UNEXPLAINED WEALTH ORDERS Criminal Finances Bill, Part 1 Part 1 of the Criminal Finances Bill introduces a new measure, Unexplained Wealth Orders (UWOs) – a legal tool that will provide stronger powers for UK law enforcement to seize and repatriate the proceeds of grand corruption.
The problem Corrupt people cannot steal public funds unless they have a safe place to hide them. Unfortunately, there is growing evidence that the UK has become a safe haven for corrupt individuals and their assets. Currently, UK law enforcement has limited power to seize corrupt property. There are critical gaps in the UK legal framework which are being exploited by corrupt individuals and companies. A taskforce of legal and anti-corruption experts identified the following problems with the current asset recovery regime:
Low levels of asset recovery: The UK freezes an average of US$225.5m corrupt funds per year1. Compared to the NCA estimate of billions being laundered, this is a drop in the ocean. Inadequate time to investigate suspicious transactions: The 31 days allowed is inadequate to investigate and build sufficient evidence to act on suspicious assets. Insufficient resources for law enforcement The current framework for asset recovery is overly reliant on a conviction in the origin country
At present, little can be done to act on highly suspicious wealth unless there is a legal conviction in the country of origin. In cases where the origin country is in crisis or the individual holds power within a corrupt government, this can take decades to obtain or is unlikely to be achieved at all, producing a mere trickle of results against a torrent of corrupt illicit funds.
How would UWOs work in practice? The Minister for Health in a country outside the EEA has misappropriated millions of pounds from the health budget into his own pocket. To hide this crime, he decides to buy a multi-million pound property in London. The house is far beyond the means of the Health Minister’s annual salary, raising serious questions. These allegations are brought to the attention of law enforcement agencies. After an application from an enforcement authority2, a high court judge can give notice of a UWO only if she is satisfied that the Minister/respondent is likely to be the owner of suspicious wealth beyond his means, and if all of the following tests are met: 1. The respondent is a Politically Exposed Person3 (PEP) outside of the EEA; or there are reasonable grounds to suspect that the respondent is or has been involved in serious crime 2. The respondent’s known income is insufficient to obtain the asset 3. The value of the asset is greater than £100,000
The UWO requires the Minister to explain how he lawfully acquired his assets. If he fails to respond or gives an inadequate response then this extra information can be used in a separate civil recovery process (an existing measure under the Proceeds of Crime Act) if law enforcement has gathered sufficient evidence.
1
OECD and StAR (2014) Enforcement authorities listed in the Bill are: The NCA, HMRC, the FCA, the Director of the SFO, and the Directors of Public Prosecutions (for both the England & Wales, and the Northern Ireland jurisdictions) 3 In the Bill, a PEP is defined as ‘a) an individual who is, or has been, entrusted with prominent public functions by an international body or by a State other than the UK or other EEA State, b) a family member of a person within paragraph (a), or (c) known to be a close associate of a person within that paragraph. 2
What constitutes Serious Crime under this measure? Serious Crime is defined in the Bill as categorised in the 2007 Serious Crime Act. This definition includes money laundering, bribery and corruption, slavery, people trafficking, drug trafficking and other offences.
What about the risk of asset flight? The Bill includes measures for the same enforcement agency to apply to the High Court for an interim freezing order to temporarily freeze the asset in question. This will prevent corrupt individuals from selling the asset and re-laundering the funds before responding to the UWO.
What about the human rights implications? Transparency International operates in over a hundred countries, and in many of those the human rights of anti-corruption activists, and ordinary people, are routinely trampled on by corrupt governments and police forces. We take human rights extremely seriously. We have carefully weighed the human rights implications of UWOs. Our assessment is that sufficient safeguards are in place in the legislation to ensure that the measure is not abused:
The UWO is a civil – not criminal – measure and is laid against the asset, not the individual. Civil actions against property are an altogether different proposition to deprivation of liberty and actions taken against individuals. The measure has a specific remit and its use is limited to illicit assets owned by foreign government officials or those who have links to serious crime. A reasonable level of evidence is required before applying to the High Court for a UWO, and the approval of a High Court Judge is required before a UWO can be served. This element of the process provides an opportunity to rebut the measure if there are concerns. TI has been reassured by our legal advice that use of UWOs is compatible with the UK’s international obligations on safeguarding human rights.
It is important to note that UWOs do not target an individual’s liberty; they target assets from countries that have been plundered by grand corruption, and assets should be rapidly unfrozen if the required proof of income is produced. The UWO tool is designed to enable the returning of wealth to citizens that have suffered for decades from corruption, so that elements key to public wellbeing, such as health and education initiatives, are properly resourced.
CONTACT: Rachel Davies Teka, Senior Advocacy Manager, 020 3096 7697, rachel.davies@transparency.org.uk