European Union: SOCA v (1) Hakki Yaman Namli (2) Topinvest Holding International Ltd

[2013] EWCH 1200 (QB)

On 10 May 2013, Mr Justice Males held that (1) an acquittal in foreign criminal proceedings was not conclusive as to the defendant's innocence for the purposes of English civil recovery proceedings and was merely evidence the judge could take into consideration when reaching a decision on the balance of probabilities and (2) in the context of money laundering offences, inferences drawn from the manner in which the defendant handles money can be relied on when determining whether the proceeds are derived from unlawful conduct.

Factual Background

The Serious Organised Crime Agency (SOCA) brought a claim for a civil recovery order under ss.243 and 266 of the Proceeds of Crime Act 2002 (POCA) against Hakki Yaman Namli, a Turkish resident, and Topinvest, a BVI company owned and controlled by Namli, in respect of US $7 million held in a bank account at Coutts & Co in London. SOCA alleged that six credits into the account, along with subsequent profits, represented property obtained through the unlawful conduct of Namli and First Merchant Bank OSH Limited (FMB), a bank owned and controlled by Namli himself and incorporated in Northern Cyprus (TRNC). The justifications given by SOCA were the nature of the business conducted by the defendants, Namli's failure to identify a legitimate source and the direct link they could show between some of the credits and the unlawful conduct.

SOCA argued that the unlawful conduct carried out by Namli and FMB extended more widely than the six instances of fraud and money laundering SOCA had outlined specifically as occurring between 1996 and 2002 in several jurisdictions including the US, Germany, England and Turkey. The fraudulent conduct consisted of a form of advance fee fraud where FMB would entice victims to participate in an investment programme producing high returns if they could prove that they had access to a certain level of funding. FMB and Namli (as signatory on the instruments) would then issue bogus banking instruments, these included credit reference letters, revolving underwriting facilities and a standby letter of credit, confirming the availability of funds to these victims who would in turn pay substantial advance payments to Namli and FMB. However SOCA's contention was that the victims were never able to draw on the funds as FMB had knowingly subjected them to unrealistic and vague conditions in the instruments which the victims were rarely able to satisfy, leaving FMB with the sizeable advance payments and no commitment to the victims.

Namli and FMB denied any involvement in criminal activity and asserted it was not their fault that the victims could not meet the conditions provided in what were genuine banking instruments and neither could they be blamed for the use made of these instruments by fraudsters such as the three English firms of solicitors who had fraud proceedings brought against them or any other English frauds that had been perpetrated. Namli pointed to the fact that he was an upstanding citizen who had never been convicted of a criminal offence in any other jurisdiction with the exception of the Turkish money laundering proceedings brought against him in January 2000, although these too resulted in no conviction as on appeal the initial findings were overturned and the new trial resulted in an acquittal. Males J accepted this but also noted that Namli was indicted in criminal proceedings in the US and still faced extradition.

What weight to attribute to an acquittal in foreign criminal proceedings?

Namli and FMB put forward three arguments with respect to the acquittal in the Turkish criminal proceedings brought against Namli for similar or the same charges of money laundering: (i) a contradictory finding that Namli committed money laundering is not permitted as a matter of law; (ii) alternatively, his acquittal raises a strong rebuttable presumption of innocence; and (iii) his acquittal demonstrated the conduct alleged against him does not amount to an offence under Turkish law.

Males J undertook a detailed review of the various English authorities on this issue, this included an analysis of the first instance and Supreme Court decisions in SOCA v Gale [2009] EWHC 1015 (QB), [2011] UKSC 49 in which the defendant's acquittal in criminal proceedings for the offence of drug trafficking in Portugal did not prevent the judge from finding that he was "in no doubt" that the defendant had engaged in unlawful conduct and thus the property derived from this was recoverable property. The appeal to the Supreme Court was rejected and it was held that the civil standard of proof i.e. balance of probabilities did not have to be "read down" to require it to be at the higher standard expected in criminal proceedings when reaching a conclusion that might contradict the acquittal and, neither was this against the presumption of innocence in Article 6.2 of the European Convention of Human Rights. Furthermore the absence of a "procedural link" between the foreign and English proceedings due partly to the difference in evidence to be considered was also a factor; the evidence available in the English proceedings was greater than in the Portuguese trial.

