A new tool to fight economic crimes

Unexplained wealth orders make it harder to launder cash

Unexplained wealth orders enable the targeting of criminal assets, disrupting the financial incentive to commit crime

So-called “unexplained wealth orders” are beginning to make their mark in Canada, as the British Columbia government brings two cases before the province’s Supreme Court in an effort to have a property forfeited as a proceed of crime.

These new tools in the law enforcement arsenal, which have crossed the Atlantic from the U.K., force an alleged perpetrator to explain the source of funds used to buy any asset in cases where there is a suspicion of criminal activity or corruption.

The B.C. government’s forfeiture lawsuit is lodged against a couple relating to their acquisition of a house, purchased outright for $1 million without a mortgage. The lawsuit claims neither had the lawful income to afford or maintain the property, now valued at $1.8 million, alleging the funds originated from a $200 million international “pump-and-dump” stock fraud.

The couple (who also face a civil forfeiture suit) have rejected the allegations and protested their innocence. They are arguing that any action based on unexplained wealth orders (UWOs) infringes on their constitutional rights under Canada’s Charter of Rights and Freedoms 1982.

The orders have been criticized — in my view erroneously — by groups such as the B.C. Civil Liberties Association, which suggest that they undermine constitutional rights, have not been adequately tested, and are expensive to implement.

The ultimate arbiter of all this is, of course, the courts. UWOs are a relatively new phenomenon globally, and very new to Canada. They came into force in the U.K. in January 2018, and were enacted in British Columbia in 2023.

As a Canadian who runs an international law firm focused on multi-jurisdictional fraud matters, the issue of UWOs and how they are deployed is of significant interest.

UWOs enable the targeting of criminal assets, disrupting the financial incentive to commit crime. They place the burden of proof upon an asset owner to prove the lawful origin of their wealth, making it easier for law enforcement to tackle sophisticated money-laundering schemes.

Furthermore, they promote transparency in asset ownership and financial transactions, contributing to a cleaner economy, and in doing so contribute to public safety and security.

They also encourage international co-operation against global financial crimes, making it harder for corrupt foreign officials or organized crime groups to launder money through Canadian assets (“snow washing”).

In addition, UWOs can be used to convert seized assets into revenue for public expenditure. Most importantly to my mind, though, where assets can be directly linked to criminal activities, the seizure and forfeiture of assets can provide a form of restitution to victims.

Under B.C. law, the province must apply for a UWO in each case through the courts and this must meet certain tests: no UWO should be sought by a prosecutor or granted by a court unless the statutory requirements (what lawyers call the “requisite elements of proof”) of such an extraordinary burden of proofshifting remedy are met.

If successful, information from the orders can then be used to pursue civil forfeiture cases where the province aims to seize assets or cash.

Case law will develop over time to clarify precisely how much evidence of “unexplained wealth” needs to be led to credibly and sensibly seek and obtain a UWO. English case law in this area should be considered by B.C. courts as a starting point in their analysis of where to draw the line between granting or refusing to grant these orders.

In my view, like every other developed nation, Canada needs UWOs on its statute books. Otherwise criminals will know that as long as they build a solid series of defences as they go, laundering the proceeds of crime through layers of offshore companies and trusts, they will be able to act with impunity. Without the powers afforded by tools such as a UWO, authorities often lack time and resources to act effectively.

So, when you hear the term “unexplained wealth order,” remember that all that law enforcement is asking is “where did the money come from?” That should be a simple enough question for most Canadians to answer.