UK ‘fails to freeze’ Mubarak-era assets
By Tim WhewellBBC Newsnight
The UK government is failing in its commitment to freeze assets of the regime of former Egyptian leader Hosni Mubarak, a BBC investigation has found.
Publicly available documents reveal property and companies linked to key figures in the Mubarak circle that have been unaffected by sanctions.
Egyptian officials accuse the UK of hiding stolen wealth and breaching international anti-corruption accords.
The UK says it is doing as much as it can to trace the funds.
Reports that President Hosni Mubarak and his inner circle stole tens of billions of dollars helped fuel the revolution which overthrew him on 11 February last year.
The British government is obliged by law to help us”
Assem al-GoharyHead of Egypt’s Illicit Gains Authority
Three days later, UK Foreign Secretary William Hague told parliament the UK would co-operate with an Egyptian government request to freeze the assets of several former officials.
But it was a further 37 days before Britain and other EU states applied the sanctions – a period when Egypt says the accused officials were able to move their money elsewhere.
About £85m ($135m) of assets belonging to Mr Mubarak, his wife, two sons, and 15 other Egyptians have now been frozen in the UK.
But the BBC investigation found assets that have apparently been missed.
The publicly accessible Companies House register reveals that one of those named on the sanctions list, Naglaa al-Ghazaerly, wife of the former housing minister, was able to register a company in her own name in London in November 2011, seven months after her assets were ordered to be frozen.
Another similar document shows that a London investment company, Medinvest Associates, co-founded by Mr Mubarak’s younger son Gamal, and still belonging to a Cypriot firm he helped run, continued operating until it dissolved itself, voluntarily, in February this year – 11 months after sanctions were imposed.
Meanwhile there is no indication on Land Registry documents of any freeze on the large house worth between £8m and £10m in Wilton Place, off Knightsbridge in London, that was Gamal Mubarak’s UK home for many years until the Egyptian revolution.
He listed the house as his address as recently as 2010, when it appears on the birth certificate of his daughter Farida.
The house is registered to a company in the tax haven of Panama. But in international practice, sanctions should apply to any assets of which the named individual is the “beneficial owner” – the person who enjoys the benefit of them, even if the title is in another name.
Britain has accepted official requests from Egypt for legal assistance to help trace and freeze assets. But Egypt says the UK is asking for more information before it can proceed further – information Egypt says it does not have.
It is crucial that the recovery and return of stolen assets is lawful”
Alistair BurtUK Foreign Office Minister
Assem al-Gohary, head of Egypt’s Illicit Gains Authority said: “The British government is obliged by law to help us. But it doesn’t want to make any effort at all to recover the money. It just says: ‘Give us evidence’. Is this reasonable? We are in Egypt, looking for money in the UK.”
The Foreign Office says it has passed all information received from the BBC to relevant authorities, but cannot comment further on individual cases.
Foreign Office Minister Alistair Burt said: “We understand the strength of feeling in Egypt on this issue and are working closely with their authorities to identify and restrain assets their courts have identified as stolen.”
But he added: “It is crucial that the recovery and return of stolen assets is lawful. It is simply not possible for the UK to deprive a person of their assets and return them to an overseas country in the absence of a criminal conviction and confiscation order.”
He said Britain could not have acted more quickly to freeze assets because such an order cannot be made on the basis of suspicion alone, and it took time to agree a freeze with all 27 EU states, as was necessary.
The UK is one of the worst countries when it comes to tracing and freezing Egyptian assets”
Mohamed MahsoubEgyptian Legal Affairs Minister
The UK’s approach contrasts with that of Switzerland – once known as an easy place to conceal money – which froze the assets of Mubarak and his associates within half an hour of his resignation last year.
The Swiss Federal Prosecutor Michael Lauber told the BBC he had a team of more than 20 police investigators tracing suspected illicit Egyptian assets.
The total amount frozen has risen from CHF410m (£270m) in February 2011 to about CHF700m (£470m) now – while the amount frozen in the UK has not risen since last year.
Egypt’s new Legal Affairs Minister Mohamed Mahsoub said: “The UK is one of the worst countries when it comes to tracing and freezing Egyptian assets.”
But he said Egypt itself, where elements of the old regime are still influential, had also failed to investigate adequately.
Scandal of Mubarak regime millions in UK
Investigation puts British government under spotlight for allowing members of former Egyptian dictatorship to retain assets in UK
- guardian.co.uk, Sunday 2 September 2012 20.28 BST
Britain has allowed key members of Egypt‘s toppled dictatorship to retain millions of pounds of suspected property and business assets in the UK, potentially violating a globally-agreed set of sanctions.
