Ilham Aliyev is banking
An investigation by Azattyk’s Azerbaijani service has establishedthat banks controlled by the family of an autocratic president Ilham Aliyevhave nearly tripled their market share to 43 percent since 2015, when the government devalued the national currency.
20 years ago, power in Azerbaijan passed from an autocratic president Heydar Aliyev to his son Ilham. During this time his relatives became owners of huge fortunes through government contracts in industries such as natural resources, airlines and construction. Another source of large income for the family of the Azerbaijani president was banking sector: Aliyev’s daughters and other relatives control billions of dollars in assets through private lending institutions. Azattyk’s investigation showed that the influence of their banks is steadily growing.
Since 2015, four banks fully or partially controlled by the Aliyev family have tripled their market share in the country, even as the devaluation of the national currency, the manat, as a result of a sharp drop in oil prices, has hit household savings hard and created public panic.
PASHA Bank, Kapital Bank, Xalg Bank and Eurasia Bank became the largest credit institutions servicing loans under the state business development program for hundreds of millions of manats.
The value of assets of Aliyev-linked banks jumped from four billion manats ($5.1 billion at pre-devaluation rates) in 2015 to 20 billion manats ($11.8 billion at current rates) at the end of 2022, according to an RFE/RL investigation that based on financial statements of the banking sector.
According to Azerbaijani antimonopoly law, a market share above 35 percent is considered dominant and can be regulated, but in practice this has never happened, the economist says Natig Jafarli. The total market share held by these banks exceeds that of state-owned credit institutions, which has fallen from 38 percent in 2015 to 30 percent currently.
At the same time, more than 20 competitors left the market after the devaluation of the manat and the decision of the Azerbaijani Central Bank in January 2015 to raise the required minimum capital for working in the banking sector five times – to 50 million manat ($64 million).
The sharp growth of banks associated with Aliyev over the past eight years can be attributed to the consequences of devaluation, but these banks are absorbing assets much more actively than their competitors. In addition, they received cheap government loans to support businesses, which allowed these banks to make money by issuing loans to the population.
Banking analysts believe that the state gave preference to the Aliyev banks to the detriment of competitors with fewer political connections, resulting in a de facto oligopoly: entrepreneurs and the population have less choice in obtaining loans and loans cost them more.
Aliyev, 62, came to power in 2003 and has since increased his control over the country, rich in oil and gas resources.
He recently announced early presidential elections on February 7, which he is certain to win given the political situation in Azerbaijan and laws that restrict fundamental rights and freedoms. The president of the country is elected for seven years, the number of terms is unlimited.
Azerbaijan ranks 157th out of 180 in Transparency International’s Corruption Perceptions Index. The US State Department stated that “the country’s economy is dominated by a small group of companies associated with the national government.”
RFE/RL contacted all four banks close to Aliyev for comment. At the time of publication, a response was received only from Kapital Bank. It notes that the growth of assets is associated with the expansion of online services and other technical innovations. When asked about issuing loans through the State Entrepreneurship Development Fund, the bank advised contacting the “relevant government agencies.”
For some everything, for others everything else
In October after 20 years of work closed Baku bank Muganbank. The Central Bank of Azerbaijan revoked his license “due to violation of capital adequacy requirements.” Five months earlier in a similar situation Gunay Bank ceased to exist.
A total of 22 banks have closed over the past eight years, largely due to tightening capital requirements and a currency crisis caused by falling oil prices. This is almost half of the 45 banks operating in Azerbaijan at the beginning of 2015.
Ali Alirzayev, former chairman of the parliamentary committee on economic policy and a member of the ruling New Azerbaijan party, in a conversation with RFE/RL, called this the normal course of things: “Companies must adapt to a dynamically developing market economy. There is nothing to analyze or throw around accusations here – this is the law of the market. We shouldn’t cling to statistical figures and say that if there used to be 45 banks, then there should always be 45.”
As a result of consolidations over the past decade, three of Azerbaijan’s five largest banks—PASHA Bank, Kapital Bank and Xalq Bank—have come under the control of Aliyev’s two daughters and a relative of the first lady, Mehriban Aliyeva, who has served as the country’s first vice president since 2017.
