Author: Garo Vardanian

https://urldefense.com/v3/__https://www.occrp.org/en/investigations/dethroned-azerbaijani-elites-made-big-investments-in-europe__;!!LIr3w8kk_Xxm!8GI4tll_fjW2Zy_Z6x60Rjy43_S-BB581dtkBWCXhrE7L1ERG3FolOVbAPpzTA$
 



by OCCRP
30 May 2020

When Eldar Mahmudov fell out of favor with Azerbaijan’s government, he
fell hard.

In October 2015, the country’s national security minister was
dismissed from his powerful role by a presidential order. Within days,
wild stories peppered local media outlets about raids on his villa,
where police discovered glass jars full of diamonds and cardboard
boxes stuffed with foreign currency. His ministry associates were
reportedly arrested on various charges linked to corruption and
extortion, and a statue honoring his late father — a famous economist
— was unceremoniously demolished.

The lack of transparency in the tightly controlled country makes it
difficult to verify the allegations or the reporting. But one thing is
clear: by the time Mahmudov left government, his family possessed a
sizable fortune, most of it obtained during his decades in public
office.

A leak of bank documents reveals one mode of moving that family
fortune from Azerbaijan to Europe: his children. Reporters from OCCRP
and Finance Uncovered scoured terabytes of data, along with public
company and property records, to piece together a picture of his
family’s business and property empire in the UK, Spain, Luxembourg,
Lithuania, and Cyprus. All together, reporters found, it is worth over
100 million euros.

About the Leak

In November 2019, a group of self-described “transparency activists,”
Distributed Denial of Secrets, published two caches of customer data
from Cayman National Bank (Isle of Man) Limited, a subsidiary of
Cayman National Corporation Ltd. based in the British Crown dependency
of the Isle of Man, between England and Ireland. The bank — referred
to throughout the story as Cayman National— confirmed it had been
hacked, and a known hacker named Phineas Fisher claimed
responsibility.

Because Cayman National specializes in private wealth management and
operates in an offshore jurisdiction, OCCRP decided to make the now
publicly available data searchable on its Aleph database, allowing
professional journalists to identify stories in the public interest.

The hacked data included virtual computer images from a variety of
systems operated by the bank, including those designed for customer
management, databases, email servers, and anti-money laundering
compliance reviews of customers and transactions.

Almost all of the properties and companies are owned by Eldar
Mahmudov’s 36-year-old son, Anar Mahmudov, and 31-year-old daughter,
Nargiz Mahmudova. The two siblings began their careers as investors
and real-estate moguls in their early 20s.

In response to reporters’ inquiries, Anar Mahmudov and Nargiz
Mahmudova said through a lawyer that their family wealth is inherited
from an ancestor, the 19th-century entrepreneur Aslan Ashurov.

Although the Mahmudov children do appear to be the
great-great-grandchildren of Ashurov on their mother’s side, reporters
could not find evidence of family wealth prior to Eldar Mahmudov’s
career as a public official, which began in 1980.

It is unclear from historical evidence what happened to Ashurov’s
money, but it would have been very unusual for a large personal
fortune to be handed down unscathed after the Bolshevik takeover of
Azerbaijan in 1920 and seven subsequent decades of Soviet communism.

In a follow-up letter, the Mahmudovs’ lawyer again said that “it is
widely known that our clients are beneficiaries of inherited wealth
accumulated by their family over very many years,” and that the links
are established in a 2014 book about the family.

However, this story contradicts the explanation of wealth Anar
Mahmudov provided to Cayman National Bank in 2014, which identified
companies started by his aunt in the 1990s as the source of his money.

The leaked bank documents and public records offer a rare glimpse into
the Mahmudov family’s wealth, some of which they used to score golden
visas allowing them to travel in Europe’s Schengen Zone.

Definitively verifying the sources of the family’s wealth is almost
impossible given both the opacity of Azerbaijan’s financial reporting
systems, even for public officials, and the contradictory accounts of
the source of Mahmudov’s money.

The Isle of Man

Hannah Holden was doing a routine compliance review at Cayman National
in August 2015 when she discovered among a batch of flagged accounts a
“standard risk” corporate client that actually wasn’t. One related
account had already been flagged because an unexpected amount of money
flowed through it.

The PEP Treatment

Banks are required by law to be on the lookout for clients who may be
involved in financial wrongdoing, and report any suspicious activity
to the authorities. This includes paying special attention to
“politically exposed persons” — government officials, their family
members, and their associates. Accounts with PEP links must be
reviewed more carefully than standard accounts to ensure the client is
not engaged in corruption. Banks can sometimes close PEP-linked
accounts without evidence of wrongdoing because of the elevated risk
of having such clients, and the higher costs associated with increased
compliance.


