By Edward Robinson and Gavin Finch
(Bloomberg) -- The indicators have been there. Jahangir Hajiyev, chairman of the largest financial institution in Azerbaijan, and his spouse, Zamira, seemed to be residing on soiled cash.
Between 2003 and 2015, the couple spent a fortune within the U.Okay. They dished out 11.5 million kilos ($14.three million) for a townhouse within the ritzy London neighborhood of Knightsbridge and one other 10.5 million kilos on a golf course and membership close to Ascot, the famed horse racing locale. They purchased a brand new Gulfstream jet for $42.5 million. In the meantime, Zamira, wielding 35 bank cards, went wild in Harrods. In a single week alone, she dropped about 725,000 kilos within the division retailer on jewellery, designer garments and different merchandise.
The catch was that Hajiyev’s annual wage at state-owned Worldwide Financial institution of Azerbaijan was $70,650 in 2008, and his spouse earned no vital revenue herself. Even so, the hole between their spending and revenue apparently didn’t cease a raft of enablers—legal professionals, accountants, funding advisers and different professionals—from serving to the couple steer their wealth into belongings within the U.Okay. from an online of offshore firms, based on court docket papers and company filings. Amongst them have been fiduciary-services agency Trident Belief and multi-family workplace Werner Capital. They helped arrange entities within the Channel Islands and Britain to accumulate and maintain the golf membership in a construction that masked the Hajiyevs’ possession, based on the U.Okay.’s Nationwide Crime Company, which is investigating the couple’s monetary dealings. It advised a London court docket the setup was “indicative of cash laundering.”
Werner Capital, based mostly in London, is one among a brand new breed of hybrid funding companies catering to the ultra-rich as strict laws drive banks to dump high-risk purchasers. Based in 2008 by Tomas Mateos Werner, a former Deutsche Financial institution AG and HSBC Holdings Plc govt, it had a web site that pitched its prowess at establishing “complicated, cross-border company governance constructions” to assist purchasers defend their belongings in nations with “political upheaval, modifications in laws or unwarranted claims.” It supplied a panoply of different providers, from serving to households purchase mansions to securing residency visas and getting kids into prime British colleges.
“It’s like a Swiss Military knife for the rich,” stated Ben Cowdock, a senior analysis officer at Transparency Worldwide UK, the British arm of the worldwide anti-corruption group. “It does the whole lot.”
Now Werner Capital and different skilled enablers have come beneath scrutiny as a part of the NCA’s groundbreaking case in opposition to Zamira Hajiyeva. Beneath the phrases of a brand new authorized instrument known as an unexplained wealth order, she should disclose the origins of her household’s fortune. Prosecutors suspect the cash was obtained illegally as a result of her husband is serving a 15-year jail sentence in Azerbaijan for looting his financial institution. Authorities there try to extradite Zamira again to Baku to face fraud fees.
The NCA’s civil motion is pulling again the curtain on among the methods suspicious wealth worms its manner into Britain, which has lengthy been a sexy place for oligarchs and despots to park ill-gotten riches. It’s one among a number of current efforts geared toward cracking down on illicit finance. Authorities are pushing for larger transparency by requiring firms within the U.Okay., and shortly its territories, to reveal their true homeowners. They usually’re making an attempt to cease legal professionals, accountants and different practitioners from serving to unscrupulous purchasers.
“Skilled enablers are more and more facilitating crimes with their experience,” stated Rachael Herbert, head of menace response on the Nationwide Financial Crime Centre, a multi-agency group that combats cash laundering. “These crimes are large-scale, complicated and worldwide, and we aren't going to arrest our manner out of this difficulty. We now have to make the U.Okay. as undesirable an setting for laundering the proceeds of crime as we are able to, and meaning taking a look at all of the entities and their enabling capabilities in these instances.”
Funding companies within the U.Okay. that supply recommendation and handle belongings are usually regulated by the Monetary Conduct Authority. They need to adjust to money-laundering laws to make sure they don’t unwittingly present providers to criminals. That features “enhanced due diligence” for purchasers who held political positions, particularly in nations with a document of corruption.
It’s unclear what due diligence Werner Capital or Trident Belief did earlier than accepting the Hajiyevs as purchasers. Tomas Werner, citing confidentiality, declined to remark about his agency’s relationship with the couple. In emails to Bloomberg Information, he stated his agency has by no means been supervised by the FCA and there was “no foundation” for the NCA’s assertion that the company construction used to carry the golf course is indicative of cash laundering. “It was arrange following recommendation by a top-tier British regulation agency and had, to the perfect of our information, nothing to do with cash laundering,” Werner stated. Executives at Trident Belief’s workplaces in London and Guernsey didn’t reply to requests for an interview. Neither agency has been accused of wrongdoing.
