The £102m Red Flag: How Dishonest Assistance Became the Ultimate AML Lesson

Below is a concise executive summary of Stevens v Hotel Portfolio II UK Ltd [2025] UKSC 28, followed by the key AML/CDD lessons that the case underscores for practitioners.

• https://www.supremecourt.uk/cases/uksc-2023-0142

Although Stevens is not an AML case, the underlying misconduct illustrates classic AML red flags and provides strong compliance takeaways for financial institutions, lawyers, corporate service providers and regulated firms.

Executive Summary — Stevens v Hotel Portfolio II UK Ltd [2025] UKSC 28

In this 2025 decision, the UK Supreme Court clarified the scope of liability for dishonest assistance in a breach of trust.

The case involved a company (HPII) that owned valuable hotel assets. Its director, Mr Ruhan, secretly arranged the sale of the hotels through an entity (Cambulo) controlled by associates of Mr Stevens, who acted as Ruhan’s nominee.

• The claimant company (HPII) owned three hotels around Hyde Park with substantial development potential, but was unable to undertake that development.
• The first defendant, Mr Ruhan, was a director of HPII and was authorised to accept bids for the hotels in excess of £125 million.
• A Madeiran company, Cambulo, initially bid £127 million for the hotels, and later purchased them for £125 million.
• Cambulo was owned by companies associated with the second defendant, Mr Stevens.
• In fact, Mr Stevens acted as Mr Ruhan's nominee. Mr Ruhan, therefore, concealed from HPII that he was the actual purchaser of the hotels.
• Cambulo subsequently on-sold the hotels (after redevelopment in two cases) to unconnected parties, realising substantial profits. Approximately £102 million of those profits went to Mr Ruhan.
• He used £1.5 million of this sum to compensate Mr Stevens for his role in the arrangement and dissipated the rest on his own development projects in Qatar.

KEY ISSUES

• This structure concealed the true beneficial ownership from HPII. The director made unauthorised profit from the deal and then dissipated it.
• The Supreme Court restored an order requiring Mr Stevens—the dishonest assistant—to pay equitable compensation equal to the loss caused by the dissipation, even though he had not personally received all the profits.

The Court confirmed that:

• Multiple breaches of duty must be treated as distinct events, such as (1) the making of an unauthorised profit and (2) the dissipation of that profit.
• A dishonest assistant can be jointly liable with the defaulting fiduciary for losses caused by the dissipation, even if the value aligns with the fiduciary’s gain.
• Attempts to offset a beneficiary’s gain against loss (via equitable set‑off) will only be allowed where a “clearly inequitable result” would otherwise occur.

These principles reaffirmed the courts' seriousness in treating concealment, misuse of nominee arrangements, and deliberate assistance in deceptive transactions. [hsfkramer.com]

THE UK SUPREME COURT’S REASONING ON MR STEVENS (THE DISHONEST ASSISTANT AND MR RUHAN’S BREACHES

1. Supreme Court’s Reasoning (2025)

The Supreme Court’s judgment

• Focused on the liability of Mr Stevens (the dishonest assistant),
• But its reasoning also clarifies how the law treats Mr Ruhan’s breaches,
• The constructive trust over profits, and the separation of gains vs. losses.

1. Two breaches must be treated as separate and distinct

The Court held that the case involved two independent breaches by Mr Ruhan:

1. Making an unauthorised profit by secretly being the true purchaser via Cambulo.
2. Dissipating the profits, which were held on constructive trust for HPII.

These breaches must not be blended into a single “scheme.” [reedsmith.com], [hsfkramer.com]

Constructive trust of profits = immediate proprietary interest

• The profits (approx. £102m+) were held on an institutional constructive trust, meaning HPII had a real, immediate property interest, not just a remedial claim. [reedsmith.com]
• This is crucial because it means dissipation of those funds was a breach of trust, independent of the initial fiduciary breach.

A dishonest assistant is liable for losses from dissipation—even if equal to the fiduciary’s profits

• The Supreme Court restored the High Court order making Mr Stevens liable for full equitable compensation equal to the dissipated fund, even though he had personally received only £1.5m. [hsfkramer.com]

Why? Because:

• The assistant is liable for losses they helped cause in the later breach (dissipation).
• Liability is compensatory, not an account of profits.
• It is irrelevant that compensation equals the fiduciary’s profit figure.

No set‑off between the profit gained and the loss caused

• The Court rejected the Court of Appeal’s view that the profit originally generated could be used to “offset” the loss from the dissipation.