“I’m reading at the moment on Britannia Group Limited’s file that the
people who I believe at this stage to be the ultimate beneficial
owners of this group of companies are the children of a PEP,” she
wrote in a work email, using the industry acronym for “politically
exposed person.”

The company’s official co-owner was 26-year-old Nargiz Mahmudova,
whose father, Eldar Mahmudov, was at the time Azerbaijan’s National
Security Minister. Her initial source of funds was explained as
“personal savings.” Her address was listed as an apartment on the
shores of Lake Geneva in Switzerland.

A year later, Cayman National Compliance Manager Audrey Butterworth
drafted a detailed internal memo about Coldharbour Marine Holdings, a
company co-owned by Britannia Group Limited, and its “connected
entities,” Britannia Consulting and Britannia Investment. In fact,
there were eight companies linked to the Mahmudov family banking at
Cayman National.

“I have serious concerns about this a/c [account] and overall
relationship without even looking at the transactions,” Butterworth
wrote in closing.

The following month, the bank filed a disclosure with the Financial
Intelligence Unit in the Isle of Man regarding the relationship,
citing the territory’s Proceeds of Crime Act 2008. A report filed to
financial regulators is not evidence of wrongdoing, but it does
demonstrate that Cayman National had serious concerns about its
clients.

The report cited a letter from Anar Mahmudov’s UK attorney, saying the
accounts were really a vehicle for his client to set up a
discretionary trust for which his sister would be the settlor.

“We believe that Anar Mahmudov is actually the UBO [Ultimate
Beneficial Owner],” concluded the bank.

Red Flags

Between October 2014 and July 2015, the bank noted, Anar made deposits
worth 13.95 million British pounds into Britannia Group Limited’s
accounts. The deposits were explained as "discounted loan notes” —
with him being both the noteholder and the suspected beneficial owner.
Nearly identical amounts were then transferred out to related
companies and investments.

Cayman National raised concerns internally, noting that the same
reference numbers seem to have been used on numerous loan notes. “I
don’t understand the rationale for the loan notes and the subsequent
payment,” said a compliance review note on a Britannia Group
transaction file.

Anar’s plan, according to his attorney, was to invest in companies and
businesses and purchase property in the UK. His source of wealth was
attributed to Crystal Holdings, a group of companies in Azerbaijan
working in “construction, cleaning, food and beverage,” gifted to Anar
by his aunt in 2006.

By the time of Cayman National’s latest review, Eldar Mahmudov had
been dismissed from his government position. Anar’s father-in-law,
Jahangir Hajiyev — the former head of the International Bank of
Azerbaijan — had been charged with embezzlement. The negative press
reports, along with other red flags, prompted the bank to shut down
the accounts.

The process of closing them uncovered still more causes for concern at
the bank. The companies were administered by a firm called Northern
Wychwood Limited. A Cayman National compliance officer noted that
Northern Wychwood “appear to have been named in a few court cases
themselves and linked to high profile investigations in Zimbabwe,
following the Panama Papers leaks.”

In response to an inquiry from reporters, Cayman National said it does
not comment on the affairs of individual clients, but stated that it
“is committed to maintaining the highest standards of conduct. It is
conscious at all times of its responsibilities with regard to money
laundering, KYC [Know Your Customer] checks as well as its obligations
with regard to politically connected individuals, and has always
cooperated fully with the authorities in relation to suspicious
transactions or criminal or regulatory investigations.”

Northern Wychwood Limited did not respond to a request for comment.

The UK

Two office blocks in Poole and Bournemouth, on England’s southern
coast, might be the least glamorous properties in the Mahmudovs’
British real-estate portfolio — even if UK land records show they were
valued at 13.5 million British pounds.

They were bought by a UK company called Brit Holdings Limited in 2016.
Documents show the sole shareholder of Brit Holdings is Britannia
Investments Limited, a company registered in St. Kitts and Nevis to
Nargiz Mahmudova at the time. Obscuring the people behind the
properties were an army of professional service providers from Cyprus
and the Isle of Man.

Anar Mahmudov also holds the title deed to a four-story London
townhouse in Knightsbridge, one of the city’s priciest boroughs. The
property — which features a gym, spa, cinema, and elevator — was
purchased in 2013 for 17.35 million British pounds. At the time Anar
was 29 years old.