The situation has led to accusations that ministers are more interested in preserving the City of London’s cosy relationship with the Arab financial sector than in securing justice.
Hosni Mubarak, the ousted former president, was sentenced to life in jail in June. A six-month investigation, conducted by BBC Arabic and released in conjunction with the Guardian and al-Hayat, a pan-Arab newspaper, has identified many valuable assets linked to his family and their associates that have not been frozen.
These include luxury houses in Chelsea and Knightsbridge and companies registered in central London. One member of Mubarak’s inner circle has even been permitted to set up a UK-based business in recent months, despite being named on a British Treasury sanctions list (pdf) of Egyptians who are linked to misappropriated assets and subject to an asset-freeze.
In response to the investigation, the Foreign Office said it was working closely with its Egyptian counterparts to hunt down Mubarak regime assets. The Treasury, which has a dedicated unit tasked with implementing financial sanctions, said it was confident it had acted properly. Both departments said they could not comment on individual cases.
The revelations will embarrass British ministers, who have previously expressed support for the Arab uprisings and vowed to take “decisive action” to track down and return illicit funds taken out of Egypt.
Yet 18 months on from the downfall of Mubarak, publicly-accessible records from Companies House and Land Registry indicate that the fortunes of regime figures convicted of embezzling money from Egypt remain at least partially on UK soil and untouched by British authorities.
The problem is compounded by the apparent lack of political will in Egypt when it comes to chasing former regime assets – a situation which some experts attribute to the continued influence of major players from the Mubarak era.
Egypt’s government is currently pursuing a lawsuit against the UK Treasury for dragging its heels on asset recovery.
“This is a collective crime from both the British and Egyptian governments,” said Dr Mohamed Mahsoob, a public investigator who led enquiries into Egypt’s “stolen billions” and who has since been appointed to the country’s new cabinet.
“The UK is one of the worst countries when it comes to tracing and freezing Egyptian assets,” he said.
“The British are saying that they need official requests from the Egyptian government before they take any action and that until this happens they are allowing the free movement of assets and the closure of certain accounts of companies beyond UK borders, to be reinvested elsewhere under different guises in order to prevent it from being retrieved.
“This is pure political profiteering that doesn’t reflect the concept of British justice and democracy that we teach in Egyptian universities.
“The UK is doing nothing less than bleeding Egyptian assets, which can only be to the detriment of the Egyptian nation.”
An aggressive free-market reform programme instituted by the Mubarak regime in the 1990s and 2000s saw previously state-owned companies and landholdings shift into the hands of private businessmen at an astonishing rate. Prominent “big sharks” within the ruling NDP party – including Mubarak’s playboy son and assumed successor Gamal – amassed huge riches. Popular anger with the scale of corruption was a driving force behind Egypt’s revolution.
As political shockwaves from Egypt’s upheaval spread throughout the region, Britain’s political leaders scrambled to realign themselves with the revolutionaries.
David Cameron declared that the UK government was a friend of the Egyptian people and ready to “help in any way we can”.
Three days after Mubarak’s downfall, with popular pressure to recover Egypt’s ‘stolen billions’ mounting in the street, the interim government in Cairo requested that western authorities freeze the assets of several former regime members who were suspected of embezzling public funds and hiding them in property and business interests.
William Hague, the foreign secretary, told MPs the request would be co-operated with, and government ministers promised “firm, decisive and prompt action”.
Yet although Switzerland took only half an hour to begin freezing Egyptian regime assets following Mubarak’s overthrow, the UK took 37 days to follow suit – a delay which critics say could have allowed assets to be liquidated and illicit funds to be moved offshore.
And while Switzerland has frozen almost £500m of suspect Egyptian assets, the UK has frozen less than a fifth of that and returned none of it to Egypt.
Meanwhile nearly half of Egypt’s population lives below the poverty line, and the country’s government has just agreed a controversial £3bn loan with the IMF to help stabilise its economy.
Professor Mark Pieth, one of the world’s leading authorities on cross-border asset recovery, said the revelations were not surprising.
“As a citizen I would be outraged,” he told the BBC. “But as a lawyer I would say it doesn’t astonish me that much because I’m not sure that the rules on so-called PEPs [Politically Exposed People] are really fully implemented in the UK. The state is not bending over backwards yet to help.”
He added: “Egypt had a strong relationship to the west, and quite a strong relationship to the UK for that matter.
