Author: Joshua L. Ray
27 July 2020
3 min read
Joshua Ray of Rahman Ravelli outlines the limitations of Part 5 of the Proceeds of Crime Act highlighted by the case of Gulnara Karimova.
The Serious Fraud Office’s (SFO’s) long-running efforts to seize £33M of UK real estate linked to Gulnara Karimova, the imprisoned first-daughter of former Uzbekistan leader Islam Karimov, took another twist in June when the High Court issued an order giving the agency a further six months to try to serve her with its claim.
Karimova has been the focus of multiple international investigations since at least 2013, when Swiss authorities uncovered evidence tying her to various offshore shell companies that collectively received hundreds of millions of dollars from an alleged scheme to extract bribes from Uzbekistan’s telecommunications industry. The SFO contends that she used part of that money to purchase luxury properties in and around London, including the £30M Gorse Hill Manor in Surrey.
Considering that Karimova has already been convicted of various offences in Uzbekistan, and several multinational companies have admitted making illegal payments to her, there is little doubt regarding the merits of the SFO’s case. Yet since obtaining a freezing order relating to Karimova’s homes in 2017, the SFO’s ability to actually seize them has been stymied by the service requirement contained in Part 5 of the Proceeds of Crime Act 2002. The SFO’s difficulties in this regard highlight a key difference between the civil recovery mechanisms available to the SFO and their American counterparts in the Department of Justice (DOJ).
Under Part 5, actions to recover property obtained through unlawful conduct are pursued directly against the property’s suspected owner(s). As such, service must be effected under the Civil Procedure Rules in order for the case to proceed, even when those with an ownership interest in the property reside outside the UK.
In Karimova’s case, the SFO has tried and failed to serve her through various means, including by post (which was intercepted by Uzbek authorities) and via the British ambassador in Tashkent (who was apparently unable to find a way to get her the documents).
With the latest extension from the High Court, British authorities are now reportedly preparing an attempt to complete service through Uzbekistan’s national prosecutor’s office. In light of Uzbekistan’s notoriously opaque legal system and uncertain law enforcement apparatus, we will have to wait and see whether this latest effort has any chance of success.
The service issues confronting the SFO are more easily avoided in actions brought by US prosecutors to confiscate ill-gotten property. In contrast to suits seeking recovery under the Proceeds of Crime Act, civil asset forfeiture actions in the US federal system are in rem—that is, they are filed against the property itself.
While US law, like that in England and Wales, generally requires the known or suspected owners of the targeted property to be served, there are numerous important exceptions. For example, with respect to real property, 18 U.S.C. § 985 provides that where the property owner is a fugitive, resides outside the U.S. and cannot be served under Fed. R. Civ. P. 4, or cannot otherwise be located, the DOJ can make “constructive service in accordance with the laws of the State in which the property is located.” State laws on constructive service can vary considerably but where targeted property is in New York, for instance, DOJ can apply for a court order to make service by publishing a notice to the owner in at least two newspapers likely to reach them once a week for four weeks (N.Y. CPLR Rule 315, 316).
For non-real property subject to a civil forfeiture action, the requirements are even more lax. In such cases, the DOJ need not attempt to formally serve the property owner at all—rather, it can simply provide notice. Prosecutors have various options regarding how to make such notice, but generally the most expedient is to make a post on an official government forfeiture website for at least 30 consecutive days.
Even when the DOJ has knowledge of individuals who might own the property, notice can be mailed to them directly or, where that’s not possible, to their attorney or to their place of incarceration. Importantly, notice given in these ways is deemed complete when placed in the mail, delivered to a commercial carrier, or sent by electronic mail. In other words, all that is required is that notice be sent - not that it is actually received. In the UK by contrast, the Proceeds of Crime Act requires formal service on the target property owner, regardless of whether it is real property or not.
If the SFO was equipped with the more lenient notice and service provisions available to prosecutors in the US, its difficulties in pushing forward the Karimova case would most likely have been avoided. The differences between the legal regimes governing civil recovery actions brought by the SFO and the DOJ underscore a key weakness in the Proceeds of Crime Act that defendants facing forfeiture actions in multiple jurisdictions may very well be mindful of.
This article was also featured on Lexology.com.
Joshua Ray represents individuals and corporates in complex investigations, prosecutions and regulatory actions regarding market manipulation and multijurisdictional matters involving fraud, bribery and money laundering.