In the audited financial statements of all three banks, the ultimate owners are indicated Leyla and Arzu Aliyev, as well as father Mehriban Arif Pashayev. The co-owner of PASHA Bank and Kapital Bank is Mehriban Aliyeva’s cousin Jamal Pashayev.
The shares in both cases are registered through PASHA Holding, one of the country’s largest conglomerates with assets in the financial, construction and tourism sectors, or through branches and other companies.
The fourth bank controlled by the Aliyev family, Bank Eurasia, does not disclose the ultimate owners, but RFE/RL has learned that PASHA Holding owns a 37.5 percent stake in it through the PMD Group. Another 25 percent of the shares belongs to Azbiznescom, the legal representative of which is former Tax Ministry employee Ashraf Kamilov, associated with the Aliyevs’ secret offshore empire, according to Pandora Papers leak.
Various journalistic investigations, including by the Azerbaijani edition of RFE/RL, have established that Aliyev’s close relatives own many assets abroad – often through secret offshore companies with the participation of close associates.
In 2021, the Organized Crime and Corruption Research Project (OCCRP), based on a study of the Pandora Papers, established that Aliyev’s relatives and their partners were using offshore companies secretly purchased property in England – mainly in London – worth about $700 million.
Aliyev unexpectedly commented on the results of this investigation, saying in an interview with the Italian newspaper La Repubblica: “I did not read what is written in the documents. I was told, and there is perhaps five percent truth. The rest is a lie.”
Aliyev emphasized that he stopped doing business after being elected to the presidential post: “We in Azerbaijan give preference to family values. That’s why I handed over my entire business to my children. They, making efforts, continue the business. Their investments are mainly in Azerbaijan. They have investments outside Azerbaijan.”
The market dominance of Aliyev-linked banks is even more pronounced if state-owned banks are excluded from the calculations: in this case, their accumulated assets of $12 billion by the beginning of 2023 amount to 63 percent of the entire private banking sector. The total profit of these banks in 2022 reached 486 million manat ($285 million), according to the Azerbaijani Central Bank, and in 2023 – 500 million manat ($294 million).
Lawyer Akram Hasanov, who works in the banking sector in Baku, in an interview with RFE/RL, pointed out a direct connection between Central Bank loans at the beginning of the crisis and the rapid growth of banks associated with Aliyev.
“The central bank gave them cheap loans” for several years before the 2015 devaluation. At the same time, other banks did not receive such loans, and the procedure for issuing them was not transparent, says Hasanov. He notes that in April 2022 he discussed the problem of favoritism with the head of the Central Bank, Taleh Kazimov, who previously headed PASHA Bank. He insisted that bank loans were distributed evenly.
The Central Bank of Azerbaijan did not respond to RFE/RL’s request for specific loans and conditions for issuing them. However, the former head of Gunay Bank, Mahmud Mammadov, spoke in the press with criticism of the Central Bank shortly before it revoked his license in May 2023: “There were banks that were allocated loans in the amount of 500-600 million manats, but we felt sorry for giving them a loan of even one or two million manats.” Mammadov did not respond to RFE/RL’s request for comment on this statement.
Loans are cheap and not cheap
The Aliyev banking empire is responsible not only for paying salaries to civil servants and accepting payments for utility bills, but also issues government-financed loans to entrepreneurs. At the end of 2022, the Entrepreneurship Development Fund (EDF) under the Ministry of Economy of Azerbaijan issued preferential loans in the amount of 952 million manats ($560 million), of which 699 million manats ($411 million) were loans to banks.
According to the financial statements of banks associated with the Aliyevs, the rate on loans to entrepreneurs and other borrowers was five to seven percent, while they themselves received loans from the FPP at one percent. By the end of 2022, more than half of FPP loans were issued through Aliyev-linked banks.
The total income from various loans issued by Azerbaijani banks in 2023 amounted to three and a half billion manats (two billion dollars), according to the country’s Central Bank. The Aliyev banks account for 38 percent (1.3 billion manats, or $765 million).
