CiFAR has launched a new report Unexplained Wealth Orders: A New Tool for Asset Recovery?
This report assesses the efficiency of Unexplained Wealth Orders (UWOs), primarily as existing in UK legislation, in advancing asset recovery and the fight against grand corruption. The report introduces the UWO legislation, explores how, when and where UWOs have been used to date, and also reflects on transparency and accountability considerations. In the process, it contemplates the involvement of civil society and the impact of UWOs on the countries where the corruption originated and compares them to other, similar tools.
While it was initially assumed UWOs would be applied in tens of cases a year, since their inception in January 2018, UK law enforcement agencies had reportedly obtained only 15 UWOs relating to four cases. Two of these cases concerned PEPs, who mounted a substantial legal defence after being served a UWO. A case targeting properties worth GBP 80 million owned by Kazakh nationals Dariga Nazarbayeva and her son Nurali Aliyev, and initially linked to the convicted Rakhat Aliyev, was successfully challenged by the respondents. Another one of these cases and the first UWO case, targeting properties of Azerbaijani Zamira Hajiva and her husband, is still ongoing.
The only successful recovery so far relates to property worth approximately GBP 9.8 million which belonged to a UK citizen linked to serious organised crime and money laundering. In practice, UWOs have encountered a number of challenges and have so far failed to meet the high expectations placed upon them by politicians, civil society and the media.
The analysis of the failed case against property owned by Kazakh nationals often referred to as NCA v Baker, as well as a reflection of the reasons behind the underutilisation of the UWOs, points to a number of obstacles:
- Difficulties in overcoming information and legislative gaps between the UK and the foreign jurisdiction when validating and accepting evidence
- A lack of clarity over what constitutes compliance with a UWO
- Challenges in the validation of and low evidentiary threshold for proving the respondent’s income
- Issues with identifying and targeting the property’s beneficial owner
- High costs for court proceedings and a lack of financial and legal resources for public law enforcement agencies
An analysis of best practices from similar investigative tools shows several improvements that should be considered for countries who might wish to implement similar tools targeting illicit wealth:
- Increase transparency in property ownership through legislative requirements to identify beneficial owners registered in foreign jurisdictions; this can assist authorities and civil society in gathering the evidence that a UWO may be needed.
- Ensure sufficient resources are available for financial investigations and for litigation; UWO processes can be expensive and time consuming, this should be factored in.
- Provide adequate support for law enforcement agencies more general; this will support the detection of potential cases.
- Close information gaps in the judiciary on how kleptocratic practices are carried out; assist judges to understand how corrupt schemes work.
- Undertake reviews of UWO legislation as necessary to ensure they are working effectively.
- Strengthen legislation against the financial enablers of kleptocracy; to reduce barriers to understanding corrupt wealth.
You can download the report here.