The UK Criminal Finances Act: Freezing Suspiciously Obtained Property to Fight Global Corruption

3 min

With the passage of the Criminal Finances Act 2017 (the Act) last week, which provides for the issuance of Unexplained Wealth Orders (UWOs), the United Kingdom has given British law enforcement a powerful tool in the war against global corruption, with serious implications for individuals and companies doing business overseas. Among other things, the new law creates a controversial asset forfeiture regime for property suspected of being derived from a serious crime (like bribery, fraud, and money laundering). Anti-corruption activists in London have lauded the measure as the most significant piece of legislation in the fight against global corruption since the enactment of the UK Bribery Act in 2010.

Under the Criminal Finances Act, suspicious property that is reported to a government authority (through a Suspicious Activity Report or similar reporting mechanism) may be immediately frozen at the request of a government enforcement agency if a high court judge is satisfied that (1) the owner of the property is likely in possession of suspicious wealth beyond his or her means, (2) the owner is a foreign Politically Exposed Person or is reasonably suspected to have been involved in a serious crime, (3) the owner's known income is insufficient to obtain the asset, and (4) the value of the asset is greater than £50,000 (USD$65,000). When using a UWO to seek forfeiture, authorities do not need to establish a predicate offense; instead, the law reverses the burden of proof by compelling the subject of the UWO to provide a satisfactory explanation for the source of the wealth in question.

While the Act's UWO regime is not the first of its kind (similar laws exist in Australia, Colombia, and Ireland), it is unique in that it targets "foreign politically exposed persons"—an overt escalation of enforcement against public officials and political leaders abroad (potential recipients of bribes) that will likely have serious implications for companies with compliance obligations under the UK Bribery Act and Foreign Corrupt Practices Act. The seizure of UK-based property of foreign politically exposed persons accused of obtaining such assets with illicit funds poses a significant risk for companies connected to those officials, whether they have been involved in wrongdoing or not. For example, the forfeiture of a £3,000,000 house in the UK that is owned by a foreign official who works in his country's trademark office and makes £50,000 per year could implicate an American-based company with an employee who has simply had business dealings with the foreign official—or, more seriously, a rogue employee who has provided gratuities or bribes to the foreign official. Even if the American company is confident that it was not involved in any unlawful activity, the trademark official's involvement could prompt heightened scrutiny if the company had dealings with him. Companies should monitor the Act's enforcement and, in particular, the use of UWOs against government officials in the industries they and their partners are engaged in abroad.

Venable has a deep bench of lawyers who have advised clients on anti-corruption compliance measures and defended clients subject to anti-corruption investigations. Our background and experience set us apart as we represent companies that need help navigating developments in the enforcement of anti-corruption laws in the United States and around the globe.