Until mid-2018, he was also part-owner of 8-10 Dover Street, a holding
company that owns the trendy London restaurant and bar MNKY HSE, which
offers its upscale clientele contemporary Latin American cuisine and
“an edgy and sophisticated spirit.” In its last financial statement,
the company reported 6.3 million British pounds in fixed assets in
2018.

That year, Anar’s shares in 8-10 Dover Street were transferred to an
attorney, Michail Skordis, who also appears on documents of a Cyprus
company with Mahmudov. The change took place the same month that the
UK’s National Crime Agency was defending in court their first
Unexplained Wealth Order against Anar’s mother-in-law, Zamira
Hajiyeva.

Hajiyeva lived in a house worth 11.5 million pounds near the luxury
department store Harrods, where she reportedly spent more than 16
million pounds over 10 years, nearly 6 million of that using credit
cards issued by Azerbaijan’s state bank. Its chairman, her husband
Jahangir Hajiyev, was jailed for embezzlement in 2015. After
exhausting her challenges to the order, Hajiiyeva must now explain the
source of her wealth or risk the seizure of her assets.

Splurging on Startups

The Mamudovs used their Isle of Man discretionary trust to sink
millions into obscure companies:

Spain

Anar Mahmudov first appeared on the Spanish radar in May 2006, when
the then-22-year-old incorporated Majorca Capas Group Investment, the
first of a handful of companies he would open in Spain.

Over the next nine years Anar, both personally and through those
companies, bought dozens of properties on the Mediterranean island of
Mallorca, including land plots, luxury apartments, offices, parking
and storage spaces, shops, and a hotel.

In late 2014, Anar consolidated many of the Spanish properties under
one company, Macent Invest Group, of which he is the beneficial owner.
The assets owned by Majorca Capas, his first Spanish company, were
absorbed as well.

The Spanish registry doesn’t disclose the values of properties sold or
purchased, but Macent Invest Group reported almost 33 million euros in
assets in its most recent financial filing.

Dolunay SL, a company that is 50 percent owned by Macent Invest Group,
is currently selling a stunning 17th-century farmhouse estate that
sits on 127 hectares of land in the Calvià municipality for 15 million
euros.

Anar is not the only Mahmudov to park big money in Mallorca real
estate. His sister Nargiz owns one of the art nouveau-style Can
Casasayas and Pensión Menorquina buildings in the island’s capital
Palma. The two ornate structures are classified as cultural monuments
and architectural landmarks. The building was purchased in Nargiz’s
name in September 2013 for 4.1 million euros, according to a document
seeking permission to sell a building of cultural interest.

Fairy Tales

In 2013 an artist living in Mallorca was asked by a woman named
Khuraman Mahmudova to illustrate a children's fairy tale. She gave
OCCRP this account of what followed when she accepted the assignment.
She requested anonymity to protect her privacy.


Anar Mahmudov is also the owner of a few older investments on the
island, though his involvement could only be confirmed as of 2016. He
is the beneficial owner of a Luxembourg company called Hotel & Resort
Investment, which owns a Spanish company by the same name. Since 2001,
the Spanish company has owned a building — home to an upscale hotel —
near the Palma port and marina, and since 2003 a parking garage
nearby. It reported 4.1 million euros in assets in 2018.

Family Connections

Anar Mahmudov is the beneficial owner of four companies in Luxembourg,
a financial center that runs on foreign cash. Besides Hotel & Resort
Investment SRL, which was opened in 2001, the others — KONOCO.M,
UTILICOM, and GRAVITYLUX — were all incorporated in 2015, before Eldar
Mahmudov’s dismissal. The four companies have combined assets of 14.7
million euros.

Farhad Rahimov, an Azerbaijani national with French residence, has
appeared as director in all of Muhmudov’s Luxembourg companies. He
also regularly appears in the company network of Anar’s jailed
father-in-law, the former head of Azerbaijan’s state bank, Jahangir
Hajiyev. Rahimov signed documents in 2013 on behalf of Berkeley
Business Limited, refinancing a US$42.5 million private jet. In 2015,
he was also the sole director of MRGC 2013 Ltd, the company used to
purchase one of the Hajiyev properties now being targeted by the UK’s
Unexplained Wealth Order. “I was brought in to restructure [the deal]
but it coincided with the time when the issues started with the family
and that’s why I left shortly after,” Rahimov told reporters in an
email.

Rahimov said he worked with the Hajiyev and Mahmudov families through
a Luxembourg company called Fortrust Global. “I was only a nominee
director in these entities for a very short period of time and
resigned straight away once these families started to have issues back
in Azerbaijan,” he wrote. “My involvement was very brief and carried
barely any responsibilities,” he said, adding that he did consult for
the Hajiyev family “on a number of deals as an independent consultant
or through my company.”