As for Zamira, her legal professionals wouldn’t remark in regards to the case. However in a sworn assertion offered to the court docket final yr, she stated the Azerbaijan authorities’s fees in opposition to her have been unfaithful. She stated her husband had amassed his wealth legitimately and was “very properly off” for the reason that early 1990s. “He additionally had a considerable portfolio of shares within the financial institution, and was all the time very proud that the financial institution was doing so properly,” Zamira stated in her assertion.
The Hajiyeva case is unfolding at a time when money-laundering scandals have engulfed a few of Europe’s greatest banks and uncovered the vulnerability of the continent’s monetary system to criminals. Authorities in Europe and the U.S. are pursuing inquiries into Denmark’s Danske Financial institution A/S, which stated final yr that it dealt with greater than 200 billion euros ($223 billion) in doubtlessly suspicious transactions largely originating with purchasers in Russia and former Soviet states. Sweden’s Swedbank AB and Deutsche Financial institution have additionally been investigated. Each lenders have stated they’re cooperating with authorities.
For all the eye on lenders, consultants say it’s crucial to carry professionals accountable for suspicious transactions earlier than they hit the monetary system. “Banks are straightforward targets for regulators as a result of they've a lot information and may be closely fined,” stated John Howell, an adviser to the British authorities on measures to fight illicit finance. “By the point a transaction hits the banks, the crime might properly have already occurred, so you must lean on the skilled gatekeepers as a result of they're concerned firstly.”
That’s simpler stated than executed. The U.Okay. has lengthy taken a light-touch strategy to monetary regulation. Prosecutors there didn’t begin specializing in main money-laundering instances till 2014, based on the Monetary Motion Process Drive, a Paris-based group that units pointers for the U.Okay., the U.S. and different nations.
London has develop into such a infamous magnet for soiled cash that activists give “kleptocracy excursions” of its prosperous neighborhoods. For years, criminals washed their money within the U.Okay. utilizing the identical modus operandi again and again—a lot of shell firms in a lot of jurisdictions. “It’s nearly as if there may be an offshore fraudsters’ handbook,” Mark Thompson, chief working officer of the Severe Fraud Workplace, testified at a parliamentary listening to in March.
After years of lobbying by anti-corruption teams and their allies in Parliament, authorities are actually transferring on a number of fronts. In October, officers shaped the Nationwide Financial Crime Centre to pool the experience of officers and legal professionals from the NCA, the Severe Fraud Workplace, the Crown Prosecution Service and 4 different regulation enforcement our bodies. In Might, the NCA slapped an unnamed individual suspected of involvement in critical crime with unexplained wealth orders tied to three residential properties price 80 million kilos which are held by offshore firms. And this fall, Parliament is predicted to think about a invoice that may establish homeowners of abroad shell firms that maintain land within the U.Okay. in a publicly accessible register.
The Hajiyeva case is an important take a look at of the U.Okay.’s push to curb the stream of soiled cash. Jahangir Hajiyev, 57, made his technique to the highest of Azerbaijan’s ministry of international financial relations within the chaotic years that adopted the oil-rich nation’s independence from the Soviet Union within the 1990s. It was a interval marked by rampant corruption and cronyism as the brand new ruling elite jockeyed for energy amid a wave of profitable privatizations. Armed with an MBA from the College of Texas, Hajiyev flourished, and by the center of the last decade he was a division head on the ministry, a plum job as Azerbaijan opened up its huge crude reserves to international buyers for the primary time.
In 1995, he joined the Worldwide Financial institution of Azerbaijan as chairman of the credit score committee, the a part of the financial institution accountable for approving mortgage functions. Inside six years, he was chairman of the largest lender within the South Caucasus, a serious cog within the Azerbaijani financial system. And he turned an envoy for his nation’s financial opening, selling the promise of frontier markets at World Financial Discussion board occasions and in conferences with Western ministers and bankers.
Hajiyev purchased his first property in London in 2003, a home in Knightsbridge bought for two.5 million kilos through a shell firm domiciled within the British Virgin Islands. Though his IBA wage that yr was lower than $36,000, he didn’t take out a mortgage.
