National Crime Agency v Baker & Ors

The court considered applications to discharge three unexplained wealth orders (UWOs) and related interim freezing orders made under sections 362A to 362R of the Proceeds of Crime Act 2002 (POCA 2002). The judge analysed the statutory requirements for the making of a UWO: the holding requirement (s.362B(2)(a)), the value requirement (s.362B(2)(b)), the income requirement (s.362B(3)) and the PEP/serious crime requirement (s.362B(4)).

The National Crime Agency's case depended upon the assumption that Rakhat Aliyev was the founder and ultimate provider of funds to the offshore foundations which held the properties and that the properties derived from his unlawful conduct. The court found that material evidence adduced under cover of the respondents' 9 August letter established instead that the ultimate beneficial owners of Properties 1 and 3 were Mrs Dariga Nazarbayeva and of Property 2 was their son, Nurali Aliyev, and that the foundations had lawful and explicable sources of funds. As a result, the evidential basis for the NCA's suspicions was undermined.

The judge further held that the respondent Mr Baker did not, on the evidence, "hold" Properties 1 or 3 within the meaning of POCA 2002: effective control is vested in the foundations and the Foundation Council (and in the first beneficiary under the by‑laws), not in the President personally; he was not a trustee in whom the legal interest was vested. The court concluded that the NCA had not established reasonable grounds for suspecting the income requirement or the PEP/serious crime requirement. The applications to discharge the UWOs (and therefore the related IFOs) were granted.

The respondents applied to discharge three UWOs and related interim freezing orders made by Supperstone J. on 22 May 2019 under sections 362A–362R POCA 2002. The orders related to three London properties held in the names of offshore foundations; the orders were directed against Mr Andrew J Baker (President of two foundations), the foundations and associated corporate owners. The NCA had obtained the orders ex parte, alleging that the properties were acquired with proceeds connected to the unlawful conduct of Rakhat Aliyev.

Nature of the application: The respondents sought discharge or variation of the UWOs and related IFOs, relying on new material provided in a letter dated 9 August 2019 which explained beneficial ownership and funding of the properties and rebutted the NCA's factual assumptions.

Issues framed by the court:

• Whether the statutory requirements for making a UWO under s.362B POCA 2002 were satisfied as at the date of the hearing: (i) holding; (ii) value; (iii) income; and (iv) PEP or reasonable grounds to suspect involvement in serious crime.
• Whether material non-disclosure or inadequate investigation at the ex parte hearing justified discharge.
• How the concepts of "effective control" and "holding" apply to private foundations and officers such as a President.

Background and evidence: The NCA relied on investigative statements from its investigator, Ms Kelly, and publicly available material (including a Global Witness report) to assert links between the properties and Rakhat Aliyev. The respondents (and the ultimate beneficial owners) provided contemporaneous documentary material and a detailed explanatory letter (9 August letter) demonstrating purchases, transfers and sources of funds, including sale proceeds and bank transfers, and the creation of foundations in 2013 (for ATED tax planning). The letter identified Mrs Dariga Nazarbayeva as the ultimate beneficial owner of Properties 1 and 3 and Nurali Aliyev as the beneficial owner of Property 2.

Court’s reasoning and outcome:

• The court reiterated the statutory tests and relevant interpretive authorities and emphasised the limited investigative purpose of UWOs and the requirement of proportionality given Article 8 ECHR.
• On the facts before the judge (including the 9 August material), the court found the NCA's core factual assumption—that Rakhat Aliyev was the founder and funder of the foundations holding the properties—was unreliable and rebutted by cogent documentary evidence showing lawful origins of funds or plausible legitimate explanations (e.g. sale proceeds, legitimate bank loans, tax mitigation by use of foundations).
• With respect to "holding" under s.362B and s.362H, the court held that effective control over foundation assets lay with the foundation and its Foundation Council (and, as to Villa Magna and Tropicana, the first beneficiary under by‑laws), not personally in the President. Thus Mr Baker was not shown to "hold" Properties 1 or 3 for the purposes of the provision, nor to be a trustee in whom the legal interest was vested.
• The income requirement could not properly be applied in a notional manner that ignored the limited or administrative role of a President; the NCA had not shown reasonable grounds to suspect the respondents' known lawful income would have been insufficient to obtain the relevant interest.
• There were no reasonable grounds to suspect that Mr Baker was a politically exposed person or that he or the foundations had been involved in serious crime: the suspicions derived from the same flawed assumption about Rakhat Aliyev.
• The court did not find material non‑disclosure at the ex parte hearing but did find failures by the NCA to investigate obvious lines of enquiry and to evaluate the 9 August material fairly.

Disposition: The applications to discharge the UWOs (and related IFOs) were granted. The judgment records the court’s detailed factual findings and legal analysis and emphasises the limited and investigatory nature of UWOs and the need for proportionality.

The court granted the applications to discharge the unexplained wealth orders and, accordingly, the related interim freezing orders. The judge concluded that the NCA had not shown reasonable cause to believe the respondents "held" Properties 1 or 3 within the meaning of POCA 2002, and that there were insufficient grounds to satisfy the income requirement or the PEP/serious‑crime requirement. The NCA’s core factual assumptions about the founder and source of funds (that they derived from Rakhat Aliyev) were found to be unreliable and were rebutted by cogent documentary evidence that the properties derived from the lawful sources and beneficiaries identified in the respondents’ material. The judge also identified shortcomings in the NCA’s investigation and its evaluation of the new evidence.