Editorial

Unexplained wealth orders: the tussle between combating money-laundering and protecting fundamental human rights

This paper outlines the recent implementation of the Unexplained Wealth Orders (“UWOs”) within the United Kingdom, which was effected by the Criminal Finances Act 2017 on the 31st of January 2018. The purpose of this paper is to address potential human rights issues that may arise from the investigative functions of UWOs.

It is a well-established fact that money-laundering remains a pertinent issue within the financial and banking industry. The implementation of various anti-money laundering regimes alongside the enhancement of enforcement powers clearly indicates that authorities are constantly striving to eliminate any potential laundering acts. Apace with the financial industry, the problem of money-laundering is also entrenched within the real-estate industry. As money-laundering activities are effortlessly disguised amongst massive numbers of real-estate transactions, it becomes exceedingly arduous to uncover real-estate transactions that are affiliated with money-laundering or terrorist financing activities (Financial Action Task Force, June 2007).

The UK has been recently plagued by the presence of illicit Russian funds which have infiltrated into the UK’s property market; the scale of dirty money that has been mixed with legitimate funds remains arbitrary and undetectable. It is therefore unsurprising that the UK had recently implemented the Unexplained Wealth Orders (“UWO”), to which it was effected by the Criminal Finances Act 2017 on the 31 January 2018.

Essentially, the introduction of UWOs signifies a huge step towards combating money-laundering due to several reasons. First, where there is a conspicuous inconsistency with the legal income of politically exposed persons (“PEP”) or suspected criminals and the value of an asset (worth £50,000 or more), the burden is on them to explain how they can afford such an asset. The shifting of the burden from the investigators to the investigated provides a compelling investigative tool for enforcement agencies. This is because enforcement authorities often have difficulties in distinguishing illegitimate transactions from those that are legitimate, to which the shifting of the burden of prove enhances the likelihood that authorities may successfully convict alleged offenders for money-laundering.

Second, UWOs are “civil”, and not “criminal” investigative tools. The incorporation of a civil standard results in the lowering of the burden of proof on part of enforcement authorities. Thereupon, authorities merely have the burden of showing “reasonable grounds of suspicion” rather than the criminal standard of “beyond a reasonable doubt”. As the imposition of UWOs is based on reasonableness and probability, and not certitude, this gives the impression that UWOs provides an imperative platform for authorities to fight against money-laundering within the real-estate industry.

Finally, UWOs encapsulates a spectrum of properties within its operative scope. Given the fact that properties can be captured by UWOs regardless of where they are located, the elimination of the need to prove a nexus between a property and the UK arguably grants authorities with efficacious dominance over alleged money launderers.

Notwithstanding the potential for UWOs to act as an effective investigative tool, the operation of UWOs may contravene fundamental human rights. Ostentatiously, human rights activists are often galvanized by issues pertaining to the protection of white-collar criminals; the association of how white-collar criminals deserve the same rights as any other criminals is well-founded. Despite assertions that white-collar criminals deserve to be treated with respect and dignity, these acts of activism are merely a plaster to significant human rights issues. Consequently, white-collar criminals are typically met with palpable and swift vengeance. Moreover, there is often sporadic apprehension towards the imposition of harsh sanctions on money launderers.

Given the extensive financial damages that may arise from laundering acts, enforcement agencies generally do not put a brake in imposing the harshest penalties. The premise for this proposition is exemplified by the news that the National Crime Agency had recently secured two UWOs to investigate assets (worth £22 million) that are conceived to be appertained to PEPs (National Crime Agency, 2018). On top of UWOs, interim freezing orders (“IFOs”) were administered against these individuals to prevent the assets from being sold, transferred or dissipated. Unsurprisingly, the use of UWOs alongside IFOs has the intentional impact of depriving alleged offenders of their livelihood due to the imposition of restrictions.

Although it can be argued that there should be lighter sanctions on alleged offenders, as money-laundering is a “victimless crime”, it is submitted that the ultimate victim of money-laundering activities is society itself. Inescapably, the lack of tough sanctions against money launderers may dampen the UK’s tenacious fight against money-laundering; the endemic manifestations of money-laundering within the UK may send a signal to white-collar criminals that the UK tolerates illicit acts. Even so, I argue that it is necessary to constitutionalize an effective regime that balances between the rights of white-collar criminals and the regulation of money-laundering. This is because no individual would want to become a target of money-laundering sanctions without countenance from legal mechanisms that protect them from disproportionate measures.

The ground of human rights against UWOs has already been alluded within Ireland and Australia. Apart from the UK, these two jurisdictions are the only ones which have fully enforced UWOs. Within these jurisdictions, the premises against UWOs are as follows:

• the reversal of the burden of proof from the investigators to the investigators undermines the criminal standard of “innocent until proven guilty”;

• the imposition of the need to explain one’s wealth removes the right to silence and the right against self-incrimination;

• the absence of a right to appeal against decisions of authorities eliminates the right to fair trial; and

• the insufficiency of clear guidance leads to arbitrary results.

Naturally, the same arguments may be made against UK’s employment of UWOs. Given the implementation of the Human Rights Act of 1998 (“HRA”), which takes account of the European Convention of Human Rights, it is plausible that the operation of UWOs may contravene the following Articles within the HRA:

• the right to property under Article 1 Protocol 1;

• the right to fair trial (including the right against self-crimination) under Article 6; and

• the right to privacy (including the principle of proportionality) under Article 8.

In view of this, the following points may be made. First, Article 1 Protocol 1 HRA is likely to be contravened. Given how UWOs depart from the English criminal standard of proving “beyond a reasonable doubt”, the lowering of the threshold on part of investigators alongside the elimination of the need to prove a nexus between a property and UK arguably undermines fundamental protections afforded by property law.

Second, Article 6 HRA may be jeopardized by the operative functions of UWOs. As the reversal of the burden of proof (from investigators to the investigated) arguably provides enforcement agencies with “easy to prove” requirements, this gives the impression that enforcement authorities might act on limited evidence – to which the likelihood for wrongful confiscations is a source of potential injustice.

Finally, Article 8 HRA may be compromised. Placing the burden of proof on the alleged offender neglects the potential difficulties that may arise. Specifically, an alleged offender may genuinely have troubles obtaining bona fide evidence to stipulate the origins of his income; the use of a draconian measure which fails to envisage such issues thereby leads to the disproportionate interference with one’s privacy.

Notwithstanding the potential challenges against UWOs on grounds of human rights, it is submitted that this remonstrance merely scratches the surface of UWOs – UWOs remain intact within Ireland and Australia. Although the resistance towards UWOs has not led to legislature removing UWOs within Ireland and Australia, the likelihood for UWOs to be challenged within the UK remains ever-present. This is because the need to balance human rights and harsh sanctions seem to be entrenched within the European Courts of Human Rights (“ECtHR”). This gives the impression that there may be potential disputes towards the operation of UWOs. However, it is probable that UWOs will remain within UK’s legal system in years to come. Considering how the ECtHR have been slow to criticize the reversal of burden (which is arguably onerous towards white-collar criminals) in the recent case of Goditidze and Others v. Ge orgia [2015] App. No. 36862/05, this gives the impression that penal sanctions may escape the clutches of fundamental human rights values.

Conclusively, given how researchers have been reprehensibly callous about the magnitude of laundering activities within the real-estate industry, the presence of an arguably cacophonous regime may spark the interests of many more academics; manifesting greater enthusiasm within scholastic repertoires. This would provide enforcement agencies with better knowledge to combat money-laundering within the real-estate industry.