Azerbaijan remained a tough place. Transparency Worldwide ranked it the 137th most corrupt state out of 159 in its 2005 Corruption Perceptions Index. That February, Zamira was kidnapped and held in “atrocious circumstances,” she advised the U.Okay. court docket in 2018. Information reviews in Azerbaijan stated she’d been seized by rogue police officers. Freed after 28 days in an armed raid by regulation enforcement officers, Zamira fled to London, the place her daughter was in personal faculty. “I used to be not properly once I arrived, and I used to be in a really fragile bodily and psychological state,” she advised the court docket.
Court docket data present she moved right into a three.2 million-pound flat on a sought-after Belgravia sq. that Jahangir purchased, his second London property. Zamira joined Harrods’ loyalty rewards plan in 2006 utilizing bank cards issued by her husband’s financial institution. She spent greater than 15,000 kilos on the retailer on merchandise from Louis Vuitton and different objects over the subsequent 90 days.
Subsequent purchases weren’t so frivolous. In December 2009, Jahangir used a shell firm within the British Virgin Islands known as Vicksburg International to improve Zamira’s residence to the townhouse in Knightsbridge. Barclays’ private-banking arm in Switzerland offered the Hajiyevs with a 7.5 million-pound mortgage to purchase the home, which was paid off in full a number of years later, based on court docket data. London regulation agency Mishcon de Reya LLP represented Vicksburg and dealt with the paperwork. Mishcon de Reya stated in an e mail that it complied with all of its regulatory obligations. Barclays declined to remark.
The home, a cream-colored Georgian residence with Ionic columns and ornate iron grill work framing the home windows, wasn’t removed from Werner Capital, which might go on to play a key function serving to Zamira construct a cushty new life in Britain.
Integrated in 2008 as a “boutique funding and wealth-management agency,” Werner Capital was one among scores of outfits popping up in London catering to wealthy abroad purchasers seeking to transfer cash into the U.Okay. Tomas Werner, 53, epitomized the globetrotting nature of the family-office enterprise. The German-Spanish businessman earned an MBA from Columbia College in New York and a regulation diploma from the College of the Balearic Islands in Spain. His banking profession had taken him from Zurich to Frankfurt to London.
Three offshore entities based mostly in Panama, Cyprus and the British Virgin Islands have been listed as members of Werner Capital’s restricted legal responsibility partnership. Tomas was quickly joined by his sister Margarita Mateos Werner, 51, a Spanish lawyer, and his brother Daniel, 47, who had studied enterprise in Spain.
The family-office mannequin dates again centuries to when royal stewards dealt with the fortunes of monarchs. Within the Gilded Age, oil baron John D. Rockefeller used a household workplace to handle his wealth, and within the 1980s it began dealing with the fortunes of different wealthy clans. Lately multi-family workplaces not solely steer investments for the ultra-rich, additionally they provide concierge providers comparable to securing locations at the perfect personal colleges, hiring jets and helicopters, sustaining yachts and getting alternative tickets to sporting occasions. They'll even stroll your Pomeranians.
In 2011, Werner Capital produced a net-worth assertion on Jahangir for EFG Worldwide AG, a Zurich-based personal financial institution. It itemized Jahangir’s $72.6 million in belongings, together with $four.5 million held in an account at one other Swiss financial institution, Bordier & Cie, a few residences in Azerbaijan and a villa in Sardinia price $15 million.
Additionally on the listing was a 1.5-acre parcel of land known as Warreners in St. George’s Hill, an enclave southwest of London that has lengthy attracted rock stars comparable to Ringo Starr and, extra not too long ago, rich Russians. It was valued at three.7 million kilos. After a five-bedroom, Regency-style mansion was constructed on the lot, Werner Capital showcased its many options, together with an indoor lap pool and an elevator that lowered vehicles from the driveway into an underground storage, on a promotional video on its web site.
In 2013, Tomas and Daniel Werner helped arrange a extra sophisticated funding: the Mill Experience Golf & Nation Membership, a 170-acre course nestled within the verdant Berkshire countryside. A agency known as MRGC 2013 was included within the U.Okay. on Aug. 1, 2013, firm filings present. Daniel was its sole director and Tomas its solely shareholder. On the finish of that month, Tomas transferred possession of MRGC 2013 to Natura Ltd., which had been based in Guernsey a couple of week earlier. Natura was, in flip, owned by an entity named Western Home Nominees. Each it and Natura shared an deal with with nonetheless one other outfit, Trident Belief Firm (Guernsey), based on Nicola Bartlett, a monetary investigator with the NCA. It's a part of Trident Belief, a sprawling financial-services firm with operations within the U.S., Hong Kong and several other offshore havens. Three executives at Trident Belief Firm (Guernsey) have been additionally listed as administrators of Natura.
