Crooked Banker Tapped Professionals to Manage Web of Dirty Money
09 Mar 2020

Jahangir Hajiyev was running out of money.

That was the urgent subject before the board of a company based in the tax haven of Guernsey in September 2015. For years, Hajiyev, then chairman of the International Bank of Azerbaijan, had used a chain of trusts and shell companies stretching from Cyprus to the Channel Islands to move tens of millions of dollars out of the state-owned lender, according to allegations in U.K. court filings.

The scheme financed a life of luxury for a man who investigators said earned a salary of $70,650 in 2008: four mansions in the English countryside, a $42.5 million Gulfstream jet, a $13 million golf club outside London and a villa in Sardinia. Hajiyev’s wife, Zamira, ensconced in adjoining Knightsbridge townhouses, splurged on $20 million of diamonds, designer handbags and other baubles at nearby Harrods. Even as the couple burned through cash, they borrowed millions more.

When the directors of Lumea 2014 PTC jumped on a conference call that September, they grappled with a new reality. The company was cratering and its creditors, including a Swiss bank, were circling, according to internal minutes of its board meetings seen by Bloomberg News. That wasn’t good because Lumea, which had consolidated control of Hajiyev’s assets, was the cog that kept his wealth machine spinning, the records show.

Dialing in to deal with the crisis was a cast of professionals Hajiyev had hired to run his operation. There were Lumea’s four directors — the head of a multifamily office in London, the managing director of a global trust company in Guernsey and two attorneys affiliated with Dentons, the world’s biggest law firm — as well as an Azerbaijani banker.

Their discussion ranged from dwindling cash balances to maneuvers involving shell companies in Luxembourg to making grants to Harvard’s John F. Kennedy School of Government, according to the minutes. Striking a reassuring note, Francois Chateau, a senior partner at Dentons, said Hajiyev, who resigned from the bank that March, was “in the middle of reorganizing his personal wealth and finances, which has restricted cash flows.” The process “should be completed within the next 60 days, when liquidity issues should be resolved,” he advised the board.

That turned out to be wishful thinking. Within three months, Hajiyev would be charged in Azerbaijan with plundering the bank he’d led since 2001. He proclaimed his innocence but was sentenced to 15 years in prison. Any hope for a fresh infusion of cash to replenish the coffers was gone.

Hajiyev’s fortune — believed by law enforcement officials to have once exceeded $100 million — has become the focus of a groundbreaking money-laundering case. The U.K.’s National Crime Agency obtained court orders in 2018 freezing some of his assets and requiring Zamira to explain the origins of the family’s wealth. The authorities have said they hope the case will be a blueprint for curbing the estimated 100 billion pounds ($128 billion) in dirty money that worms its way into Britain every year, often from economically deprived countries.

One of the keys to doing that is cracking down on so-called professional enablers, who are required under U.K. regulations to carry out know-your-customer checks of clients and report suspicious activity to the authorities. A politically connected chairman of a state-owned bank in a notoriously corrupt country, whose spending far outstripped his earnings, should have raised red flags with those hired to manage his finances. One look at the International Bank of Azerbaijan’s annual reports and prospectuses would have shown that compensation for its five-member management board, plus senior executives, totaled about $1 million a year during Hajiyev’s tenure in the 2010s. In 2018, a British judge said it was “very unlikely” that Hajiyev “would have generated sufficient income” to fund even one of his many properties.

The trove of documents reviewed by Bloomberg provides a rare look at the inner workings of two dozen shell companies that moved Hajiyev’s illicit wealth around the world. The minutes of about 30 meetings from 2011 through 2016 reveal that the banker owned more luxury assets than previously reported, including a vineyard in Sardinia and three mansions in developments in Surrey popular with Russian oligarchs. The records demonstrate how Hajiyev’s advisers handled the day-to-day operation of these financial vehicles and scrambled to keep them afloat after his legal troubles turned off the tap.

A multifamily office called Werner Capital played an instrumental role in steering Hajiyev’s fortune into high-end British properties, Bloomberg reported in July. Led by Tomas Mateos Werner, once a private banker at HSBC Holdings Plc, the firm didn’t register with the U.K.’s Financial Conduct Authority, which regulates firms that manage client assets, even though it catered to wealthy people in the Russian-speaking world. The FCA declined to comment on whether Werner should have. The new information shows that Chateau, a former Dentons global vice chairman, and Philip Enoch, a consultant for the firm’s U.K. arm, also played important roles advising Hajiyev’s offshore operations.

“Business is supposed to provide a first line of defense against money laundering, and yet time and time again we see firms facilitating it instead,” said Duncan Hames, director of policy at Transparency International UK, the British arm of the global anti-corruption organization. “Faced with suspicious activity, senior partners in a global law firm should not be disregarding red flags and continuing to offer services.”

By Edward Robinson, Gavin Finch and Stefania Spezzati, Bloomberg, 5 March 2020

Read more at Bloomberg

Photo: Perini Navi Spa / CC BY-SA 4.0

RiskScreen: Eliminating Financial Crime with Smart Technology

Count this content towards your CPD minutes, by signing up to our CPD Wallet

FREE CPD Wallet