Some entrepreneurs say they are not receiving preferential loans and express dissatisfaction with the issuance criteria. Shahin Najafov lives in Baku and owns a farm in Shamkir in the west of the country. He says that for six months he sought a preferential loan from the bank, but was refused because the bank demanded collateral property in Baku: “I am a rural farmer, why should I have property in Baku? It turns out that I, as an entrepreneur, cannot get a loan because of this?”
Another farmer, Geibulla Mammadov from the village of Rustov, Guba region, also complains that neither he nor his neighbors received preferential loans. He says he has been trying to get it for a year and a half, but so far without success.
Economist Allahverdi Aydin notes that interest rates could become an additional problem. According to the Central Bank, the average rate on consumer loans is 16 percent, but independent experts believe that it is higher. The population is already experiencing difficulties with loan payments, and the monopoly that has developed in the market will only create additional problems for them, Aydin believes.
Ilham Aliyev’s family owns real estate in London worth almost $700 million
A whole network of offshore companies, supervised by the corporate services provider Trident Trust, helped the Aliyevs secretly dispose of expensive real estate in the British capital under the cover of a narrow circle of formal owners.
For centuries, London has been one of the world’s most popular destinations for lovers of expensive shopping, gourmet cuisine and comfortable living. The construction boom in recent decades has only added to the city’s attractiveness.
Tourists and locals alike enjoy new-fangled “molecular gastronomy” at Hibcus restaurant, shop on the charming pedestrian Sicilian Avenue, and stop for a glass of Guinness at the 19th-century Gothic-style Bloomsbury Tavern.
Housing estates with names such as Knightsbridge and Thornwood Gardens have sprung up close to Harrods and the world-famous Hyde Park. Sales at these complexes are in the tens of millions of pounds and sometimes make national news.
At the same time, the mentioned famous buildings are united by something that neither passers-by enchanted by them, nor even seasoned local reporters writing for the “Real Estate” column are aware of: they are owned or owned by people from the closest circle of Azerbaijani President Ilham Aliyev, known for his dictatorial style of rule.
Aliyev’s two daughters, his son, father-in-law and two close family associates controlled London real estate, whose value reached an incredible amount of 429 million pounds sterling ($694 million). The objects include significant historical buildings, commercial complexes and luxury apartments in prestigious neighborhoods.
Ownership of this real estate empire was carefully hidden for many years behind the screen of offshore companies with faceless names like Sheldrake Six and Fliptag Investments.
But thanks to the Pandora Archive, a new leak of offshore documents obtained by the International Consortium of Investigative Journalists (ICIJ) and provided to OCCRP and other media outlets, journalists have been able to lift the veil of secrecy that surrounds these companies.
In total, OCCRP discovered 84 previously unknown offshore companies registered in the British Virgin Islands (BVI), which the Aliyevs and their associates owned since 2006.
Apparently, the companies were managed “comprehensively”: over and over again, data emerged in the leak that these companies in groups filed documents or changed directors on the same day. It was not uncommon for the same group of individuals to succeed each other as their shareholders and directors.
Several companies were established during Ilham Aliyev’s first presidential term, which began in 2003. He is now in his fourth term; Aliyev heads an increasingly harsh autocratic regime built on criminal prosecution of journalists, lawyers, civil activists, election fraud and endemic corruption.
His son Heydar started his first offshore company when he was in elementary school. His daughter Arzu, who studied psychology in London, received her offshore as soon as she turned 19 years old.
Although the Aliyev companies declared their goals in vague terms, such as “opening an account” or “trading in Azerbaijan and Europe,” one thing was clear: many of them managed numerous properties throughout the British capital and beyond.
The sources of money for the purchase of a significant part of this real estate are hidden in documents that, it is possible, will never become publicly available. These means may or may not be legal, and those involved in acquiring the objects may have little or no knowledge of their origins. Further investigation will be required to draw definitive conclusions on this issue.
