A Luxembourg bank has come under scrutiny for allegedly playing a “central” role in laundering money from an Azerbaijani embezzlement scheme that funneled tens of millions into European real estate and luxurious lifestyles. According to investigative reports based on insights from the UK’s National Crime Agency (NCA), Banque Internationale à Luxembourg (BIL) and other international entities are allegedly implicated in dubious practices that allowed stolen Azerbaijani funds to end up in Europe’s financial capitals.

The story centers on Jahangir Hajiyev, the former chairman of the International Bank of Azerbaijan (IBA), who was imprisoned for embezzling more than $3.5 billion from Azerbaijan’s most prominent state-owned bank. Under Hajiyev’s 14-year leadership, the IBA became embroiled in widespread money laundering operations, famously known as the “Azerbaijani Laundromat,” where funds were transferred from Azerbaijan to elite accounts across Europe. Yet, as Hajiyev faced legal consequences, questions have now surfaced about the institutions and individuals who allegedly enabled this enormous movement of stolen money.

While Hajiyev’s wife, ZamiraHajiyeva, faced an Unexplained Wealth Order (UWO) in the UK – requiring her to account for her luxury assets, including a high-end townhouse in London and a Berkshire golf club – more attention is now directed at VES Consultancy, a company allegedly run by Hajiyev’s close associate, KhaganiBashirov. According to the NCA, VES Consultancy’s accounts at BIL were “at the heart” of laundering the funds that financed the Hajiyev family’s property acquisitions in the UK.

Luxembourg has long been seen as a financial haven due to its banking secrecy laws and favorable regulatory environment. But its reputation is under fire as investigations reveal its potential role as a conduit for laundering money from the Commonwealth of Independent States (CIS), including Azerbaijan. The NCA’s evidence in the Hajiyev case highlights that Banque Internationale à Luxembourg, one of the country’s major banks, played a substantial role in transferring laundered funds across Europe, allowing VES Consultancy to move at least $175 million between 2011 and 2015.

To date, BIL has not been formally charged with facilitating money laundering. However, the bank faced a €4.6 million fine by Luxembourg’s financial regulator in 2020, following inspections that revealed “weaknesses” in its anti-money laundering controls, particularly for clients from the CIS. BIL denied any wrongdoing and claimed no actual money laundering was detected. The bank has since pledged to strengthen its compliance measures.

Transparency International’s EkaRostomashvili emphasizes that, given the NCA’s findings, Luxembourg’s regulatory oversight needs a closer examination. “Promises to strengthen compliance going forward are not enough,” Rostomashvili said, calling for more stringent oversight on how banks handle high-risk clients from regions known for financial crime.

The NCA’s investigation reveals that BIL’s role may have extended beyond mere oversight failures. According to a 242-page witness statement obtained by the Organized Crime and Corruption Reporting Project (OCCRP), the funds that VES Consultancy moved through BIL originated from various shell companies and ultimately enabled Hajiyev’s real estate acquisitions. VES Consultancy itself was owned by KhaganiBashirov, a French citizen of Azerbaijani descent, who reportedly held hundreds of accounts in Luxembourg to facilitate these transactions.

The NCA alleges that Bashirov’s firm acted as an “enabler” in Hajiyev’s laundering scheme. Through a network of companies and accounts, VES Consultancy allegedly moved money siphoned from the IBA into European assets. The NCA’s findings further suggest that BIL was pivotal in Bashirov’s scheme, providing a secure environment to transfer funds without significant regulatory interference.

In an interview with journalists, Bashirov claimed innocence, portraying himself as a fiduciary merely managing Hajiyev’s funds without knowledge of the money’s origins. He blames BIL for permitting the transactions and asserts that his Luxembourg operations were conducted with full transparency. “If a banker forbids a transaction, I won’t do it,” Bashirov insisted, suggesting that the blame lies with the bank for failing to flag suspicious transactions.

The court evidence uncovered a complex chain of transfers, shell companies, and offshore accounts in various jurisdictions, including Guernsey, Cyprus, and the British Virgin Islands. For example, the Mill Ride Golf Club in Berkshire, which was purchased for £10.7 million, was acquired through a Luxembourg-based company named Semfra. The money first flowed from Azerbaijan through a series of companies associated with Bashirov, including VES Consultancy, before reaching Semfra’s accounts.

The intricacies of these transactions illustrate the global reach of Bashirov’s network, as funds cycled through Luxembourg, the British Virgin Islands, and the United Kingdom. The NCA’s evidence suggests that BIL served as the main channel for this money, often obscuring the true origin and ownership of the funds. This layered structure, according to the NCA, made it difficult for authorities to trace the origin of the wealth back to Azerbaijan.

According to the NCA, Bashirov also leveraged Luxembourg’s fiduciary industry to create and maintain shell companies for his operations. By setting up a fiduciary firm called Fortrust Global in Luxembourg, he allegedly enabled VES Consultancy to create numerous companies and retain full control over their accounting, avoiding external scrutiny. The Luxembourg Chamber of Commerce records show that Bashirov used his influence and connections to bolster his reputation in Luxembourg’s financial elite, further embedding himself in the country’s financial landscape.

The NCA’s investigation into the Hajiyev case highlights the systemic regulatory weaknesses that continue to plague Luxembourg’s financial sector. Despite assurances from BIL and other banks that they have addressed anti-money laundering flaws, many experts argue that Luxembourg’s financial infrastructure remains susceptible to exploitation by high-risk clients from CIS countries.

The ramifications of the NCA’s findings have already led to forfeiture orders against Hajiyev’s assets in the UK Earlier this year, a court concluded that the properties purchased by Hajiyev’s family were funded through criminal activities. Hajiyev’s wife agreed to surrender the assets, though the court refrained from making any rulings on BIL’s alleged involvement in the embezzlement scheme.

Bashirov, on the other hand, faces criminal charges in Luxembourg for money laundering, forgery, and professional misconduct. He has characterized these charges as “absurd” and claims they represent a bias against him by Luxembourg authorities. Bashirov maintains that he is being unfairly targeted for activities he insists were lawful, asserting that no other country besides Luxembourg has taken legal action against him.

The NCA’s investigation raises significant concerns about Luxembourg’s regulatory framework and the accountability of its financial institutions. While BIL claims it has since improved its anti-money laundering processes, experts argue that more needs to be done to prevent financial crime in jurisdictions like Luxembourg, where regulatory leniency can sometimes accommodate illicit money flows.

As regulatory bodies worldwide work to combat financial crime, the Luxembourg case exemplifies the challenges they face in monitoring vast, interconnected financial networks. For Hajiyev and other politically exposed individuals, a web of international banks, fiduciary services, and shell companies facilitated the movement of stolen assets into secure havens, where the funds could be laundered into properties and other assets without significant oversight.

The court rulings in the UK may mark a pivotal step toward greater transparency in international financial dealings, but experts say it remains to be seen whether Luxembourg and its banking sector will implement the sweeping changes needed to prevent further money laundering.

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