Prosecuting “Illicit Enrichment”: a new offence for the UK?

This article by  James Maton and Jamie Humphreys was first published on the blog of the All-Party Parliamentary Group on Anti-Corruption.

There are many policy developments that would help improve asset recovery efforts in the UK (see Transparency International’s publication Closing down the Safe Havens). However, if we were to choose one initiative that we believe should be prioritised by the next Government, it would be the introduction of an illicit enrichment offence.

Article 20 of the United Nations Convention against Corruption (UNCAC) states:

Subject to its constitution and the fundamental principles of its legal system, each State Party shall consider adopting such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, illicit enrichment, that is, a significant increase in the assets of a public official that he or she cannot reasonably explain in relation to his or her lawful income.

In our view, Parliament should introduce legislation to bring the UK in line with the aspirations of UNCAC. In this blog we summarise how it would work and identify what benefits it would bring.

The jurisdiction for such an offence would be any suspicious transaction involving a public official’s assets which passes through the UK financial system. This would ensue that funds obtained corruptly abroad would still be covered, in much the same way as the Bribery Act operates.

In practice, when a financial institution files a Suspicious Activity Report (SAR) in relation to a Politically Exposed Person (PEP), the authorities could serve an Unexplained Wealth Order where there was no obvious explanation for the wealth. This would impose a moratorium on the time limit for the authorities to investigate – which currently stands at 31 days. Under current rules, the funds must be released if insufficient evidence has been found within 31 days. Unfortunately, in most cases this is simply not enough time to meet the evidential standards for seizing the assets. Accordingly, 90% of SARs are cleared and given the UK’s stamp of approval.

Once the Unexplained Wealth Order had been served, it would impose an obligation on the PEP to justify their wealth. Evidence would include their salary as a public officer and any Income and Asset Declaration they had filed in their home jurisdiction. In the event that the PEP could not justify their wealth, the authorities could forfeit the assets under existing civil forfeiture proceedings.

The new offence would remove the requirement for a conviction in the home jurisdiction – a stumbling block for many claims where political will is absent – and allow the UK to take a pro-active stance on corruption. It would strengthen the existing SAR regime and give the authorities sufficient time to conduct an investigation. The importance placed on Income and Asset Declarations may encourage PEPs to file accurate Declarations in their home jurisdictions. Finally, if successfully implemented, we anticipate that it would make the UK a considerably less attractive location for corrupt capital.

Asset recovery

What do I need to know about POCA?

If you’re a company officer or director and need a quick reminder on your responsibilities under the UK’s Proceeds of Crime Act and the anti-money laundering regime, take a look at our one page tipsheet. We cover the following areas:

  • an overview of the Act
  • the definition of “proceeds of crime”
  • confisction and forfeiture of the proceeds of crime
  • money laundering and related offences
  • reporting requirements
  • the regulatory regime
Bribery

What do I need to know about the UK Bribery Act?

If you’re a company officer or director and need a quick reminder on your responsibilities under the UK Bribery Act, take a look at our one page tipsheet. We cover the following areas

  • the offences;
  • the corporate offence of failing to prevent bribery;
  • the defence of adequate procedures;
  • the global reach of the Act;
  • self-reporting and deferred prosecution agreements; and
  • due diligence in M&A transactions
Asset recoveryBribery

Recovering the proceeds of corruption: an overview

Victim states seeking to recover the proceeds of corruption, or compensation for corrupt acts, may have a choice of mechanisms to do so:  criminal, civil and non-conviction forfeiture.   Each mechanism has advantages and disadvantages, and the “right” route for a particular case depends on the circumstances.   Flexibility is key, and any substantial programme is likely to deploy all of the available mechanisms.  Indeed, many successful individual cases have used two or more mechanisms to maximise recoveries.

Cooley’s briefing, “Recovering the proceeds of corruption: how states can recover stolen assets” outlines and discusses the recovery options, and the factors that a state should consider when choosing between them.  It is available here.

Anti-corruptionAsset recoveryBribery

Welcome to the Cooley blog on asset recovery

Welcome to our blog.

Cooley has a proven team representing states  and companies seeking to trace, freeze and recover the proceeds of corruption or fraud, or obtain compensation for corrupt or fraudulent acts.

We assist states to:

  • Recover stolen public funds, bribes and compensation for corruption from dishonest public officials, their companies, trusts, and associates;
  • Make claims for compensation against contractors that have paid bribes to win contracts or gain other advantages (and we advise on the termination or renegotiation of tainted contracts);
  • Make claims to recover assets or compensation against third parties which knowingly handle the proceeds of corruption, or assist in the laundering of it;
  • Use insolvency remedies to take control of companies used to receive or launder the proceeds of corruption

We have worked internationally on some of the most innovative and successful claims to recover the proceeds of corruption and, in addition to cases in our own jurisdictions, have assisted states to formulate and implement international asset recovery strategies taking into account the complex practical and legal issues that arise in cases involving multiple countries.

We also help companies or individuals that have suffered fraud or theft to recover assets, or to make claims against the principal wrongdoers or those that have assisted them.

This blog will discuss key issues in the field of asset recovery and claims arising from corruption. We hope our blogs are enjoying, interesting and insightful.