Complex offshore corporate structures or trusts are not immediately dodgy

In an application dated 4 September 2019, to discharge three unexplained wealth orders (“UWOs”) and related interim freezing orders (“IFOs”) (together “the Orders”) made by Supperstone J. on 22 May 2019, under sections 362A to 362R of the Proceeds of Crime Act 2002 (“POCA 2002”) MRS JUSTICE LANG DBE made some interesting observations about offshore corporate structures and suspicion.

MRS JUSTICE LANG DBE said:-

• The need for caution in treating the complexity of property holding through corporate structures as grounds for suspicion has been recognised in the context of the risk of dissipation of assets in civil proceedings.
  • In Candy v Holyoake [2018] Ch 297, Gloster LJ said, at [59]:
    • “Several cases have emphasised that there is nothing implicit in complex, offshore corporate structures which evidences an unjustifiable risk of dissipation.
  • As Arnold J put in VTB v Nutrietek [2012] 2 BCLC 437, 517, para 233 (approved by the Court of Appeal ….):
    • “It is not uncommon for international businessmen, and indeed quoted UK companies, to use offshore vehicles for their operations, particularly for tax reasons.

• Similarly, in Mobil Cerro Negro Ltd Petroleos de Venezuela [2008] 2 All ER (Comm) 1034, para 62 Walker J rejected that there was anything unusual about the ready transferability of assets within a corporate structure…..”.

• In the present case,
  • There was no or only minimal evidence to suggest a risk of the defendants dissipating their assets.
  • There was also nothing about either the corporate structure or the ongoing corporate reorganisation that was suggestive of a risk of dissipation……
  • There was no evidence in this case that the companies were set up or being used for wrongful purposes; and
  • There was no allegation in the claim that any fraud was facilitated by the use of offshore companies (or similar)…”

• The use of complex offshore corporate structures or trusts is not, without more, a ground for believing that they have been set up, or are being used, for wrongful purposes, such as money laundering. There are lawful reasons – privacy, security, tax mitigation – why very wealthy people invest their capital in complex offshore corporate structures or trusts. Of course, such structures may also be used to disguise money laundering, but there must be some additional evidential basis for such a belief, going beyond the complex structures used.

• The Respondents relied upon the principle established in R v Anwoir [2008] EWCA Crim 1354, [2008] All ER 582 where the Court of Appeal held, per Latham LJ at [21], that where the Crown seeks to prove that property derives from crime by evidence of the circumstances in which the property is handled, it must be “such as to give rise to the irresistible inference that it can only be derived from crime” (emphasis added). See also: R v MK and AS [2009] EWCA Crim 952 per Hallet LJ, at [12]; National Crime Agency v Khan & Ors [2017] EWHC 27 (Admin), per O’Farrell J at [27].

Read full judgement here:

https://www.judiciary.uk/wp-content/uploads/2020/04/Approved-Judgment-NCA-v-Baker-Ors.pdf