General rule (reaffirmed):

• Gains from one breach cannot be set off against losses from another breach. [reedsmith.com]
• Set‑off is possible only where refusing it would produce a “clearly inequitable result”—not simply because the breaches form part of one sequence. [hsfkramer.com]

“But for” causation in multi-breach cases

• The correct counterfactual is:
• What would have happened if the constructive trust (over the secret profit) had been performed? [reedsmith.com]
• The Court rejected the idea that you wipe out the earlier breach (creation of the profit) when analysing causation for the later breach (dissipation).

Outcome

• Order against Mr Ruhan remained:
• He must account for the entire secret profit (>£100m). [mills-reeve.com], [supremecourt.uk]
• Order against Mr Stevens (dishonest assistant) was restored:
• He must pay equitable compensation equal to the full dissipated fund (£95–102m, depending on the calculation). [hsfkramer.com]

Flow of Funds and Liabilities (Diagram)

Below is a simplified flowchart showing the movement of money and where liabilities arise.

What AML/CDD Lessons Can Be Learned?

Although Stevens is not an AML case, the underlying misconduct illustrates classic AML red flags and provides strong compliance takeaways for financial institutions, lawyers, corporate service providers and regulated firms.

1. Hidden Beneficial Ownership = High-Risk Red Flag

The fraudulent scheme relied on concealing the true purchaser (Ruhan) through a nominee (Stevens) and a foreign corporate vehicle (Madeiran company, Cambulo). [hsfkramer.com]

CDD Implications

• Always verify ultimate beneficial ownership (UBO), not merely stated directors or signatories.
• Apply Enhanced Due Diligence (EDD) to any transaction involving:
• Nominees, proxies, or “representatives”,
• Offshore entities in opaque jurisdictions,
• Structures that appear designed to obscure control.

2. Complex Corporate Structures Require Enhanced Scrutiny

The case shows how multi-layered ownership structures can facilitate asset diversion and conceal beneficiaries’ rights. [hsfkramer.com]

CDD Implications

• Map corporate structures end-to-end.
• Assess whether the structure is commercially rational or designed for obfuscation.
• Increase monitoring intensity for layered cross-border corporate arrangements.

3. High‑Value Real Estate Transactions = Elevated AML Risk

The underlying transaction involved the sale of hotels worth over £125 million, a sector known globally for being vulnerable to money laundering due to:

• Opaque ownership structures,
• High-value single transactions,
• Potential for value manipulation.

CDD Implications

• Require robust documentation of the source of wealth (SoW) and the source of funds (SoF).
• Validate valuation consistency and commercial rationale.
• Scrutinise counterparties and intermediaries (lawyers, brokers, introducers).

4. Concealment + Deception = Indicators of Intentional Evasion

The Court emphasised that Ruhan concealed his role as purchaser, and Stevens knowingly assisted. Dishonesty in this context closely aligns with patterns observed in intentional AML circumvention. [hsfkramer.com]

CDD Implications

• Treat unexplained secrecy, avoidance of disclosure, or resistance to providing documentation as a red flag.
• Consider whether the client (or an associated party) may be attempting to circumvent governance, approval, or underwriting processes.

5. Importance of Monitoring Post-Transaction Behaviour

The dissipation of unauthorised profits was treated as a separate breach, reinforcing the concept that wrongdoing can occur after the initial transaction.

CDD Implications

• Implement ongoing monitoring beyond onboarding:
• Unusual transfers after an asset sale,
• Mismatch between expected and actual payment flows,
• Rapid redistribution of proceeds.
• Implement triggers for periodic CDD refresh when risk profiles change.

Overall AML/Compliance Takeaway

Stevens illustrates how dishonesty, concealment and misuse of corporate structures intersect directly with AML‑CDD duties. Even though the case arises from breach‑of‑trust litigation, the factual pattern mirrors typical laundering behaviours: nominee disguises, offshore vehicles, unexplained wealth movements, and deliberate obfuscation.

For AML teams, the key message is clear:

• Robust CDD, UBO verification, EDD on complex structures, and ongoing monitoring are essential to detect the types of misconduct that, in civil law, give rise to dishonest‑assistance liability—and in AML law, amount to facilitating money laundering.

Source

• https://www.hsfkramer.com/notes/cf/2025-posts/supreme-court-clarifies-remedies-available-against-dishonest-assistant-for-breach-of-a-constructive-trust
• https://www.mills-reeve.com/publications/supreme-court-decision-dishonest-assistance-in-breaches-of-constructive-trusts/
• https://www.reedsmith.com/articles/uk-supreme-court-clarifies-liability-key-insights-stevens-hotel-portfolio/