FOR successful crooks and corrupt foreign officials, Britain has long been a popular place to stash dodgy cash. Investing a few million pounds in a house in a discreet London neighbourhood is a neat way to hide stolen money. But Britain is getting tougher on such ruses.
The government hopes that “unexplained-wealth orders”, part of the Criminal Finances Act 2017, which comes into effect on September 30th, will make it easier to seize the loot of crooked bureaucrats and con artists.
The National Crime Agency reckons that up to £90bn ($120bn) is laundered through Britain each year, which is probably an underestimate. The capital’s status as a centre of global finance and a wealthy, cosmopolitan city where rich foreigners attract little attention makes it an attractive destination. Its booming housing market makes a particularly good hiding place. In March Transparency International, an anti-corruption group, identified £4.2bn worth of property reckoned to have been bought by politicians and public officials with suspicious wealth.
Seizing the property of foreign crooks has proved difficult. A £9m Hampstead mansion owned by a son of Muammar Qaddafi, Libya’s late dictator, is the only asset to have been recovered from those connected to the regimes toppled in the Arab Spring and have its ownership returned to the country of origin. Securing criminal convictions for corruption, either in Britain or in the offender’s home country, is time-consuming and difficult. Shell companies hide who really owns properties.
Unexplained-wealth orders will make the seizing of such assets easier. Where there is a significant disparity between what an individual earns and what they own, be that a mansion in Mayfair or a fleet of Bugattis, law-enforcement officials will be able to apply to a judge for an order to demand evidence that such items were purchased legitimately.
Three conditions must be met: the subject must be a “politically exposed person” from outside the European Economic Area or someone reasonably suspected of involvement in serious crime; their known income must be insufficient to have purchased the property in question; and the asset must be worth more than £50,000. Most significantly, the orders will shift the burden of proof towards the accused, who will have to demonstrate that their assets were acquired legally. If they cannot, the assets may be frozen. Lying about them will be a criminal offence.
Several other countries, including Australia and Ireland, have similar laws. Ireland has focused on organised crooks rather than foreign politicians. In February John Gilligan, a big crime boss, lost an appeal against the freezing of his assets in 1996. Australian officials have been reluctant to use the measures at their disposal, for reasons both bad and good, says Jason Sharman, an expert in international corruption at Cambridge University. Police worry that if such orders were successfully challenged, a lousy precedent would be set, so they are wary of using them at all. But they have other tools at their disposal, such as increasing the taxes owed by the owners of suspiciously pricey property.
Britain is innovative when it comes to fighting corruption and has considerable expertise. Its weakness has been that the resources available are limited compared with the scale of the problem, says James Maton, a lawyer who works in asset recovery.
Unexplained-wealth orders may help by lessening the initial burden on investigators. But other difficulties remain. It is not yet clear whether foreign politicians will be able to claim immunity from such orders. And although David Cameron, the previous prime minister, was enthusiastic about efforts to fight corruption, campaigners worry that Theresa May, burdened by Brexit, may prove less zealous.
Plans for a public register showing the beneficial owners of property controlled by overseas companies (mostly shell ones) have been announced but not yet implemented. After Brexit, Britain will have to decide what sort of country it wants to be. In fighting corruption, says Duncan Hames of Transparency International, it has a chance to be a beacon or a buccaneer.