Guest Post: The UK Should Fight Corruption Using “Unexplained Wealth Orders”

Nick Maxwell, Head of Advocacy and Research at Transparency International-United Kingdom, contributes the following guest post:

UK Prime Minister David Cameron has made the fight against global corruption a high priority for his government, declaring that corruption is the cancer that is at the root of many of the world’s problems. But as much as we should applaud the UK’s efforts to support anticorruption measures and good governance abroad, it is equally important that the UK ensure that it is not a safe haven for the proceeds of corruption stolen throughout the world. Yet here the UK has fallen short: We have only seen limited asset restraint and recovery against the proceeds of corruption, especially against those currently associated to power. While estimates of total extent of the problem vary, it is generally agreed that large amounts of unexplained suspicious wealth enter the UK each year and are invested in the British financial system, in property, in luxury goods or in other areas of the economy. And despite the fact that UK law enforcement has the necessary expertise on this issue, the rate of asset recovery by UK agencies of the proceeds of grand corruption is undeniably very low compared to the scale of the problem.

Given the scale of the problem and the inadequacy of the government’s response to date, Transparency International’s UK chapter (TI-UK) established a taskforce of experts to review the legislation in place to deter grand corruption and recover stolen assets that have made their way into or through the UK. The results of the taskforce’s deliberations were published last month as a discussion paper entitled Empowering the UK to recover corrupt assets: New approaches to illicit enrichment and asset recovery; the paper sets out a new proposal for UK law enforcement: the use of an Unexplained Wealth Order (UWO), which would allow UK law enforcement to start proactively questioning suspicious unexplained wealth associated with foreign public officials, and to start civil recovery proceedings against the relevant assets.

As it currently stands, the UK system for asset recovery ideally relies on a criminal conviction in the country from which the wealth was stolen in order to initiate asset recovery proceedings. As a result, under current legal powers in the UK, there is limited prospect of restraining suspicious transactions, unless there is already a pre-existing conviction against the individual. Yet while a prior criminal conviction is still likely to be the best option to serve justice when pursuing corrupt UK officials, in the case of foreign public officials and politicians, where a criminal conviction is unlikely, a civil power directed against assets in the UK may provide the best available law enforcement option.

A UWO power could be conferred on law enforcement agencies such that, in response to having grounds for suspicion that an asset represents the proceeds of corruption and a sufficiently high value-threshold of asset, a suspect could be issued a UWO. Suspects issued with a UWO would be required to explain legitimate and legal sources of wealth for any designated asset or transaction. The assets would be temporarily frozen until a response to the UWO was submitted, thus preventing the flight of the assets in question. Failure to respond to a UWO, or an inadequate response, could then be used (together with the initial grounds for suspicion) to facilitate a civil recovery process against the asset.

In order to avoid over-reaching or excessive burdens, UWOs would not be available for all individuals, but rather to a more limited group that would include, at least, public officials or “politically exposed persons” (PEPs) as defined by Financial Action Task Force. Consideration should also be made for including “oligarchs.” (Safeguards would be needed to prevent UWOs from being used for purposes other than those intended, and to prevent other government agencies co-opting this instrument to their own ends, in the way that anti-terror surveillance legislation has been used by local authorities to assist with parking enforcement.)

UWO laws are a relatively recent development in confiscation and forfeiture jurisprudence. Like traditional in personam (directed towards a person) and in rem (directed towards property) forfeiture, their primary objective is to deprive criminals from acquiring or benefiting from unlawful activities. However, by using UWOs the state does not have to first prove a criminal charge, as is the case with conviction-based forfeiture. Likewise, the state does not have to first prove that the property in question is the instrument or proceed of a crime, as is generally the case in in rem asset forfeiture. UWO powers differ from traditional forfeiture powers in another important respect: they shift the burden of proof to the asset owner who must prove a legitimate source for his or her wealth. Only three countries in the world – Ireland, Australia, and Colombia – have full UWOs where no proof of the property being connected to the crime is required and the burden of proof is reversed. Research sponsored by the US Department of Justice indicates that the effectiveness of the UWO regime varies significantly across of these three nations, with Ireland having used these orders to greatest effect.

We at TI-UK believe that the proposal for a UWO is an important breakthrough in how the intention that exists within the United Nations Convention against Corruption (UNCAC) for illicit enrichment legislation (Article 20) can be taken forward in common law countries. TI-UK now recommends that an appropriate UK authority, such as the Law Commission or a Parliamentary Committee, consider this discussion paper as the basis for a more wide-ranging review of powers to tackle grand corruption and the money laundering of grand corruption in the UK. We believe that broader discussion is now required within government, in Parliament and in society about what steps the UK should take to stem the flow of corrupt money into the UK and what is a proportionate response to the scale of the threat and the harm. These questions go to the heart of what society and economy we want to have in the United Kingdom.

2 thoughts on “Guest Post: The UK Should Fight Corruption Using “Unexplained Wealth Orders”

  1. Pingback: The Missing Piece in UK’s Unexplained Wealth Order Mechanism – Legal Note to Self

  2. Pingback: The Missing Piece in UK’s Unexplained Wealth Order Mechanism – Legal Note to Self

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