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Azerbaijan’s president, Ilham Aliyev, and his daughters Leyla and Arzu
A network of offshore companies linked to the family and associates of Ilham Aliyev has traded close to £400m of UK property over the past 15 years. Illustration: Guardian Design
A network of offshore companies linked to the family and associates of Ilham Aliyev has traded close to £400m of UK property over the past 15 years. Illustration: Guardian Design

Crown estate bought £67m London property from family of Azerbaijan ruler

This article is more than 2 years old

Leak reveals firms linked to Aliyev family – repeatedly accused of corruption – have traded nearly £400m of UK property

The Queen’s crown estate has launched an internal review over a £67m London property it appears to have bought from Azerbaijan’s multimillionaire ruling family – which has repeatedly been accused of corruption.

Details of the purchase are contained in the Pandora papers, which reveal how a network of offshore companies linked to the family and associates of the Azerbaijani president, Ilham Aliyev, has traded close to £400m of UK property over the past 15 years.

The property purchases include one building acquired for £33.5m in 2009 by an offshore company beneficially owned by President Aliyev’s son, Heydar, who was then only 11 years old.

The revelations raise questions about potential loopholes in the UK’s property registration system, and whether they prevent proper due diligence, even by a body such as the crown estate, nominally owned by the UK monarch and run by commissioners for the benefit of the nation’s finances.

Quick Guide

What are the Pandora papers?

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The Pandora papers are the largest trove of leaked data exposing tax haven secrecy in history. They provide a rare window into the hidden world of offshore finance, casting light on the financial secrets of some of the world’s richest people. The files were leaked to the International Consortium of Investigative Journalists (ICIJ), which shared access with the Guardian, BBC and other media outlets around the world. In total, the trove consists of 11.9m files leaked from a total of 14 offshore service providers, totalling 2.94 terabytes of information. That makes it larger in volume than both the Panama papers (2016) and Paradise papers (2017), two previous offshore leaks.

Where did the Pandora documents come from?

The ICIJ, a Washington DC-based journalism nonprofit, is not identifying the source of the leaked documents. In order to facilitate a global investigation, the ICIJ gave remote access to the documents to journalists in 117 countries, including reporters at the Washington Post, Le Monde, El País, Süddeutsche Zeitung, PBS Frontline and the Australian Broadcasting Corporation. In the UK, the investigation has been led by the Guardian and BBC Panorama.

What is an offshore service provider?

The 14 offshore service providers in the leak provide corporate services to individuals or companies seeking to do business offshore. Their clients are typically seeking to discreetly set up companies or trusts in lightly regulated tax havens such as the British Virgin Islands (BVI), Panama, the Cook Islands and the US state of South Dakota. Companies registered offshore can be used to hold assets such as property, aircraft, yachts and investments in stocks and shares. By holding those assets in an offshore company, it is possible to hide from the rest of the world the identity of the person they actually belong to, or the “beneficial owner”.

Why do people move money offshore?

Usually for reasons of tax, secrecy or regulation. Offshore jurisdictions tend to have no income or corporation taxes, which makes them potentially attractive to wealthy individuals and companies who don’t want to pay taxes in their home countries. Although morally questionable, this kind of tax avoidance can be legal. Offshore jurisdictions also tend to be highly secretive and publish little or no information about the companies or trusts incorporated there. This can make them useful to criminals, such as tax evaders or money launderers, who need to hide money from tax or law enforcement authorities. It is also true that people in corrupt or unstable countries may use offshore providers to put their assets beyond the reach of repressive governments or criminal adversaries who may try to seize them, or to seek to circumvent hard currency restrictions. Others may go offshore for reasons of inheritance or estate planning.

Has everyone named in the Pandora papers done something wrong?

No. Moving money offshore is not in or of itself illegal, and there are legitimate reasons why some people do it. Not everyone named in the Pandora papers is suspected of wrongdoing. Those who are may stand accused of a wide range of misbehaviour: from the morally questionable through to the potentially criminal. The Guardian is only publishing stories based on leaked documents after considering the public interest. That is a broad concept that may include furthering transparency by revealing the secret offshore owners of UK property, even where those owners have done nothing wrong. Other articles might illuminate issues of important public debate, raise moral questions, shed light on how the offshore industry operates, or help inform voters about politicians or donors in the interests of democratic accountability.