On Sept. 9 of that yr, Natura bought Mill Experience Golf Membership for 10.5 million kilos with no mortgage. Herbert Smith Freehills, a regulation agency based mostly in London, dealt with the title switch. A spokesman for the agency didn’t reply to requests for remark. With the property wrapped in so many company layers, there was nearly no technique to see who really owned it.
By 2014, Jahangir was working into critical bother again dwelling. A decade-long enlargement was ending as oil costs plummeted from close to a document excessive of $107 a barrel in June 2014 to $53 by the top of that yr. Because the financial system sputtered, IBA’s stability sheet strained beneath a mountain of debt. The authorities started arresting debtors defaulting on their loans. Jahangir, citing unwell well being, resigned as chairman in March 2015. 9 months later he was arrested and charged with embezzlement.
The financial institution was then swept up in a corruption scandal dubbed the Azerbaijani Laundromat. From 2012 to 2014, a gaggle of well-connected Azeri enterprise and political figures ran a $2.9 billion scheme to bribe European lawmakers, launder soiled cash, splurge on luxurious items and line their pockets, based on an investigation by the Organized Crime and Corruption Reporting Challenge. The perpetrators coated their tracks by establishing shell firms within the U.Okay. to deal with transactions. Some huge cash additionally handed by way of Danske Financial institution’s department workplace in Estonia.
Virtually half of the $2.9 billion originated in an account at IBA, based on the report. At his trial in 2016 and in subsequent hearings, Jahangir stated he didn’t embezzle cash from the financial institution and was being persecuted by his enemies. He stated the financial institution made loans for legit infrastructure tasks. In October 2016, he was convicted of monetary crimes by a court docket in Baku, sentenced to 15 years in jail and ordered to pay IBA $39 million in restitution.
After Jahangir was arrested, Zamira stopped her spending binge at Harrods. She began promoting items from Cartier, Boucheron and Van Cleef & Arpels through Christie’s public sale home, court docket papers present. By June 2016, she’d raised 1.5 million kilos.
The opaque offshore constructions the couple used to carry their belongings have been turning into extra clear because of the U.Okay.’s crackdown on cash laundering. In April 2016, the federal government carried out a regulation requiring British firms to publicly disclose their final homeowners irrespective of what number of shell firms have been concerned.
That yr, MRGC 2013 submitted a six-page submitting with U.Okay. Firms Home displaying Zamira Hajiyeva successfully managed at the least 75% of the agency by way of a belief. But Zamira’s standing as MRGC 2013’s “Particular person of Vital Management” didn’t final lengthy. On the identical day the regulation went into impact, she was changed by Andreas Georghiou, head of a Cyprus regulation agency, based on court docket data. By then Daniel Werner was now not a director of MRGC 2013, and by 2017 Trident Belief was out, too. In time, Georghiou would switch management to his niece, Elena Georghiou. The Georghious didn’t reply to requests for remark.
Sizing up these maneuvers, NCA investigator Bartlett decided that the cash used to buy Mill Experience Golf Membership most certainly stemmed from Jahangir’s crimes. “Equally, I additionally imagine the style during which the property has additionally been obtained and subsequently dealt with is very uncommon, secretive and complicated, and, absent additional and credible rationalization, is indicative of cash laundering,” she advised the court docket in 2018. Tomas Werner disputed that conclusion in an e mail to Bloomberg Information. “Werner didn't advise on the set-up of the construction nor has ever been concerned in cash laundering, on this or different contexts,” he wrote.
But it surely wasn’t simply the golf course. The NCA suspected the couple was additionally spending soiled cash on the Knightsbridge townhouse and the Gulfstream jet. On Feb. 27, 2018, the company directed Zamira to disclose the supply of her cash. In October, Justice Michael Supperstone rejected her request to throw out the order. Zamira appealed, and that matter is pending.
Whereas Zamira’s case made an enormous splash, the U.Okay. gained’t cut back the influx of soiled cash till skilled enablers develop into extra rigorous in turning away suspicious purchasers, stated Margaret Hodge, a Labour Get together Member of Parliament who final yr sponsored laws to reveal the final word homeowners of shell firms.
