National Crime Agency v Baker & Ors

Proceeds of Crime Act 2002 permits an unexplained wealth order only where the statutory conditions are independently established on objectively reasonable grounds. A respondent must be shown to hold the property in the statutory sense, and the income requirement must be applied to the respondent’s actual interest, not notionally to the entire property. A president of a private foundation is not thereby its foundation council or a trustee. Complex offshore structures alone do not justify suspicion of unlawful conduct. The court must assess the evidence at the discharge hearing, including later evidence. Here, the assumptions linking the properties and their funding to serious crime were unreliable. The unexplained wealth orders and related interim freezing orders were discharged.

The National Crime Agency obtained three unexplained wealth orders and related interim freezing orders ex parte against the respondents in respect of three valuable London properties. The orders concerned Mr Baker, Villa Magna Foundation, Manrick Private Foundation, Alderton Investments Ltd and Tropicana Assets Foundation.

The respondents applied to discharge the orders. They provided evidence that the beneficial owners were Dariga Nazarbayeva and Nurali Aliyev, and that the properties had been acquired independently of Rakhat Aliyev and his alleged criminal conduct. The central issues were whether the statutory requirements for unexplained wealth orders remained satisfied in light of the fuller evidence, and whether the related freezing orders should continue.

1. Orders discharged. The court granted the applications to discharge all three unexplained wealth orders. The related interim freezing orders stood or fell with the unexplained wealth orders, and there was no freestanding challenge to them.
2. Applicable approach. An unexplained wealth order is an investigative tool under Part 8 of the Proceeds of Crime Act 2002. It obtains information and is not the forum for finally determining beneficial ownership, tainted gifts or whether property is recoverable. Those issues belong, if pursued, in civil recovery proceedings. The court assessed the legality and justification of the orders at the date of the discharge hearing, taking account of evidence unavailable at the ex parte hearing.
3. Statutory thresholds. The expressions reasonable cause to believe and reasonable grounds for suspecting require objectively reasonable grounds, but do not require proof of the underlying fact. The court itself must be satisfied that the holding, value, income and PEP or serious-crime requirements are met; it is not merely reviewing the NCA’s decision. The NCA bore the onus.
4. Holding and complex structures. Complex offshore companies, foundations or trusts are not, without more, grounds for believing that property is held or used for money laundering. Under section 362H, the court must identify the actual control and interest in the property. Mr Baker’s office as president of Villa Magna and Tropicana did not give him personal effective control. The Foundation Council was a separate governing body, and his authority to sign documents did not make him its trustee. The holding requirement therefore failed for Properties 1 and 3.
5. Income requirement. Where property is held through a trust, foundation or effective-control arrangement, the NCA must assess the actual extent of the respondent’s interest and compare it with the known sources of lawful income. The market-value assumption is only a starting point and cannot justify a notional assessment against the whole property. The income requirement was not met for any of the three orders.
6. Property 2 and serious crime. Manrick was a registered owner, so the holding requirement was met. However, the evidence showed that Nurali Aliyev was the founder and beneficiary and that the purchase was funded by a legitimate bank loan, with a later mortgage. There were no reasonable grounds to connect Manrick or the property with Rakhat Aliyev or serious crime. The PEP and serious-crime requirement therefore also failed.
7. Investigation. The court found no material non-disclosure at the ex parte hearing, but found inadequate investigation of obvious alternative explanations and a failure to evaluate the new evidence in a fair-minded way. The NCA’s assumptions about the source and ownership of the properties were consequently unreliable.

The judgment was a first-instance decision on applications to discharge orders made ex parte by Supperstone J on 22 May 2019. Interim relief had later extended the response period, and permission in related judicial review proceedings was refused on the papers, with a renewed application stayed pending determination of these discharge applications.