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A spokesperson for the estate, which manages £15bn of property assets, said: “Before our purchase of [the building] we conducted checks including those required by UK law. At the time we did not establish any reason why the transaction should not proceed. Given the potential concerns raised, we are looking into the matter.”

Aliyev has ruled Azerbaijan since succeeding his father as president in 2003 and has presided over a country that is frequently accused of human rights abuses, rigged elections and systemic corruption.

In 2015, a European parliament resolution called on “EU authorities to conduct a thorough investigation into the corruption allegations against President Aliyev and members of his family”, following a series of stories by Azerbaijani investigative journalists accusing the first family of personally benefiting from state contracts and business deals.

In 2017, the human rights campaign group Freedom House also criticised the country for “widespread and pervasive” corruption in a report. “As long as the ruling elites continue to enrich themselves at the expense of the public purse, government anti-corruption measures will have limited impact,” it said.

The Conduit Street building in London. Photograph: Martin Godwin/The Guardian

In August 2018, the crown estate paid £66.5m for 56-60 Conduit Street, an eight-storey office and retailing property in London’s Mayfair, which it bought from a British Virgin Islands-based company called Hiniz Trade & Investment.

Hiniz had acquired the building for £35.5m in 2009, and the Pandora papers show how the ownership of the company was passed from the president’s daughter, Arzu Aliyeva, to her grandfather Arif Pashayev, who then placed the company into a trust in 2015.

Arif Pashayev.

The leaked files do not show the source of the funds originally injected into Hiniz, but disclosure of the company’s shareholders – and the manner in which ownership was switched between members of Azerbaijan’s first family – raises fresh questions about whether the transaction should be investigated on money-laundering concerns.

Dylan Kennedy, a former UK law enforcement officer and director of the financial due diligence company Intelpool, said: “The onward sale of any property that had originally been purchased with potentially dirty funds completes the money laundering cycle, by providing a fresh paper trail that effectively legitimises the proceeds. In this case, if the source of funds is shown to be questionable, the sale of a property to the crown estate is the pinnacle of legitimisation.”

The crown estate said it had been “provided with details of the ultimate beneficial owner of Hiniz Trade and Investment Limited, but no other ownership details”.

Arzu Aliyeva, daughter of Azerbaijan’s president, votes in the 2018 presidential election. Photograph: Yegor Aleyev/TASS

The deal is not the first time the Aliyev family’s London property investments have caused controversy.

In 2018, the Solicitors Regulation Authority fined a London solicitor £45,000 for failings connected to the property investments of President Aliyev’s daughters, Leyla and Arzu Aliyeva. The tribunal found the solicitor had failed to conduct enhanced due diligence in a case that should have raised money-laundering risks.

Do you have information about this story? Email simon.goodley@theguardian.com

The UK government has repeatedly promised to introduce a compulsory register of overseas owners of property in the country amid concern that vast swathes of real estate are secretly held by owners who hide behind shell companies in tax havens.

The Pandora papers have removed some of that invisibility, revealing for the first time how, between 2006 and 2017, the Aliyevs and associates spent £389m secretly acquiring 27 properties using a network of offshore companies. Twelve of those properties have since been sold for a combined total of £374m.

Properties that the documents show the Aliyev-connected offshore companies still own include: a house in an exclusive new-build Kensington development, where homes are advertised with features including a swimming pool, Jacuzzi and a gym/cinema, and which Land Registry records state was bought for £29.3m in 2012; and three apartments in an exclusive Knightsbridge block located within metres of the department store Harrods and Hyde Park, which were acquired for about £5m in 2006.

The Aliyev family did not respond to efforts to contact them.

More on this story

More on this story

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  • King Charles to receive huge pay rise from UK taxpayers

  • King Charles to adjust takings from crown estate as windfarm profits soar

  • Biden meets Kenyatta as Pandora papers leak swirls around world leaders

  • Crown estate triples pay of CEO in three years to nearly £1.6m

  • Pandora papers: what has been revealed so far?

  • Windfarms help drive record profit for crown estate

  • Top EU official calls for crackdown on shell firms used to avoid tax

  • Cost of the crown: what we know so far about British royals’ wealth and finances

  • Jonathan Aitken was paid £166,000 for book on Kazakh autocrat, leak suggests

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