Hajiyev has been convicted in the embezzlement of more than $4 billion
from the International Bank of Azerbaijan.

Lithuania

Following the financial trail, reporters discovered that the Mahmudov
family also expanded into Lithuania, where they acquired two companies
that soon amassed impressive wealth.

In 2016, Anar Mahmudov, his sister Khuraman, and their business
partner Hamid Abbasov became the owners of UAB Barkas LT, a small
Lithuanian company that up to that point had no significant assets.

At the end of 2015, Barkas LT recorded net sales of 24,000 euros and
assets worth 48,890 euros. In February 2017, the new owners changed
the company’s articles of association, adding new business activities
including real-estate construction, development, and intermediary
services such as brokering.

By the end of 2017, the company had more than 722,000 euros in assets,
mostly tangible assets worth 413,223 euros, although Lithuanian
business registry filings don’t give any more details.

In 2018, the value of Barkas LT’s assets grew yet more, to 1.17
million euros. Its financial records cite data from the previous year
that don’t match the figures from the 2017 report. The company now
said it worked in a completely different business, supplying water,
heating, and air conditioning. Public records show Barkas LT also has
a license for the wholesale sale of alcohol.

In just two years it amassed assets worth more than a million euros,
yet its net sales for 2017 and 2018 added up to some 60,000 euros.

The Mahmudovs invested in another Lithuanian company, White Cat, also
doing wonders for its assets. After acquiring White Cat in mid-2017,
Nargiz Mahmudova and her mother, Tahira Mahmudova, rewrote the
articles of association, adding “consulting in real estate business”
as the company’s primary activity.

By the end of the year, the company already had assets worth 576,554
euros — 26 times more than what it reported in 2016. In last year’s
annual report, White Cat declared assets worth 536,033 euros.

In the paperwork for their local companies, the three Mahmudov
siblings and their mother all claim to reside in Lithuania. All list
the same 64 square-meter flat in a residential block on the outskirts
of the capital Vilnius. Official data values the flat, built in 2002,
at 73,500 euros.

OCCRP reached out to the current owner of the flat, a young Lithuanian
woman who bought the apartment in 2018 and asked not to be named to
protect her privacy. She said she had never met anyone from the
Mahmudov family in person, but confirmed she knew at least three of
them were officially listed as residing in the flat. She said she has
now annulled those records, though reporters could not confirm that.

Lithuania’s Migration Department confirmed to OCCRP that Anar
Mahmudov, his mother, and two sisters were all issued “golden visas,”
a type of residency permit that has drawn scrutiny as an easy gateway
to the European Union’s Schengen Zone. The Migration Department states
that in order to apply for a residential permit on business grounds, a
foreigner must invest at least 14,000 euros into a Lithuanian
company’s share capital.

The family’s investment scheme began about eight months after Eldar
Mahmudov’s fall from grace in Azerbaijan, and the visas were issued in
2017. The Lithuanian government said those visas have since been
cancelled. Anar Mahmudov’s and Khuraman Mahmudova’s residential
permits expired in 2019 and the two did not move to extend them, the
department said. In the case of Tahira Mahmudova and Nargiz Mahmudova,
their residential permits were cancelled by the Migration Department
in 2018 because the mother and daughter violated Lithuanian
administrative regulations, according to the authorities. The
department did not indicate the precise nature of the violation, only
stating that residential permits can be revoked for providing false
data on residency or business activities, or in the case of risk of
illegal migration.

Indre Korsakoviene, the Lithuanian director of both Barkas LT and
White Cat, refused to comment about the two companies she manages.

Azerbaijan

Rory Fordyce, the owner of UK-based law firm Taylor Fordyce, sent a
formal letter of introduction for a client to a tax advisor in
December 2013 with the subject: Mr Anar Eldar Mahmudov - New Trust.
The tax advisor, UK-based Lawfords Consulting, brought their new
client to Cayman National, as they’d done with a number of others.

Anar Mahmudov needed a discretionary trust, “to invest in companies
and businesses and purchase property in the UK,” but it would be in
the name of his sister, Nargiz Mahmudova’s, Fordyce’s letter detailed.

Attached to the letter was Anar’s story of how he obtained his wealth,
titled “Early History” and printed on stationary emblazoned with
“Crystal Holding” in cursive across the top.

