear from the legislation that the only privilege preserved is that against self- incrimination in criminal cases. The judgment was rather less clear in answering another question, raised by Mrs Hajiyeva’s predicament – namely, whether the process of Azeri justice can be trusted. In the extradition context the answer, pending a separate appeal, was clearly ‘No’, as she would suffer a ‘flagrant denial of justice’ if sent there to stand trial. In the UWO context, however, her attempt to have her husband’s conviction discounted for the purposes of assessing his ‘lawfully obtained income’ ran aground, not because the court decided there were no problems with Azeri justice, though, frustratingly, it seems they had no independent expert evidence on this subject, but because there were other signs that the income was not legitimate. These included ‘the process by which the acquisition was made’, in this case, the purchase of an £11.5m Knightsbridge home via a BVI company with only a £7.5m mortgage, repaid five years later, and a due diligence report aimed at showing that Mr Hajiyev was a high net worth individual, but which the Court said ‘posed more questions than it answered’. This brings us to the second reason to look sceptically at the prospect of more UWOs in future, which is that a lot still rests on the concept of ‘lawfully obtained income’, which remains worryingly ill- defined. The concept is crucial to the scheme because, in order to obtain a UWO, the authorities must satisfy the court that there is a reasonable suspicion that the respondent’s known sources of lawfully obtained income are insufficient to be able to explain their interest in the property. From the perspective of the NCA, though clearly it would have been preferable for the Court to rule that the Azeri conviction was sufficient in itself, the broad nature of its reasoning is certainly welcome. From the perspective of those potential targets of UWOs, whose wealth may be legitimate albeit hidden in various ways to protect their financial privacy, the risks are obvious. What, exactly, did the Court of Appeal mean by ‘the process by which the acquisition [was] made’? Would it be enough for a purchase to be effected via an offshore company, or for the price to be paid in full within a short time? With respect to the Azeri conviction, the precedent Mrs Hajiyeva was seeking, that the Azeri justice system could not be trusted sufficiently for it to be taken into account at all, was, in fact, a very reasonable one. A wealthy individual PEP, about whom malicious allegations are made and who is made the victim of a justice system unworthy of the name, should absolutely not see that injustice compounded by a UK system that encourages them to fuel the authorities’ suspicions. The risks are made worse by the expanded definition of a PEP in this context, which includes innocent family members and others ‘connected’ with the primary PEP in potentially quite tenuous ways. The boldness, in other words, that the NCA and others following this result is both unwarranted, because the result was not as strong a victory as it may appear, and dangerous, because of the risk that they may now pursue potentially innocent targets. Such, unfortunately, is the impact of a system that allows idiosyncratic cases to set such far-reaching precedents. LM 37 MAR 2020 | WWW.LAWYER-MONTHLY.COM John Binns and Michael Drury, partners, in the business crime and corporate regulatory department of BCL Solicitors LLP “ The whole point of the concept of PEPs in EU money laundering directives, and the use of an adapted version of it in the UWO system, is to address the risks of public sector corruption

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