London’s Anti-Kleptocracy Setback: A New Way Forward?
Earlier this year, overshadowed by both the pandemic and the ongoing global recession, the United Kingdom took one of its most substantial steps toward rooting out dirty post-Soviet money from British markets, and toward stanching the U.K.’s role as a sink for questionable, kleptocratic funds hemorrhaging from the region.
In a series of filings, British authorities moved to freeze and seize high-worth assets tied directly to the family of former Kazakhstani dictator Nursultan Nazarbayev. According to the documents filed, the U.K.’s National Crime Agency revealed that a trio of London properties were connected directly to Nazarbayev’s daughter, Dariga Nazarbayev, and her son Nurali Aliyev. And these were not simple manor houses or residential properties. With a combined value of over $100 million, these properties consisted of a massive Chelsea apartment, a mansion along one of Britain’s toniest streets – known colloquially as “Billionaires’ Row” – and another overlooking one of the most exclusive golf clubs in Europe.
Per British authorities, the purchase of these three properties was tied directly to crimes committed by Dariga’s former husband, Rakhat Aliyev, who died in an Austrian prison in 2015 after falling afoul of Nazarbayev’s regime. British authorities further alleged that Aliyev himself was “involved in money laundering.” As one British investigator wrote, “the complexity and deliberate obscurity of the way in which the Aliyev assets were handled… indicates they had a criminal origin.”
Involving a series of Caribbean shell companies and British lenders who were willing to look the other way about the source of the funds, the case appeared to fit a familiar mold: a kleptocratic elite ensconced in a corrupt dictatorship, swindling local populaces and national treasuries, utilized a series of trans-national financial networks to move and launder the money, before parking the funds in lavish Western properties. Those properties would then serve not only as playgrounds for the crooked members of the leading families of these regimes, but could serve as safety valves – rainy-day funds, in essence – should the regime ever be toppled. This is a playbook we’ve seen play out time and again, from Gulnara Karimova’s European holdings to Maxim Bakiyev hiding away in his British mansion following the 2010 ouster of his father.
On its face, the case appeared clear-cut. And yet, the British judicial system didn’t follow suit. After the British High Court ruled against the asset seizure efforts in April, a Court of Appeal judge refused to grant permission to appeal the ruling. Both rulings found that British authorities had failed to establish reasonable connections between the properties and funds traceable to Rakhat Aliyev’s money laundering or corruption. (“It is certainly interesting to speculate how the case would have unfolded had the NCA focused instead on the origins of Nazarbayeva’s wealth outside of specific links to her former husband, given Kazakhstan’s strong kleptocratic underpinnings,” as the University of Exeter’s Tom Mayne wrote.)
The ruling effectively halted the asset seizure efforts altogether. Moreover, the ruling was a blow to broader, forward-leaning efforts out of London to specifically slow the inflows of dirty money into the British property market. The unexplained wealth orders (UWOs), after all, had been one of the most innovative tools recently introduced in the West’s broader efforts to counter dirty money flooding their polities, ranging from the art and auctions markets to hedge fund and private equity industries to even universities and think tanks.
Enacted in 2017, UWOs effectively forced foreign nationals accused of lavish spending – or spending beyond their presumed means, at least – to disclose the source of their incomes. British authorities successfully launched their first UWO in 2018, targeting the wife of a former Azeri minister who splurged over $20 million at Harrods, including hundreds of thousands of dollars on jewelry alone. In addition to Dariga and Aliyev, the BBC has previously reported that British authorities have specifically targeted multiple other potential cases for UWO actions – including unidentified former Russian officials. Due to the ruling regarding the properties linked to the Nazarbayev family – and the fact that Aliyev has demanded that the NCA compensate him for 1.5 million pounds following the court proceedings – there are suddenly new questions about the potential, and efficacy, of future UWO actions.
However, even though the case ultimately fell through, it also highlighted one other effect of UWOs and related proceedings: reputational damage, especially in the domestic context. With the UWO proceedings against Nazarbayeva, who was then serving as the speaker of Kazakhstan’s Senate – and was often whispered to be someone set to slide into the presidency, once current placeholder president Kassym Jomart-Tokayev’s turn ended – media coverage in both Western jurisdictions and among Kazakhstan’s beleaguered independent media highlighted the fresh corruption allegations surrounding her and her family’s (reportedly astounding) wealth. Rather than being seen as the family that helped steer Kazakhstan out of its post-Soviet morass, the Nazarbayevs were suddenly viewed as little more than a kleptocratic cabal, preying on Kazakhstani citizens.
Shortly thereafter, Nazarbayeva was summarily, and quite surprisingly, demoted from her position as speaker. Her presidential ambitions were effectively gutted. While Kazakhstani authorities never offered a formal reason for Nazarbayeva’s demotion, her swift fall showed all the signs of being tied directly to the negative press coverage swamping her, and her family’s, name across the West, and among Kazakhstanis avoiding state propaganda outlets.
There is, of course, a clear precedent for such an implosion. A few years ago, when American and Swiss authorities finally moved against Uzbekistani heiress Gulnara Karimova’s portfolio of ill-gotten assets – the fruits of grand corruption, overseen by Karimova herself – the daughter of the former dictator promptly fell from grace, her father apparently embarrassed with his daughter’s behavior. Shortly thereafter, Karimova was arrested on related charges. She has remained jailed ever since.
To be sure, even while judicial proceedings against Karimova continue, Nazarbayeva no longer faces any legal threats – and is free to enjoy her lavish British properties as she sees fit. But even where the formal proceedings against the Nazarbayev family may have faltered, the UWO actions against Nazarbayeva and Aliyev illustrated their potential for significant reputational damage, in both domestic and international contexts.
Nor should this be a lesson solely for British authorities. While the U.S. hasn’t yet enacted a similar UWO program, the U.S.’s history of civil forfeiture actions (which have specifically targeted kleptocratic scions in the past) present a similar playbook. In addition to implementing basic anti-kleptocratic reforms – banning anonymous shell companies and anonymous real estate purchases, forcing lawyers and escrow agents to conduct basic anti-money laundering checks, etc. – the U.S. should increasingly discuss the utility of reputational damage as a potentially powerful anti-kleptocracy tool.
After all, just this summer, Karimova’s sister, Lola Karimova-Tillyaeva, made millions of dollars from the recent sale of a number of Californian properties – all of which she purchased perfectly legally. Thus far, Karimova-Tillyaeva has managed to escape broader association with her brutal father, at least when she travels through the West (as an infamous Vanity Fair 2016 piece made clear). There is no reason that should be the case – all the more reason that jurisdictions outside of the U.K. should consider following London’s lead, and begin passing legislation that will allow them to target properties and assets that reek of kleptocracy, and that allow these bloodied regimes to continue to brutalize their populations back home.
Casey Michel is a journalist who writes on kleptocracy, trans-national money laundering, offshoring, and related topics for outlets like Foreign Affairs, Foreign Policy, and The New Republic, among others. He is the author of the forthcoming book American Kleptocracy.