18
I
Taxing Crime
structures (such as which legal entities are used, which types of assets, or which offshore jurisdictions). This bird’s-eye view may help authorities better understand in general how to trace assets, follow the money, and unravel complex structures in future criminal investigations. 2.4.1.4 LAWS ON UNEXPLAINED WEALTH OR UNEXPLAINED REVENUE “Unexplained wealth” is often understood to be wealth (property or assets, broadly defined) that a person holds or consumes that exceeds that person’s (1) known income or (2) wealth (or both) and that was lawfully obtained or declared (see box 2.3 for examples of definitions of unexplained wealth). Ideally, the concept of “holding” wealth would be construed as broadly as possible to include holding property directly or indirectly via, for example, legal arrangements such as trusts. In other words, it should cover not only property that a person owns, but also property over which the person exercises effective control. Although different terminology is used, such as “unexplained wealth,”30 “unexplained assets,”31 and “illicit enrichment,”32 the concept can be used by both tax authorities and LEAs. Personal income tax, corporate income tax, property tax, value added tax (VAT) or sales tax, customs taxes, and other sources of tax information provide access to information on a person’s income and wealth. The basic job of tax authorities is to research and detect unexplained wealth because any sign of undeclared or unduly minimized taxable revenue constitutes potential tax evasion. However, beyond tax violations, unexplained wealth or revenue in the context of tax verification may serve as an indicator of ill-gotten gains resulting from money laundering, corruption, or other financial crimes. It is essential that these red flags can be disclosed to LEAs. Moreover, FIUs
BOX 2.3
Definitions of Unexplained Wealth across Jurisdictions
Australia. Unexplained wealth arises when there are “reasonable grounds to suspect that the person’s total wealth exceeds the value of the person’s wealth that was lawfully acquired”— Proceeds of Crime Act 2002 (as amended), sec. 179B(1)(b). Mauritius. Unexplained wealth includes “any property—(a) under the ownership of a person to an extent which is disproportionate to his emoluments and other income; (b) the ownership, possession, custody or control of which cannot be satisfactorily accounted for by the person who owns, possesses, has custody or control of the property; or (c) held by a person for another person to an extent which is disproportionate to the emoluments or other income of that other person and which cannot be satisfactorily accounted for”—The Good Governance and Integrity Reporting Act 2015, Act 31/2015, Government Gazette of Mauritius No. 122, December 10, 2015, sec. 2. United Kingdom. One key condition for unexplained wealth is that “there are reasonable grounds for suspecting that the known sources of the respondent’s lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property”—UK, Criminal Finances Act 2017, sec. 362B(3).
