Unexplained Wealth Orders Come to Canada
We’re going to take a short hiatus over the Christmas holiday and be back with a bang in January. We’ve got a great year of content lined up for you! As always, feel free to suggest topics that are of interest, and please share this with your network to help grow our community. But most of all, have a good holiday, and a great start to the new year! Thanks for caring about illicit finance.
In November, the province of British Columbia issued its first unexplained wealth order, and the first unexplained wealth order in Canadian history.
The order targets two BC residents, and requires that they explain how they got $1 million to buy a home on Salt Spring Island. The couple are believed to be beneficiaries of a major stock fraud scheme (a pump and dump arrangement involving a Swiss firm that hid the beneficial owners of the companies). One of the subjects of the order bought the home for $1 million cash in 2017, and listed her occupation as “home maker”.
The house in question, obtained from a realtor’s website. The listing has since been removed.
Unexplained Wealth Orders, in Brief
UWOs compel people to explain how they acquired their wealth in cases where there are suspicions that it came from criminal activity. UWOs do not require a criminal conviction in order for assets to be seized. In other jurisdictions, UWOs are sometimes viewed as an investigative tool to help build evidence for a criminal case, because in responding to the UWOs, individuals might reveal additional information that can be useful for securing a conviction.
UWOs are seen as tools for addressing complex money laundering and professional money laundering networks, and might be particularly useful where there is (and will likely always be) insufficient evidence for a criminal conviction, such as in cases where international crime has occurred and the ability to get evidence is limited. Read more here.
These orders compel people to explain how they acquired their wealth in cases where there are suspicions that it came from criminal activity. They can also target assets that are used to engage in unlawful activity, and where the property or a portion of the property was acquired or is maintained as a result of unlawful activity.
Use in Canada
In British Columbia, the Civil Forfeiture Act was amended to include legislation to allow for unexplained wealth orders. These orders target assets of more than $75,000 and are meant to address some of the deficiencies identified in the Cullen Commission. Read more here.
Manitoba might soon also introduce legislation to create unexplained wealth orders, likely also as part of its civil forfeiture act.
The use of UWOs in Canada are by no means settled law. There are significant civil liberties concerns, particularly whether they undermine the presumption of innocence and if they subvert the rights that shield people from unreasonable search and seizure.
Whatever happens, these orders are likely to end up at the Supreme Court and will almost certainly undergo a challenge under the Canadian Charter of Rights and Freedoms. My view is that these orders are an important tool, but are not a panacea for solving our problems with addressing money laundering, proceeds of crime, and financial crime in general. If they withstand the inevitable charter test, they will likely have to be used sparingly. Canada will need to continue to strengthen our existing financial crime framework and develop new tools for our toolbox to counter adaptive threats.