HSE University Anti-Corruption Portal
A Guide on Forfeiture of Unexplained Wealth Released
Natalia Gorbacheva, Vladislava Ozhereleva

The Stolen Asset Recovery Initiative (StAR) has issued the analytical publication entitled “Unexplained Wealth Orders: Toward a New Frontier in Asset Recovery.

The paper stresses that the asset recovery mechanisms employed by countries in most cases do not produce the expected results.

In search of more effective solutions, a number of countries (for instance, the United Kingdom, Australia, Kenya and Mauritius) have established such as tool as the unexplained wealth order (UWO). Under the UWO issued in civil proceedings, the individual accused of an offence, including corruption one, must explain the discrepancies between the legal sources of his/her income and the value of assets owned by him/her. If the respondent fails to produce evidence proving the legal origin of the assets, the forfeiture decision can be taken.

The main advantages of this mechanism are:

  • Law enforcement officers do not need to prove the link between the assets and the offence which means that it is possible to forfeit the assets that are difficult or impossible to confiscate in the framework of other proceedings (criminal in the first place): in Mauritius for instance, under the UWO it is not necessary to prove the link between the assets and an offence in any case; in the UK, provided that the proceedings against a foreign politically exposed person are ongoing;
  • The reversal of the burden of proof on the respondent and, as a consequence, facilitation of the standards of evidence and reduced burden on the law enforcement authorities;
  • Removal of a number of obstacles in international cooperation, including lack of access to certain evidence: in 2018 for example, the UK authorities, thanks to the UWO mechanism, initiated civil proceedings against a foreigner, the wife of Jahangir Hajiyev, former head of the International Bank of Azerbaijan, who should have proved the legal origin of her assets; her failure to do so constituted the grounds for the issuance of an order to forfeit the property of over 20 million GBP;
  • Wide scope of application - most countries that use the UWO allow for the forfeiture of the following assets:
  1. The assets that are both on the territory of the country and abroad;
  2. The assets that are owned by the respondent indirectly, including through offshore companies;
  3. The assets that are owned by any persons, including foreigners (except for Mauritius where the list of persons is limited to the national citizens);
  4. The assets that are proceeds of offences committed both in the territory of the country and abroad;
  • Broader timeframe: in particular, the statutes of limitation in relevant proceedings are normally unlimited, and the forfeiture under the UWO can be executed also with respect to the assets acquired before the UWO was established.

The StAR experts put forward the following more detailed recommendations for the countries that may wish to implement this instrument:

1. Preconditions for establishing a UWO system:

  • Determine whether a UWO system is needed by identifying existing obstacles and gaps in the jurisdiction’s asset recovery framework also by analysing the potential correlation between the UWO mechanism and the provisions of legal acts, including the procedure of confiscation, disclosure of beneficial ownership information, functioning of mutual legal assistance mechanisms, submission of asset declarations etc.;
  • Define the categories of people with respect to which the UWO system should be implemented as a matter of priority, for instance, politically exposed persons and their close relatives, “oligarchs” and public officials;
  • Assess whether there is the political and institutional environment favourable for the implementation of the UWO system, including the independence of the judiciary and political will;
  • Define the UWO status – for example, recognise this instrument as a non-conviction-based legal remedy, a means to counter illicit enrichment or any other alternative mechanism;

2. Modification of the institutional environment:

  • Implement a UWO model that will be the most effective in a specific jurisdiction, in particular, define whether the UWO will be only an investigative instrument or can also be used in plea agreements;
  • Reverse the burden of proof of the link between assets and offences from the public authorities to the respondents who must prove the legal origin of their assets;
  • Entitle public authorities to forfeit assets with regard to which no sufficient evidence proving their legal origin is produced;
  • Recognise the provision of knowingly false or misleading evidence as an offence;
  • Apply UWOs not only on natural but also on legal persons;
  • Apply UWOs to all kinds of assets wherever they are, either material or immaterial, property shares, asses donated or acquired otherwise;
  • Consider the possibility to set a minimum threshold of value of assets subject to forfeiture under UWOs to ensure that resources are allocated to the cases of particular financial or public and political importance, and to provide for a periodic re-assessment of this threshold taking account of the law enforcement practice;
  • Envisage the liability of persons who indicate the income that was not disclosed in the asset declaration before that as a source of acquisition of the assets in question;
  • Envisage forfeiture of the equivalent value of assets in monetary value if the assets themselves cannot be forfeited;
  • Envisage the possibility to apply UWOs extraterritorially;
  • Envisage temporary freezing or other kind of restrictions on the use of assets for the period of proceedings if there is a risk that they can be damaged, moved or otherwise disposed of;
  • Provide the competent bodies (for example, courts) with the necessary independence and sufficient resources, including financial and human ones;

3. Operational issues:

  • Promote interagency cooperation in the proceedings related to UWOs;
  • Consider establishing a dedicated interdisciplinary group for the recovery of assets under UWOs;
  • Recognise UWOs as a priority instrument for asset recovery if the access to evidence in international cooperation is limited;

4. Provision of procedural and due process safeguards.

In implementing the UWO, the authors recommend ensuring adequate procedural and due process safeguards, and proper functioning of the mechanisms of judicial control, in particular:

  • Require review by a judicial officer before a UWO is issued and the right to appeal against the decision to issue a UWO;
  • Consider whether the use of statements from a UWO proceeding should be forbidden in parallel or subsequent criminal proceedings against the respondent;
  • Limit the use of disclosed information and disclosure to third parties;
  • Add a limit or other safeguard to assess how far back the respondents can be compelled to explain the origin of assets;
  • Incorporate a minimum threshold for the value of the unexplained assets calibrated to the specific legal and operational context of the jurisdiction in question;
  • Protect innocent third parties, for instance, in the event that the respondent has sold them the assets;
  • Permit potential recoupment of legal fees for respondents when UWOs are denied, possibly limiting this to cases where authorities acted unreasonably or improperly;
  • Incorporate the duty of relevant bodies to submit to parliament (or other independent body) annual reports on the UWO framework and, if appropriate, amend legal acts regulating the UWO system based on the practical experience and changing political priorities.
Illicit enrichment
Asset recovery

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