B.C.'s plan to confiscate suspected proceeds of crimes with "unexplained wealth orders" will involve significant challenges to implement and enforce, organized crime and legal experts say.
An unexplained wealth order (UWO) — for short — is a court order that compels the target to reveal to authorities the source of funds derived to obtain a particular asset, typically a luxury vehicle or property.
When Premier David Eby announced on Nov. 20 his government’s intentions to impose a UWO regime in the province by next spring, he acknowledged the process would not be easy.
“I have no doubt this will be challenged in court, because it is new. But I believe we will be successful, and we need to address these issues for British Columbians,” said Eby, claiming UWOs will target luxury homes and vehicles purchased by proceeds of crime.
Unexplained wealth orders — found across the world in various forms — are one of 101 recommendations of Commissioner Austin Cullen, who oversaw the public inquiry into money laundering in B.C. that concluded last June. Cullen had heard from concerned residents in Richmond, who had witnessed a seemingly inexplicable rush of mansions of up to 20,000 square feet being built on farmland in recent years.
Cullen specifically recommended to the provincial government that it adopt a UWO regime based on the United Kingdom’s model.
But as U.K.-based financial crime expert Maria Nizzero explained to a panel at the Vancouver Anti-Corruption Institute on Nov. 21, the much-trumpeted U.K. model has actually been a “Shakespearean tragedy” so far, requiring several key amendments, especially since Russia’s invasion of Ukraine more prominently exposed the embedded Russian kleptocrats in London.
Nizzero says lessons have been learned since its implementation in 2018, as the so-called “McMafia orders”— dubbed so by British media — have only led to one successful case. Key changes to the U.K. model this year include: expanding the scope of assets that can be targeted, such as beneficial trust; expanding statutory time frames for its use; and properly resourcing applications by government.
UWOs a necessary tool, says crime expert
Transparency International Canada executive director James Cohen told Glacier Media a UWO regime will need a strong and enforceable federal public beneficial ownership registry for corporations, which is said to be in the works.
Panellist Andrew Dornbierer, an asset recovery specialist at the Basel Institute on Governance, has defined UWOs as “legislative mechanisms under which a court can sanction a person through a stand-alone criminal or civil procedure for enjoying wealth that is not justified by reference to lawful income.”
Such orders are controversial as they may lead to asset forfeiture without a criminal conviction.
B.C. must aim for a civil UWO regime, said Dornbierer, so as to avoid constitutional challenges should it involve federal criminal laws or proceedings.
B.C.’s UWOs are likely to fall under proceedings by the existing director of civil forfeiture, who will need to apply for a court order by providing some evidence that there is a connection between criminal activity and an asset, such as a home. Should the asset owner be unable to produce the source of funds, the asset may be seized in a separate proceeding.
“The federal government has consistently refused to implement a criminal unexplained wealth law based on legal and constitutional concerns,” wrote Dornbierer in an October 2022 paper titled “Targeting unexplained wealth in British Columbia” and co-authored by Jeffrey Simser, a Canadian financial crime expert and former legal director for the federal Ministry of the Attorney General.
Simser says UWOs can make up for a struggling law enforcement and justice system, or “atrophic” RCMP that is stuck in “information silos” with the likes of tax authorities and other Canadian law enforcement agencies.
“What Cullen found was the entire system wasn’t working from a law enforcement perspective,” said Simser, who sees UWOs as a necessary tool until police units begin more prominently factoring in proceeds of crime as part of their criminal investigations.
UWOs undermine rights, says civil liberties association
Critics have called UWOs a slippery slope to unfettered state power.
“UWOs undermine privacy rights, the presumption of innocence, and the right to silence. They have only been adopted in a few countries, and there is no credible evidence that they have been effective,” stated the BC Civil Liberties Association.
B.C.’s Civil Forfeiture Act, to which UWOs would likely fall under, is presently being challenged at the B.C. Court of Appeal, noted the association.
Cullen stated how his opinion was formed in part from jurist Hon. Thomas Cromwell, a former Puisne Justice on the Supreme Court of Canada, who said provincial civil UWOs can be a reasonable infringement on charter rights.
Key to this will be a regime whereby information obtained in a UWO cannot be used in a criminal case. Nor can law enforcement be involved in the proceedings, experts such as Cromwell note.
In order for UWOs to be successful in B.C., by overcoming these limitations, Dornbierer says other measures will be needed, namely by placing the burden of proof on the person.
“We’re not asking a person to do something outrageous. We’re asking for information within their own knowledge,” argued Dornbierer.
The government also needs to commit resources to the regime and have strong penalties against lying to officials, he said.
“If you have a burden of proof, you can really have an impact on these kleptocrats,” said Dornbierer, who says there are safeguards that B.C. can put in place to prevent the infringement of legal rights.
- having a public interest test by a judge, however flexible that may be;
- empowering a court to exclude certain components of a person’s property from unexplained wealth proceedings when it would be too difficult for them to prove how they legitimately acquired that property;
- providing money to targets to pay for legal proceedings;
- establishing monetary thresholds so as to only target high-value assets;
- annual independent reviews; and
- funding the regime independently (not through seized funds to avoid conflict of interest).
“Whether or not such a mechanism would result in the identification and recovery of substantial amounts of illicit funds is far from certain — particularly as the U.K.’s mechanism has not achieved a significant amount of success to date,” concluded Dornbierer.
“A U.K.-style UWO would also need to be adapted to fit British Columbia’s existing constitutional context, and particularly the strict delineation between federal law enforcement agencies investigating criminal actions and provincial agencies seeking civil forfeiture,” added Dornbierer.
Better yet, Dornbierer says the federal government could implement its own “illicit enrichment provisions” in criminal law to bring the country in line with recommendations in both the United Nations Convention Against Corruption and the Inter-American Convention Against Corruption.