Recovering the proceeds of corruption is part of the United Nations (UN) Sustainable Development Goals. Moreover, international media and global policy forums – such as the G20 and the Financial Action Task Force – are paying increasing attention to kleptocracy and calling for coordination in better targeting and forfeiting the proceeds of these grand-scale illicit activities.
In this context, the discrepancy between amounts stolen and actual recoveries indicates that the tools that governments have at their disposal are not yielding the desired results. Legal actions to recover assets are often unsuccessful when they fail to establish that a property is derived from a given offense, as required by criminal as well as civil confiscation. This link can be difficult to establish when there is no money trail leading from the jurisdiction harmed by corruption to the one in which the ill-gotten gains are laundered. For example, a government official may receive bribes in foreign bank accounts held by shell companies and invested in real estate. When there is no specific information about a specific corrupt transaction, opening an investigation on the origin of the property may be legally challenging; moreover, obtaining evidence for criminal, or even civil, confiscation may require years of complex cross-border investigations without guarantee of success.
To overcome these obstacles, several countries, including Australia, Kenya, Mauritius, the United Kingdom (UK), Trinidad and Tobago, and Zimbabwe, have introduced the unexplained wealth order (UWO). A UWO is a civil court order that can assist countries in investigating or confiscating assets that are incommensurate with a person’s known sources of income. UWO processes are generally opened if authorities show a manifest discrepancy between legitimate earnings, as evidenced, for example, by tax statements or declarations of income, and the assets they own. Once that discrepancy has been demonstrated, the person concerned will generally have to prove to the satisfaction of the court the legal origin of those assets.
If this person does not, the consequence depends on the legal provisions adopted by the jurisdiction. In the UK, where the UWO is an investigative measure, authorities can seek civil confiscation in accordance with the rules of non-conviction-based confiscation. In other jurisdictions, the UWO system encompasses both the ability of certain authorities to compel the production of information as well as the ability of courts to confiscate any wealth that is not explained to the satisfaction of the courts.
By its nature, a UWO is like illicit enrichment provisions, which also require a comparison between known legitimate sources of wealth and the assets accumulated by a person (often a public official). Except in jurisdictions that have opted for exclusively administrative or civil consequences, illicit enrichment is often a criminal offense, potentially punishable by imprisonment. Consequently, thus far the implementation of illicit enrichment provisions has been limited in various jurisdictions because of due process requirements. By contrast, UWOs are civil measures that do not involve the same requirements.
In the future UWOs may have the potential to demonstrate their efficacy in two different contexts. First, UWO systems can result in an increase in proactive investigations in countries where the discrepancy between assets and legitimate sources of income has not traditionally been sufficient to legally open a formal corruption or money laundering investigation. In these jurisdictions, UWO legislation would provide the legal justification for initiating investigations based on findings from various sources (including tax and customs administrations, whistleblowers or CSOs). This may prove particularly fruitful in the case of investments in financial centers by politically exposed persons (PEPs), high net worth individuals, or shell companies.
Second, UWOs can help jurisdictions overcome evidentiary challenges linked to criminal confiscation provisions. This can provide a significant advantage in countries that do not apply value confiscation. Moreover, in countries that have principled objections to criminalizing illicit enrichment because of due process concerns, civil UWOs can complement their existing tools.
With this in mind, the World Bank-UN
ODC Stolen Asset Recovery (StAR) initiative and the Global Tax Policy Center (Vienna University of Economics and Business, WU) have launched a new publication “Unexplained Wealth Orders: Toward a New Frontier in Asset Recovery”. This book provides guidance to policy makers around the globe on assessing whether a UWO system would be beneficial in their legal system and, if so, what design considerations would be useful to contemplate. The publication also provides case studies that are useful for lead practitioners, discussions of the potential implementation challenges, and important safeguards to support good governance practices in applying UWOs.
It is hoped that this work will contribute to reinforcing asset recovery regimes in line with G20 high-level principles and amended FATF standards in the coming years.