However, journalists found that at least eight Aliyev companies received millions of dollars from giant payment and laundering schemes previously uncovered by OCCRP: “Azerbaijan Laundromat”, “Russian financial mega-laundromat” And “Laundromat Troika”. The origin of this money is also unclear; Both legal and illegal capital migrated through the channels of these schemes.
Although some of these offshore companies have been closed in recent years and some of their properties sold, as of 2017 the Aliyevs had transferred properties worth £125 million ($191 million) to a secret trust fund established and controlled by the father-in-law of the Azerbaijani president.
One of these objects was sold in 2018, but the latest data from the Pandora Archive about this circle of companies dates back to this year, and there is no other information.
President Aliyev’s office did not respond to requests for comment for this article. There was also no response from the children of Ilham Aliyev – Leyla, Arzu and Heydar.
“Permanent increased control?”
The Aliyevs’ rule in Azerbaijan began with Heydar Aliyev, the father of the current leader, who also led the Azerbaijan SSR, and in 1993, two years after the republic gained independence, became its new head.
Heydar Aliyev was an authoritarian president, under whom Azerbaijan began to turn into a corrupt, oil-dependent state. But people familiar with the country’s recent history say the regimes are different.
“What I’m saying is that, essentially, they’re serving their own interests.”
The situation changed soon after Ilham Aliyev took the presidency in 2003. A few years later, his youngest daughter, 19-year-old Arzu, was already a co-owner of the offshore company Strahan Holding and Finance with an account in a Swiss bank. The company bought three apartments for a total of 5.1 million pounds ($9.7 million) in London’s elite Knightsbridge area.
The person of the presidential daughter should have immediately caused increased attention and control in Trident Trust, a firm providing offshore corporate services, which opened this company for her.
However, Trident Trust ordered a financial and legal audit of Arzu Aliyeva, apparently only three years later, in 2009. The inspectors’ report, which is included in the leaked materials, explains why any finances associated with this young lady should have been considered potentially suspicious.
The report also states that “if a client wishes to establish a relationship with Arzu Aliyeva… then any transactions involving her should be subject to constant, enhanced monitoring and verification.”
However, by that time business relations between them had long existed: Trident Trust managed to establish at least 16 offshore companies for Arzu Aliyeva. In addition to the three apartments mentioned in the Knightsbridge area, these companies have already purchased a penthouse in the same building plus a large commercial real estate in Romania.
If the report made the Trident Trust consider whether to continue working with the Aliyev family, this did not manifest itself in reality. In the same 2009, the company acquired new clients in the person of Arzu’s older sister Leyla and their 11-year-old brother Heydar: Leyla became the owner of the company (it was also administered by Trident), which owned a spacious office building near the famous Regent Street in London , and young Heydar was the “landlord” of premises for Michelin-starred restaurants, an art gallery and the head office of the media company Conde Nast.
In response to journalistic queries, a Trident Trust spokeswoman wrote:
By 2010, OCCRP and other media outlets were already discovering significant assets among Ilham Aliyev’s children. Those articles about offshore commercial conglomerates, mining interests and telecoms stood in stark contrast to their apparent efforts to express themselves in the arts and media.
In 2010 The Washington Post wrotethat Azerbaijani citizens with the same first and last names as Aliyev’s three children own real estate in the UAE worth $75 million.
Information that emerged later from the Panama Papers and other investigations pointed to Arzu and Leyla Aliyev as the owners of more than a dozen shell companies in different jurisdictions. These companies owned luxury real estate in European capitals, three telecom operators (which allowed the Azerbaijani authorities to spy on their citizens), shares in the construction and banking conglomerate AtaHolding, and a gold mine.
Arzu Aliyeva studied psychology in London and has produced several documentaries. She is now the president of a production company in Baku; Otherwise, little is known about her life.
Her older sister Leila married a Russian pop singer and lived in Moscow for several years, where she founded a glossy cultural magazine. It was reportedthat she was also a film producer, tried her hand at art, served as vice president of a charitable foundation, and even wrote an ode in memory of her late grandfather, which was included in an elementary school textbook.
