02 Jun 2020
OCCRP—When Eldar Mahmudov fell out of favour 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.
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.
“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.
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.
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.
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.
Read more at OCCRP
RiskScreen: Eliminating Financial Crime with Smart Technology
You can claim CPD minutes for this content, by signing up to our CPD WalletFREE CPD Wallet