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The Criminal Finances Act 2017, which received Royal Assent in April 2017, introduces a new investigatory power to law enforcement in the form of Unexplained Wealth Orders (UWOs) that will require respondents to explain the source of their wealth if he/she is a Political Exposed Person (PEP) outside the European Economic Area (EEA) or there are reasonable grounds to suspect that the respondent is or has been involved in serious crime; there is clear inconsistency in their apparent legal income and their visible assets in the UK; and if the value of the asset is greater than £50,000. A UWO can only be granted if all three tests are met. Enforcement authorities must apply to the High Court for the order, who can then make this assessment.
The powers extend the UK’s current non-conviction-based asset recovery regime contained within the Proceeds of Crime Act (POCA) 2002, and seeks to address the difficulties law enforcement currently faces when trying to gather evidence on the wealth of serious criminals and corrupt officials in the UK and from other jurisdictions.
The powers are thus aimed at those suspected to be involved in serious and organised crime, as well as foreign politicians and officials (and their associates). In addition to relieving the state of proving a criminal charge, the state is also not required to prove that the property in question is the instrument or proceeds of crime, with the burden shifting on the respondent to show that their assets have been obtained through legal means. The UK is already one of only a handful of jurisdictions worldwide that have adopted asset confiscation in the civil sphere, in large part due to the perception of civil recovery as an infringement on civil liberties in other territories. This further extension of the powers has, however, been lauded by many as the most effective way to pursue criminal assets, and prevent the economic and social harms created by the laundering of illicit funds through the property market.
This paper specifically shows how the optimum conditions for gathering evidence to support cross-border civil recovery claims are often difficult to achieve, particularly against highly organised and well-resourced domestic suspected criminals or against foreign PEPs. This paper provides a detailed account of the UWOs introduced in the Criminal Finances Act 2017, noting the government’s rationale behind them, and outlining some of the practicalities and thresholds in which the orders can be made.
Second, it assesses the non-conviction-based asset recovery regimes of the Republic of Ireland and Australia as case studies – both of which hold comparable ‘reverse burden of proof’ mechanisms, but which differ in their recovery success rates. The Republic of Ireland’s regime, led by the Criminal Assets Bureau (CAB), is multidisciplinary. It draws on a range of officials in different agencies that have been seen to efficiently share information and utilise resources when using non-conviction-based asset recovery, and hold impressive figures with regard to civil confiscation. Other factors of note include the political climate in which the regime came into place, namely that public opinion had been mobilised into supporting stringent crime laws in the wake of high-profile murders committed by organised crime groups.
Australia, conversely, has yielded mixed results, with UWOs having been introduced at both the Commonwealth and state level. Given the scope, and subtle differences depending on each territory, evaluating their merit is complex. Overall, total confiscation rates have been low, with the Commonwealth yet to bring any successful UWOs. This has been attributed to a number of factors: a lack of expertise in financial investigations and resource allocation; inter-agency disputes; and a degree of judicial reserve, meaning that the orders were not prioritised.
After examining the potentially important lessons learned from these jurisdictions, as well as the UK’s current civil recovery architecture, it is clear that upon the commencement of the Criminal Finances Act later this year, the success of UWOs will be dependent on a number of variables of which the UK government should take note. These are:
- Expertise and necessary allocation of skills: Because the targets of UWOs are those involved in serious and organised crime and foreign PEPs involved in corruption, cases will be highly complex. This will require skilled financial investigators with a proven track record in civil recovery, with talent harnessed and retained in relevant agencies.
- Inter-agency cooperation: In the UK, the powers will be available to a range of government agencies, which will need to be joined up in order to be effective. As evidenced by the Australian experience, the lack of clarity around agency roles and responsibilities caused notable difficulties. However, the Republic of Ireland’s Criminal Assets Bureau has managed to share information across agencies to great effect.
- Appropriate resource allocation: Without a certain level of investment from the UK government, UWOs will simply not be used. Financial support will be required throughout investigations, and court hearings, particularly in light of the financial resources at the disposal of those that will be the targets of UWOs. Sensible allocation of the Asset Recovery Incentivisation Scheme is also recommended as a more effective way of providing additional funding for financial investigators. Prosecutorial support must also be a priority, with the Crown Prosecution Service an essential part of this picture that must be supported both financially and legally.
- Political will: Underpinning the above is the genuine political will and resolve to ensure that UWOs do not sit untouched on the statute books. This will require leadership from the government if the UK is to see any success.
UWOs could certainly prove to be a powerful tool in efforts to tackle attempts to invest the proceeds of serious and organised crime and corruption in the UK. These are intended to help key stakeholders and observers to understand both the complexity of the orders, but also their viability if the appropriate level of commitment from the government is given.