Combining Tax and Financial Crime Prosecution in an Interagency Asset Recovery Strategy
BOX 3.2
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Country Examples of Illicit Enrichment and Possession of Unjustified Resources
France. In 2013, France enacted a reform on money laundering. When financial transactions obviously have no purpose other than concealing the origin of funds or the ownership of assets, these funds or assets can be confiscated as proceeds or instruments of money laundering, unless the defendant proves the legitimate origin of the funds or assets. In addition, for all predicate offenses punishable by at least five years of imprisonment, the confiscation can be carried out for all the properties of the defendant, unless the defendant proves that their origin is legitimate. Some have called into question the constitutionality of these provisions, but the French Supreme Court determined they were constitutional in its decision of June 16, 1999. Similarly, in its decision of October 7, 1988, the European Court of Human Rights found that, under certain circumstances, presumptions of law or facts are acceptable in criminal law if the burden on the defendant is not excessive or disproportionate. As a result, French prosecutors can now open investigations on the laundering of proceeds derived from tax evasion, which allows the use of anti-money laundering and organized crime procedural tools. Mauritius. Mauritius introduced the concept of the unexplained wealth order (UWO) in the Good Governance and Integrity Reporting Act 2015 (GGIRA), which also established the Integrity Reporting Services Agency (IRSA). The GGIRA applies to the property of Mauritian citizens, regardless of location. Under this statute, a UWO is a form of nonconviction-based asset confiscation (action in rem) and does not require a criminal conviction. The GGIRA also shifts the burden of proof to the owner of the property, who must show, on the balance of probabilities, that his or her wealth is of legitimate origin. The first UWO granted in Mauritius was obtained when the Mauritius Revenue Authority (MRA) referred a case to the IRSA of a man stopped at the airport carrying a huge amount of undeclared cash. Had the MRA believed the cash to be of legitimate origin, it would have raised a tax assessment and applied a penalty. However, in this case the MRA did not believe it to be of legitimate origin and so referred the matter to the IRSA. The man similarly failed to show the IRSA and a high court judge that, on the balance of probabilities, the cash had a legitimate source, and so it was confiscated through a UWO. A good example of information flows in the other direction occurred when the IRSA referred a case to the MRA. The respondent in question was suspected of involvement in money laundering by converting proceeds of drug offenses into immoveable property and a variety of businesses. In seeking to demonstrate the legitimate origin of his assets, his salary slips showed the respondent was not filing his tax returns properly. They were then turned over to the MRA, which initiated a tax assessment and then applied a penalty. The referral to the MRA had no impact on the IRSA’s unexplained wealth investigation, which is ongoing.
Prosecutors who launch money laundering investigations often consider also charging tax evasion for two reasons: (1) the nondisclosure of assets in foreign jurisdictions is frequently a tax violation per se; and (2) the undeclared foreign assets may be derived from the proceeds of tax fraud, and, if so, their transfer or possession abroad constitutes laundering of the proceeds of