Attorneys, accountants, actual property brokers and multi-family workplaces are all required to run anti-money-laundering checks on their clients. Many do. In 2017, Natura, the entity that held Mill Experience Golf Membership on behalf of the Hajiyevs, requested Savills, a London-based actual property agency, to market and promote the property for 14.5 million kilos. After conducting due diligence, Savills declined to tackle the job, based on NCA investigator Bartlett. Savills declined to remark.
Trade teams, not regulators, are largely accountable for monitoring the conduct of their members. So in 2018, the federal government created an company known as the Workplace for Skilled Physique Anti-Cash Laundering Supervision to press these teams to make sure members fulfill their obligations. In March, it discovered that 80% of the 22 authorized and accounting business organizations on its watch lacked sufficient insurance policies to oversee their members’ practices. A couple of quarter of the teams undertook no oversight of illicit finance in any respect.
“These teams haven’t delivered a constant normal of supervision,” Alison Barker, the company’s director of specialist supervision, stated in an interview. In the event that they don’t form up, she stated, the federal government might take over direct supervision of their members.
A few of the greater skilled teams are getting the message. In Might, the Solicitors Regulatory Authority, which oversees 145,000 training legal professionals in England and Wales, put 26 regulation companies on disciplinary assessment for doubtlessly breaching money-laundering laws.
Regulators throughout Europe are increasing the kinds of practitioners who should perform checks on their purchasers. Beneath new guidelines that come into impact in January, the European Union would require artwork sellers and public sale homes to run checks on clients and report suspicious transactions to authorities. The Netherlands has even began leaning on designer furnishings shops and automobile dealerships to carry out the identical form of know-your-customer evaluations as monetary professionals.
Final December, the Monetary Motion Process Drive gave the U.Okay. excessive marks for its efforts. But it surely stated the system that banks and different companies use to report suspicious exercise wants an overhaul. “There stays an underreporting of suspicious transactions by increased danger sectors comparable to belief and firm service suppliers, legal professionals and accountants,” the report stated. The U.Okay. Residence Workplace has begun a mission to retool the system.
For all of the motion, illicit-finance consultants fear that the federal government’s efforts will in the end fail to make a distinction. “We face a elementary difficulty within the U.Okay., which is that we're excellent at passing laws and, frankly, fairly poor at executing it,” stated Thomas Keatinge, director of the London-based Centre for Monetary Crime and Safety Research.
Zamira hasn’t let the NCA’s motion cease her from making an attempt to hock her valuables. Final fall, her daughter, Leyla Mahmudova, requested Christie’s to worth a brand new batch of jewellery, based on the NCA. The haul included a Boucheron sapphire necklace price 100,000 kilos and a Van Cleef & Arpels pearl necklace valued at 20,000 kilos—considerably lower than the 250,000 kilos Jahangir paid for it 10 years earlier in St. Moritz, Switzerland. The NCA promptly impounded the items. Christie’s declined to remark, as did Leyla Mahmudova’s lawyer.
Zamira’s greater fear is being despatched again to Azerbaijan to face an identical destiny as her husband. Throughout an extradition listening to in June, she sat within the glass-enclosed dock and listened because the Azerbaijani authorities’s lawyer known as her a member of an organized-crime group and stated her conduct within the U.Okay. amounted to cash laundering. Zamira’s legal professional known as these allegations false and stated Azerbaijan was persecuting her. As she awaits a call in her Knightsbridge dwelling, the lifetime of luxurious she loved for therefore a few years appears to be slipping away.
As for Werner Capital, it has undergone a makeover in current months. In July, the corporate rebranded itself as a single-family workplace centered on “searching for returns with a constructive social and environmental affect.” Its web site is scrubbed of references to visas, British colleges and defending purchasers’ belongings. As a substitute, it showcases a Kazakhstan firm headed by Tomas that recycles paper and cardboard. A brand new enterprise led by Daniel known as Werner Houses goals “to introduce wooden and trendy strategies of building to the U.Okay. housing market.” That enterprise is so new the web site remains to be being developed. Gone, too, is the workplace suite in a townhouse simply across the nook from Zamira’s Knightsbridge dwelling. Werner Capital’s new digs are in a decidedly much less glitzy workplace park in London’s East Finish.
To contact the authors of this story:
Edward Robinson in London at [email protected]
Gavin Finch in London at [email protected]
To contact the editor accountable for this story:
Robert Friedman at [email protected]
Alan Katz
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