Tag: Money Laundering

Anti-corruption

A proposal to extend beneficial ownership rules to UK land-holding foreign companies

A report published today by Global Witness, alleging that an individual with ties to a former Kazakh public official owns large swathes of London, follows much recent interest in the issue of public officials owning property in the UK via secretive corporate structures that conceal their interest.

Earlier this month, an Early Day Motion (EDM) was filed at the House of Commons in support of the motion that the Land Registry should record the beneficial owners of foreign companies holding land in the UK. The EDM was triggered by the recent screening of From Russia with Cash on Channel 4, which alleged that significant sums of illicit funds from Russia were being invested in the UK property market while estate agents turned a blind eye. While EDMs often have little chance of being debated, they are frequently used as a means of raising the profile of certain issues among the media and the public.

The proposal to extend beneficial ownership rules to foreign companies was proposed in Transparency International UK’s publication Corruption on your Doorstep, which analysed data from the Land Registry and Metropolitan Police Proceeds of Corruption Unit to identify over 35,000 properties in London owned by off-shore companies and found that over 75% of suspects in grand corruption cases had used such structures to conceal their ownership of property.

At the recent Annual General Meeting of the All Party Parliamentary Group (APPG) on Anti-Corruption, the proposal to extend corporate transparency rules to foreign companies owning property in the UK was identified as a potential priority for the APPG to pursue during this Parliament.

Given the willingness of David Cameron to take a decisive lead on beneficial ownership (see our review of the legislation here), the opportunity to close an obvious loophole may be quite attractive to the Government and it will demonstrate a sincere commitment to addressing corruption and money laundering in the UK.

Asset recovery

Privy Council Clarifies When Innocent Bank is Liable to Victims of Theft

To what extent must a bank make inquiries as to the commercial purpose of a transaction, particularly a transaction involving an offshore structure? And when is a bank liable to compensate a victim of theft for receiving funds deriving from stolen assets and using them for its own benefit?

These were the questions addressed in Credit Agricole v Papadimitriou by the UK’s Privy Council (the court of final appeal for the UK’s overseas territories and Crown dependencies, and for Commonwealth countries that have retained it as the ultimate appeal Court; its decisions are authoritative in English law as it comprises judges from the UK Supreme Court).

It is an important and potentially far-reaching decision.

An honest bank, which had unknowingly received stolen funds and used them to repay itself a loan made to the fraudster, was required to compensate the victim of the theft. It must do so because it failed to investigate the commercial purpose of the transaction under which it received the funds in circumstances where the unnecessarily complex structure and cost of the transaction were indicative of money laundering.

The impact of the judgment may reverberate around the risk departments of financial institutions (or, indeed, other regulated entities). It is relevant where stolen funds, or funds deriving from stolen assets, have been used, for example, (a) to discharge a loan or overdraft, (b) to pay substantial fees for a transaction or (c) where the bank has enforced security taken over a stolen asset.

The case concerned the proceeds of sale of artworks stolen from a private collector. It could equally apply to assets or funds stolen by a public official from a bank, or to bribes, which the bank has used for its benefit, for example to pay fees or to pay-off a loan or overdraft. A bank facing a claim from an aggrieved state could be found liable if it failed to seek an explanation when it had serious cause to question the proprietary of a transaction.

The rationale of the case is not, however, applicable where the Bank has simply received funds into a customer’s account and transferred them away on the customer’s instructions. In those circumstances, a claim would only be available against the Bank if it has been dishonest.

Finally, it is noteworthy that the Privy Council reached its decision applying the standards of money-laundering legislation in place in 2000, not the much higher requirements that apply under the present money-laundering regime.   In our view, this suggests that the courts will apply a much higher standard to more recent conduct.

Read the full article

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
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.