Less is known about Heydar Aliyev Jr., his father’s likely successor. In 2018, he graduated from the Azerbaijan Diplomatic Academy, the head of which is his mother’s uncle.
If the children of President Aliyev received their impressive assets from their father, then this can hardly be called legal income. Before becoming president, Ilham Aliyev was vice president of the Azerbaijani state oil company SOCAR. His current income as the country’s president is unknown; the last data on his salary was published in 2015 – it was approximately $230 thousand per year.
Business partners
The young age of Aliyev’s children, their lack of experience in business, as well as the amount of their father’s official income involuntarily make us think about the origin of their more than serious capital.
Neither Ilham Aliyev nor his wife Mehriban have ever declared their commercial assets; the law of Azerbaijan does not oblige them to do this, although some candidates for the presidency of the republic voluntarily provided such information about themselves.
Trying to explain the sources of the Aliyevs’ wealth, journalists spent years studying the connections between them and the oligarchs who became rich during the reign of Ilham Aliyev.
The search led to two key figures from among the former functionaries of the tax ministry. We are talking about Fazil Mamedov and Ashraf Kamilov, connected to the presidential family through the commercial conglomerate AtaHolding with assets worth hundreds of millions of dollars in banking, construction, insurance and other industries.
In the Panama Papers investigation OCCRP revealedthat the business founded by Mamedov and later headed by Kamilov arose several months before the elections that consolidated Aliyev’s power. OCCRP also described how Mamedov invited members of the Aliyev family to join his company, which formed a powerful commercial and political partnership. Plans for a secret fund
Judging by the leaked documents, President Aliyev’s wife, Mehriban, became one of two fund managers, along with Mamedov.
Among other things, a draft document surfaced, according to which the fund’s beneficiaries were supposed to include the son of President Heydar (he was only six years old at the time), the president’s still very young daughters, as well as Kamilov and Mamedov’s son. However, it is unclear from the available documents whether this scheme was actually implemented.
So, although it is impossible to clearly judge the sources of the Aliyevs’ wealth, it is clear that their financial “achievements” are closely intertwined with the successes of AtaHolding and its creators.
At the same time, new data from the Pandora Archive indicates that Kamilov was more closely connected with the Aliyevs’ offshore empire than anyone expected.
It appears in 35 of the 84 offshore companies studied for this article. In ten of them, he and members of the presidential family are shareholders. In three cases, it was Kamilov who acquired companies in the BVI, bought valuable real estate through them, and then transferred it to the Aliyev family. Another important figure was Gafar Gurbanov, a former official of the Ministry of Taxes, who was also the president of AtaHolding. He was listed as a director of most of the 84 related offshore companies mentioned. (As his fame in the business world increased, he was replaced in these structures by his brother Adnan, and later by Mamedov’s nephew.)
In many cases, nothing is known about the activities of these companies, however, judging by documents from the company that handled their affairs, Trident Trust, some of them were opened to open bank accounts in Switzerland and the Czech Republic. Others presented themselves as investment or trading entities. And only a few owned real businesses in Azerbaijan.
It is certain that some of these “offshores” had valuable assets: we are talking about dozens of real estate properties (almost all in London), the total value of which reached 429 million pounds sterling ($694 million). According to registration data, the lion’s share of the properties were bought in cash.
Acquisitions sometimes turned into oddities. For example, Heydar Aliyev found himself the owner of four buildings on Maddox Street in the fashionable Mayfair district when he was only 11 years old.
The most expensive property in the hands of Aliyev’s relatives was a commercial complex on Conduit Street, bought by Kamilov for 35.5 million pounds ($58.8 million) and a few weeks later re-registered to Arzu Aliyeva, then 22 years old.
And the largest asset owned by the offshore network of companies was the Holborn Links commercial building complex worth 208 million pounds ($343 million), occupying several blocks in central London. The buildings include the historic Bloomsbury Tavern pub, and the British Museum is just steps away. Before the sale in 2016, this complex was managed by a company owned by Kamilov.
Laundromat trenches
In most cases, the documents from the Pandora Archive do not contain information about how money came into the offshore empire of the Aliyevs and their associates.
