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A Kick in the Assets: Proposals to Help Recover Corrupt Assets Invested in the UK

Written by Nick Maxwell on Tuesday, 9 June 2015

Following the release of the “Empowering the UK to recover corrupt assets” discussion paper TI-UK looks into Unexplained Wealth Orders as a tool to stem the flow of corrupt money into the UK.

Large amounts of unexplained suspicious wealth enter the UK each year and are invested in our financial system in property in luxury goods or in other areas of the economy.

When corrupt individuals and other criminals obtain illicit funds they seek out ways to disguise the illegal origin of the money and to store the value somewhere secure. This means that all manner of investment products could be used to launder the proceeds of corruption.  Through this laundering process, illegally acquired wealth, such as bribes, kick-backs, illicit political contributions, embezzled funds and loans – as well as the proceeds of trafficking, frauds and tax evasion for example – are given an appearance of legitimacy. The assets can then be enjoyed by the corrupt or further moved on for other legal or illegal purposes.

But why is it that we hear so much about oligarchs bringing wealth to the UK and buying assets in the UK, but we see so little action taken against those that have committed corruption and stolen wealth from their own country?

While UK law enforcement have specific expertise and strength on this issue, compared to other jurisidictions around the world, the powers available to stem the flow of corrupt assets are inadequate. A recent TI-UK report found that, since 2004, over £180m worth of property in the UK has been brought under criminal investigation for being the suspected proceeds of international corruption. However, this was described by a senior police officer as “only the tip of the iceberg”.

The truth is that the rate of asset recovery by UK agencies of the proceeds of grand corruption is undeniably low compared to the scale of the problem. The National Crime Agency (NCA) estimates that around £100bn could be laundered through the UK each year. Typical detection rates of money laundering around the world by law enforcement agencies are believed to be in the region of 1 per cent; seizure rates are much lower.

In this legislative discussion paper “Empowering the UK to recover corrupt assets” we publish the arguments for a new ‘Unexplained Wealth Order’ (UWO) power to be conferred on UK law enforcement for them to start proactively questioning suspicious unexplained wealth associated with foreign public officials and to support civil recovery proceedings against the relevant assets. For corrupt UK public officials, a criminal conviction is still likely to be the best option to serve justice, but for 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.

Under the current system, when a foreign official with a declared wage of – for example – US$100,000 per annum transacts £20m through a UK bank account, current UK legislation does not allow for this transaction to be restrained. There is no power in UK law to require the foreign public official to explain sources of wealth for such suspicious transactions which exceed declared and official sources of wealth. Without evidence of a predicate crime, the mere fact of a suspicious unexplained transaction would not allow for further action to be taken against the suspect in question.

UK law enforcement only have seven days to raise an objection to a suspicious transaction, and then 31 days to prove in court that the assets represent the proceeds of corruption. They must do all of this without powers to require the foreign public official to explain what their sources of wealth are for the relevant assets. This period is generally inadequate to investigate and achieve asset restraint for grand corruption cases.

Indeed, our research finds that only 7 reports of suspicious transactions related to grand corruption were able to be acted on by UK law enforcement in 2014.

This proposal for an Unexplained Wealth Order a form of which already exists in Ireland, would require suspects issued with a UWO to explain legitimate and legal sources of wealth for suspicious UK assets or transactions, provided there was enough initial suspicion of criminality. If the trigger for the UWO was a suspicious activity report, then the 31 day timeframe for refused consent would be paused while the UWO was being responded to. Failure to respond to a UWO, or an inadequate response, together with the initial grounds for suspicion, could then be used to facilitate a civil recovery process against the asset.

If the corrupt from around the world can launder their assets through the UK with impunity, then the corrupt will continue to ferment insecurity and global poverty. It may also leave the UK vulnerable to the malign influence of corrupt billionaires and millionaires who are known to engage in influencing media and politics in the UK. It is a justice issue, a moral issue, an aid-effectiveness issue, a reputational issue for the City of London and it can be a national security issue to detect, seize and recover those assets.

Last weekend the Prime Minister made clear that corruption is the cancer that is at the root of so many of the world’s problems. However the flip side of supporting anti-corruption measures and good governance abroad is to make sure that the UK is not a safe haven for the proceeds of corruption stolen throughout the world.

The UK is well placed to lead international efforts to recover the proceeds of grand corruption using its position as a leading global financial centre, the quality and expertise of its law enforcement agencies, and the reach of its civil jurisdiction. However, it needs the right powers in order to be proactive in addressing corrupt assets in the UK.

We recommend that an appropriate governing body, 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 UK.


Read 4406 times Last modified on Tuesday, 24 November 2015 16:04

Nick Maxwell

Nick is TI-UK's Head of Strategic Engagement. You can view his full bio here, and tweet him @NickJMaxwell.

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