“I’m thinking especially of all sorts of Arab banks with their subsidiaries in the City of London. If you go for a walk in the City you can see them – I’m pretty sure that Egyptian cronies of the Mubarak family and members of that system felt quite comfortable depositing money in the UK.
“It’s probably cosier to bring your money to your friends at an Arab bank in the City of London.
“[For the British government] Egypt’s military generals are probably still a guarantor for safety whereas the new parliament and the new president are probably looked on with reservation.
“I would expect Britain is careful not to squarely go against the remnants of the old regime.”
Public records show a number of apparently unfrozen UK-based assets linked to Egyptian regime figures, some of whom are now in jail in Cairo for economic fraud. Gamal Mubarak was on a list published by the Treasury in March 2011 detailing 19 Egyptians whose assets were to be frozen.
Yet MedInvest Associates, a London-based investment firm of which Gamal was a director, has never been frozen. Gamal subsequently stepped down as director and in February MedInvest was quietly dissolved voluntarily, potentially allowing its assets to be transferred abroad beyond the reach of investigators.
Gamal Mubarak is also heavily linked with a £10m London home round the corner from Harrods department store.
The Knightsbridge house is named as Mubarak’s place of address in his company filings for MedInvest and listed as the Mubarak family home on the birth certificate of Gamal’s daughter, born in London in 2010.
But the property has not been frozen for investigation. Gamal is now in jail in Cairo, awaiting verdict on money laundering charges.
Another figure on the Treasury’s sanctions list has actually been allowed to open a new business in the UK. Naglaa el-Ghazarley, wife of former tourism and housing minister Ahmed el-Maghrabi – now serving a five-year jail sentence in Egypt for corruption – registered Essential Designs by Nejla last November, almost eight months after the UK promised to freeze her assets.
The company’s registered address in Chelsea also remains unfrozen. Tim Daniel, a lawyer specialising in asset recovery, said it was “extraordinary” that someone on the sanctions list could begin trading in the UK in this way.
Judge Assem el-Gohari, the official in Egypt’s ministry of justice responsible for tracing stolen funds, insists that he has challenged the UK authorities over their inaction, but was told in response that British investigators need more information to proceed.
“The British government is obliged by law to help us but it doesn’t want to make any effort at all to recover the money. It just says: Give us evidence. Is that reasonable?
“We’re in Egypt. How can we search for money in the UK? We believe the UK has breached international law and the anti-corruption agreements.”
Alistair Burt, minister for the Middle East and North Africa, denied Britain was not doing enough. “We are working closely with their [Egypt’s] authorities to identify and restrain assets their courts have identified as stolen,” he said.
“It is crucial that the recovery and return of stolen assets is lawful. It is simply not possible for the UK to deprive a person of their assets and return them to an overseas country in the absence of a criminal conviction and confiscation order.
“We are therefore working closely with the appropriate authorities in Egypt to help them understand the legal process and how to work with it effectively and efficiently, including through expert-to-expert contacts in the UK and Cairo, the signing of a memorandum of understanding on intelligence sharing with the Egyptian financial intelligence unit, and increased police-to-police intelligence co-operation.”
Andy Slaughter, the shadow justice minister, said the evidence unearthed by the investigation showed that the UK government is “effectively turning a blind eye” to money stolen from the Egyptian people.
“Twenty minutes work by officials could have identified very substantial assets belonging to the old Egyptian regime. We used to be a place where international justice was seen to be done, and now we’re turning a blind eye to every type of abuse,” he said.
• Egypt’s Stolen Billions will be broadcast on BBC2’s Newsnight on Monday and on the BBC Arabic channel for the next two weeks
Sanctions and the law
The international community uses financial sanctions to try to shape the behaviour of specific regimes and individuals, as well as to stop funds from slipping into terrorist hands and prevent those suspected of economic fraud from squirrelling their fortunes away beyond public reach.
Sanctions are imposed at a supranational level by either the UN (under Article 41 of the UN charter) or the EU (under Article 11 of the Treaty of the EU), though in practice each nation retains its own set of legal procedures when it comes to setting and implementing sanctions and the energy with which they go about their task often depends on political will.
With its huge financial centre and valuable property market, London is a global magnet for international assets, meaning that the British authorities are regularly called into action when sanctions are applied.
The UK foreign office is responsible for setting overall policy regarding sanctions while a dedicated unit in the Treasury implements the sanctions themselves – usually by contacting private financial institutions like banks and investment funds and asking them to freeze relevant assets.
The official British sanctions list (pdf) is constantly updated and currently runs to 74 pages, listing everyone from al-Qaida fugitives to Congolese warlords and North Korean politicians.