Males J summaried the position of English Law on the matter:

1) An acquittal whether within the UK or abroad is not conclusive as to the defendant's innocence. This would go against the binding authority of Gale;

2) The finding will be based on the balance of probabilities in all civil recovery proceedings. Cogent evidence will usually be required;

3) Though acquittal is not formally a presumption, the defendant may still rely on it as evidence and it is for SOCA to prove its case. The weight placed on the acquittal will be determined in light of the circumstances of the case and evidence as a whole;

4) The weight attributed to the acquittal may be affected by why it was granted i.e. based on the merits of the case or rather procedural issues like "shortcomings in prosecution disclosure"; and

5) It is inappropriate for the English court to challenge the reasoning of a foreign court or to make any criticisms of the foreign court when determining the weight to attribute to the acquittal. The English court should assess all the evidence available to it which will usually be different from what was available to the foreign court. The acquittal might cause the court to "pause and think again before concluding that the defendant's conduct was criminal, but should not ultimately deter it from doing so, if that is the right conclusion on the evidence".

Following this reasoning, Males J decided that due to the evidence he, unlike the Turkish Courts, had the benefit of considering (oral evidence from Namli and other evidence made available to him to consider further allegations of fraud and money laundering by Namli), he would attribute more weight to the evidence than to the acquittal. In addition the judge opined that the Turkish case "did not fail on the ground that what was alleged against him [Namli] was not criminal, but rather that it was not proved". He also rejected Namli and FMB's argument that a finding of unlawful conduct by the jury in the American proceedings would not have taken place had Namli attended trial as they had acquitted Namli's co-conspirator who in fact had been present and tried, and said that as Namli chose not to attend proceedings in the US he therefore could not benefit from any acquittal.

Recoverable Property

Having determined that the activities carried out by the defendants constituted 'unlawful conduct', Males J, based on the defendants' failure to provide satisfactory evidence of a legitimate source of the funds, inferred that these funds were proceeds of unlawful conduct and opined that there was no reason to consider that "tainted and untainted money were mixed together". He therefore had no need to consider the issues arising from a mixed fund of lawful and unlawful proceeds, an potentially important issues which will no doubt be the subject of consideration by a High Court in the future.

Can inferences can be drawn in the context of money laundering?

Males J felt SOCA had not satisfactorily demonstrated that one of the credits constituted money that was the same proceeds derived from one of the frauds Namli and FMB had committed. He did however consider it appropriate to draw and rely on a series of inferences as to the source of the proceeds. The judge relied on certain facts such as for instance that Credit 6 was made by an investment vehicle, Stuart & Associates, owned by Namli and was used to launder the proceeds from FMB's fraudulent conduct but the inferences were mainly based on the poor quality and dearth of explanation provided by the defendants as to the source, he thought "if these were legitimate funds I see no reason why evidence should not have been provided from the Luxembourg bank where Stuart & Associates' account was held, which would have identified the payments into that account and their source". Males J concluded that "it is an appropriate inference to draw on the balance of probabilities...there is no reason to suppose that it represents a credit form a mixed fund consisting of both legitimate and illegitimate money. Credit 6 is certainly a transaction that looks like money laundering and which has not been satisfactorily explained".

Comment

It would therefore appear that the judgment in a foreign criminal case may not have as much influence on the outcome of English civil recovery proceedings as a defendant might think, and would only be a factor which the court would take into consideration in the context of other evidence before the court. Based on this authority, an English judge will be free to deal with issues afresh applying a more holistic approach when considering the evidence before him or her, particularly where more evidence is available than in the primary foreign case. Even a decision as certain and conclusive as an acquittal will only have as much sway as the judge, in his or her discretion, decides it should. Based on Males J's understanding of Gale and a number of other cases, very little restrains the court apart from the formality of observing 'good manners' when analysing the foreign court's judgment in such cases.

The quality of evidence and explanation as to the source of the money swayed Males J considerably in terms of the inferences he was able to draw in the context of money laundering. Following this, it would appear that where there is an alleged money laundering offence, if no rational explanation can be offered as to where money has come from or can be attributed to, Males J's decision would support a finding against the defendant based on inferences and therefore 'if it looks like a duck and walks like a duck, it is a duck'.

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