Establishing Exchange of Information Channels for Tax and Criminal Investigative Agencies
I
19
receive suspicious transaction reports, offering insight into potentially unusual and large movements of money. This information can also be very useful to tax authorities because they could open their own tax verifications or investigations. Conversely, LEAs may, through audits, detect unexplained wealth in the context of corruption or money laundering investigations,33 net worth analysis, or criminal proceedings for illicit enrichment offenses. Therefore, laws authorizing or mandating authorities to detect and investigate “unexplained wealth” can be a useful tool to boost the exchange of information between tax authorities and LEAs (see box 2.4 for unexplained wealth order legislation adopted in the United Kingdom). Often, persons ostentatiously displaying their wealth, such as luxurious real estate or cars, attract the attention of the authorities. In addition, disgruntled spouses in divorce proceedings may also reveal previously hidden assets (see case 5 in appendix). To assess whether wealth is truly unexplained, however, authorities would benefit from following a formal, methodical process. Broadly speaking, it requires at least two basic steps: 1. The authorities assess what is known (that is, what is “reasonably ascertainable from available information at the time”34) to be a person’s lawfully obtained income and wealth arising from employment, assets, or otherwise. For public officials and politicians, some of this infor mation should be readily available because they are paid directly by the
BOX 2.4
The United Kingdom’s Unexplained Wealth Orders
In 2017, under the Criminal Finances Act, Section 362, the United Kingdom enacted legislation that shifts to the respondent the burden of proof of how certain suspicious assets were obtained. The “Unexplained Wealth Order” (UWO), which is in effect a new investigative power, is a court order issued to either an individual or a company suspected (on a “reasonable grounds” test) of involvement in serious criminality or having the status of a foreign (non-UK, non–European Economic Area) politically exposed person (PEP) or connected persons. Respondents must explain (within a time specified by the court) the origin of assets that appear to be disproportionate to their known income. When the High Court issues a UWO, it may also issue an interim freezing order for property if it considers it necessary to do so to avoid the risk that any recovery order subsequently obtained is frustrated. Failure of the respondent to comply with the requirements imposed by an UWO gives rise to a rebuttable presumption that the property is “recoverable” as the proceeds of a crime, and it means that LEAs can recover the property through existing civil recovery powers without requiring any further evidence of criminality.a If the respondent complies, the enforcement authority determines the next steps to be taken in relation to the property. UWOs go further than the United Kingdom’s current civil recovery procedure by shifting the burden of proof to the accused, who must demonstrate that the asset was acquired legally. a. Recently, a UWO was successfully applied to a UK businessman (NCA 2020).