However, there is information that in 2013, Perez International, which later bought Holborn Links, received more than $1.2 million from Westburn Enterpres, one of three shell companies that were the main links of the Russian Financial Laundromat (or the Russian Laundromat”). About twenty billion dollars passed through this shadow payment and laundering scheme.
Three of Kamilov’s other companies also received money from Westburn, ultimately securing $16.6 million in payments from the Russian mega-laundromat.
Another key company of the “Russian Laundromat” transferred $6.1 million to the offshore Quandu Finance, which bought a townhouse for 29 million pounds ($47 million), which was re-registered to Ilham Aliyev’s father-in-law.
Another BVI company, co-owned by Gurbanov, received almost $800,000 from a shell company from an account in the Lithuanian Ukio Bank, which served as part of the Troika Laundromat, another laundering scheme uncovered by OCCRP in 2019.
As is standard practice for Laundromat machines, these payments were designated as “equipment” or “construction equipment,” despite the extremely low likelihood that these shell companies actually bought or sold any of the items.
Transactions of two more companies from the “commercial network” of Aliyev’s associates also raise questions.
From late 2010 to mid-2011, two of Kamilov’s BVI companies, EZE Investment and Gigaworks Holding, received more than $5.2 million from two shell companies registered in Panama and Hong Kong. The purposes of the transfers ranged from payments for “passenger cars” to payments for “construction materials” and “cosmetics”.
The information was among documents on more than 750,000 bank transactions obtained by OCCRP under the Freedom of Information Act related to the 2016 investigation and prosecution of Reza Zarrab. This holder of Iranian and Turkish citizenship pleaded guilty to money laundering in violation of US sanctions against Iran and other crimes.
Less than three months after receiving the tranche for the cosmetics, Gigaworks Holding bought a townhouse at 33 Ovington Square, a luxurious green spot in central London, for $28.8 million.
Neither Gurbanov nor Kamilov responded to questions about the real purpose of their business operations.
Family trust “piggy bank”
Continuous multi-year asset accumulation appears to have peaked around 2015. Then a financial crisis began in Azerbaijan against the backdrop of falling oil prices and a strong depreciation of the national currency. Ordinary Azerbaijanis suffered the most from the crisis, but even among the elite there was a struggle for a piece of the shrinking pie. A few years later, AtaBank, one of the key structures of AtaHolding, declared bankruptcy.
It seems that the crisis also affected the offshore empire of the Aliyevs and their associates. Many of their companies went out of business, apparently becoming unclaimed.
They also sold three of their commercial assets, including the huge Holborn Links complex.
However, they didn’t sell everything. Kamilov and Gurbanov retained a significant part of the assets. In turn, the Aliyevs transferred $191 million in real estate, including a luxury apartment in the Knightsbridge area (which appears to have served as housing for the president’s daughters), into a secret family trust. It was administered in the Isle of Man.
Apparently, in order to hide traces of real estate, the companies that owned these objects were first acquired by Ilham Aliyev’s elderly father-in-law Arif Pashayev, who is now 87 years old. He then transferred them to another company whose sole purpose was to buy the properties and transfer them to a trust. Pashayev did not respond to requests for comment.
As a result of such combinations, the impression was created that the property had been disposed of. If not for one document found by journalists in the Pandora Archive, this property would have disappeared from public view and disappeared into a trust, the details of which are reliably hidden by the strict laws of the Isle of Man on corporate secrecy. However, Pashayev filled out a declaration on the Trident Trust form when he transferred the property, estimating the value of the trust’s assets at £100 million and indicating that he was the source of these funds. At this point, the trace of the property is lost.
In one of the latest documents in the Pandora Archive specifically relating to the Aliyevs and their associates, the Trident Trust requests additional information about Arzu Aliyeva from her representatives:
“We will require the following documents to satisfy the internal requirements for enhanced financial and legal due diligence: letter of recommendation from the bank, professional reference, resume.”
Aliyeva’s representatives responded the same day, sending an old recommendation from her bank in Azerbaijan.