“Business itself started from the January 10 year 1998 on the family
meeting where discussions were made about [the] booming economy of
Azerbaijan and [the] decision was [taken] to start investing in oil
infrastructure,” the narrative says.

The family took out a bank loan to start Caspian Petrol, an oil
reseller and later a chain of petrol stations, the story claims. Then
Elmira Mahmudova — the sister of Eldar Mahmudov, who had been
referenced in the media as an official with Azerbaijan’s Foreign
Ministry — also made investments in construction, food, beverages, and
the Caspian Crystal group of restaurants.

In 2006, the story goes, the avid investor transferred the companies
to her nephew, Anar Mahmudov, who became their “one and only owner.”
That year, Anar was attending business school in Switzerland, while
his father’s official salary was about 1,350 euros per month.

The personal wealth story goes on to say that the young entrepreneur
embarked on restructuring and rebranding the businesses in 2006.

His most lucrative project was importing luxury vehicles, including
Land Rover, Jaguar, Maserati and Ducati, according to the letter. In
2013, he launched Crystal Holding to consolidate his many companies
spanning industries including satellite services, parking, restaurant
catering, construction, printing, and petrol.

“From the information above we can understand that the formation of
Crystal Group took 10 years to become one of the keen players in [the]
Azerbaijan market and the group is ready to invest in any
international company which will justify its investments,” the story
ends.

However, a lawyer for Anar Mahmudov and Nargiz Mahmudova gave a
different account of the origin of their wealth in response to
inquiries from reporters.

The lawyer said that Anar and his sister inherited money that was
“accumulated by their family over very many years, which can be traced
back to their entrepreneurial ancestor, Aslan Ashurov, in the 19th
Century.”

The siblings’ “assets and business interests are properly registered
and declared in accordance with legal and regulatory requirements,”
the attorney added .

Today a number of companies in Azerbaijan can be linked to Mahmudov,
some actually created as early as 1992, according to Crystal Group’s
own presentation materials. The materials provide an estimated
turnover of $65.9 million for some of Mahmudov’s main companies in
2012, including Caspian Crystal, Caspian Petrol, and Indigo
publishing. It also lists $56.1 million in estimated costs for two of
Mahmudov’s companies that year, A.I.F. Car Parking and Crystal
Construction.

The presentation claims that all the 10 automatic car parks to be
constructed by A.I.F. in 2013 are government orders, and that Crystal
Construction contracts include government buildings.

It’s difficult to verify the company’s claims, since it doesn’t file
financial statements and very little public procurement information is
available in Azerbaijan.

In a follow up letter weeks later, Mahmudov’s attorney provided more
details, some referencing questions from the Crystal Holding 2013
presentation. “The percentage of total group turnover derived from
government contracts is less than 20 percent, nearer 10 percent,” he
claimed. The bank cited this point as one of the reasons for reporting
their client to the government, noting that the account funds may have
come from government funds.

Fordyce also confirmed that Anar’s father-in-law was indeed Jahangir
Hajiyev, then-chairman of the International Bank of Azerbaijan. There
was no mention of Anar’s father, the National Security Minister, Eldar
Mahmudov.

Fordyce told reporters that he knew of the father’s official
positions, and that over the years he worked with Lawfords to put
together “a very thorough documented source of funds statement, with
asset title documents in support” of Anar Mahmudov’s business
dealings. Fordyce declined to comment further on his client, and
Lawfords Consulting did not respond to a request for comment.

The accounts with Cayman National were opened in March 2014 and closed
in July 2016 – the leaked documents a short window with rare details
into the family’s wealth, and their narrative.

In February this year, someone using Anar Mahmudov’s full name posted
a question on the official website of Azerbaijan’s tax authority.

“I, Mahmudov Anar Eldar oglu, a citizen of the Republic of Azerbaijan,
have been living abroad permanently since 2015 and are engaged in
entrepreneurial (business) activities in the country where I live. … I
have not visited Azerbaijan since the beginning of 2015,” said the
poster.

“Question: Considering that I have been a permanent resident of a
foreign country since 2015, I am a citizen of the Republic of
Azerbaijan and I have never been a citizen of any other state, am I a
tax resident or a tax non-resident of the Republic of Azerbaijan?
Thank you in advance.”

The tax authorities replied, concluding that Anar was no longer a
resident for their purposes.

Where he and his family do reside today remains unclear.

Finance Uncovered, Diario de Mallorca, and Transparency
International-UK contributed reporting.

UPDATED: This story was updated to indicate that the children of Eldar
Mahmudov appear to be descended from Aslan Ashurov on their mother’s
side.