Money laundering & asset recovery
What’s the issue?
The UK, as a major financial centre, and its Overseas Territories and Crown Dependencies, have long been attractive destinations for laundering dirty money. In 2018, the Financial Action Task Force found that the UK faces “significant money laundering risks from overseas” because of its status as a global financial centre and as the world’s largest cross-border banking centre.
Transparency International, in 2019, estimated that over £325 billion of suspect funds has been funnelled through the UK over the past 30 years.
While there is no official figure for how much money is laundered through the UK, the National Crime Agency found that there was a “realistic possibility that the scale of money laundering impacting the UK is in the hundreds of billions of pounds annually”.
What is the Proceeds of Crime Act 2002?
The Proceeds of Crime Act aims to ensure that proceeds of crime and corruption can be confiscated.
The UK’s Law Commission is currently reviewing the Act because, it says, that the current law is “unduly complex and can hamper the effective recovery of the proceeds of crime.”
The UK’s National Audit Office has been critical of how the UK’s confiscation regime is working in practice.
The government’s 2019 Asset Recovery Action Plan sets out an ambition to increase asset forfeiture and confiscation year-on-year.
What are Unexplained Wealth Orders & Account Freezing Orders?
The Criminal Finances Act 2017 introduced two new investigative tools to help law enforcement more effectively freeze suspect goods and money.
Unexplained Wealth Orders (UWOs) are a civil power and investigation tool issued by a High Court. They are not a power in themselves to recover assets. They can apply to
Anyone reasonably suspected of involvement in or being connected to someone involved in serious crime.
A senior government, judicial or military figure or a member of their family (a Politically Exposed Person) outside of the European Economic Area regardless of whether a crime is suspected or not.
In both instances, the person subject to the UWO must provide information relating to their ownership of a property and how they acquired it. Evidence compelled under a UWO cannot be used against someone in a criminal prosecution. Failure to give an adequate response, however, gives rise to a presumption that the asset may be recovered through civil means.
While UWOs have received a lot of attention, law enforcement authorities have indicated that Account Freezing Orders (AFOs) are even more useful to them in confiscating corrupt assets.
AFOs allow enforcement agencies to seek approval to freeze all money in a bank or building society account where:
They suspect the money may on the balance of probabilities come from unlawful conduct, or
They suspect it is intended for use in unlawful conduct.
AFOs can be issued by a Magistrate’s court and can stay in place for up to two years, allowing enforcement agencies time to investigate. Once an AFO is in place, law enforcement can issue an Account Forfeiture Notice. These Notices allow law enforcement to seize the money in the account unless an objection is made.
Law enforcement bodies can also apply to the Court for an Account Forfeiture Order to take the money in an account frozen under an Account Freezing Order, where on a balance of probabilities that the money was unlawfully gained or intended for unlawful use.
What does Spotlight on Corruption do?
We track whether the UK’s laws designed to deter the laundering of corrupt money and confiscate the proceeds of corruption are working.
We particularly focus on:
Whether corrupt assets coming into the UK are being frozen and confiscated using civil forfeiture under the Proceeds of Crime Act.
How tools such as Unexplained Wealth Orders and Account Freezing Orders are impacting on the ability of the UK to detect and freeze corrupt wealth.
Whether the UK is effectively deterring individuals and institutions in the UK from being involved in high-end money laundering through enforcement of the Proceeds of Crime Act 2002 and Money Laundering Regulations 2017.
James Ibori: Confiscating the corrupt assets of a Nigerian Governor – First published March 2021
An overview of all the UK litigation related to James Ibori, with relevant court documents. (Frequently updated)
Blog by Joseph Sinclair.
The ruling to discharge the UK’s second Unexplained Wealth Order against Kazakh political figures in early April raises some key issues for the regime discussed in this blog.
UK’s new ‘freeze and seize’ powers upheld in Moldovan money laundering case – 20 November 2019
Blog by Susan Hawley on the UK’s Account Freezing Orders, and the recent appeal in which their use was upheld in a Moldovan money laundering case.
Blog by Susan Hawley questioning how and why the FATF gave the UK one of its highest ever compliance ratings for a major financial centre.
BOND paper by Corruption Watch, Global Witness and Transparency International UK outlining four key areas where the FATF review needed to be more robust.
Blog by Susan Hawley looking at how few prosecutions there are in the UK for high-end money laundering.
The UK’s first UWO has landed. What comes next? – October 2018
Blog by Susan Hawley on the UK’s first Unexplained Wealth Order against the wife of the former central banker of Azerbaijan. The blog asks whether the UK has the appetite a) to use UWOs against those in power not just those who have fallen out of power and b) to prosecute the professionals involved in helping the subject of the UWO move her money into the UK.
Accountable asset return: UK country-level civil society report – December 2017
Joint paper by Corruption Watch and Transparency International on the strengths and weaknesses of the UK’s asset recovery regime that recommends greater use of enforcement measures to recover assets, more transparency about asset recovery actions, and strengthened private sector accountability.
Corruption Watch blog on ruling that enables courts to freeze and confiscate assets even where foreign courts have not found any evidence of wrongdoing.