Source: https://www.brightlinelaw.co.uk/bll-bulletin/uwos-and-the-steady-expansion-of-extra-territorial-jurisdiction-over-financial-crime.html
Timestamp: 2019-07-16 20:16:36
Document Index: 619096142

Matched Legal Cases: ['art 5', 'art 5', 'art 7', 'art 5', 'art 5', 'UKHL ', '§ 1', '§ 7', '§ 12', '§12', 'UKSC ', 'EWCA ']

UWOs and the steady expansion of extra-territorial jurisdiction over financial crime - BLL Bulletin | Bright Line Law - Bright Line Law News
UWOs and the steady expansion of extra-territorial jurisdiction over financial crime
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Speed Read: Vanessa Reid examines the ever-expanding jurisdiction of UK criminal courts over extra-territorial conduct, persons, and property.
As has been widely noted, the newly enforceable Unexplained Wealth Orders (UWOs)—created by the Criminal Finances Act 2017—have an aggressively extra-territorial reach. They apply to persons and property located anywhere in the world, and the suspected criminal conduct need not have taken place in the UK. Moreover, non-EEA Politically Exposed Persons are specifically identified as being subject to such orders. These broad powers represent the latest salvo in a long-running tug of war regarding the proper scope of extra-territorial jurisdiction in the UK’s efforts to combat financial crime, money laundering, and corporate crime.
The presumption against extra-territoriality
There is a “well-established” canon of statutory construction that, in the absence of clear language to the contrary, an Act of Parliament should not be given extra-territorial effect.[1] Courts have therefore been understandably cautious about extending the application of laws governing financial crime, money laundering, and criminal confiscation to property and conduct occurring outside the UK without clear direction from the legislature. Law enforcement agencies, on the other hand, have repeatedly pushed for ever-expanding powers to combat financial crime, including the power to address extra-territorial misconduct and seize assets held overseas.
King v Director of the SFO: External requests not a “gateway” to worldwide jurisdiction
The House of Lords first addressed the question of the extra-territorial reach of the Proceeds of Crime Act 2002 (POCA) in the 2009 case King v Director of the SFO.[2] The King decision held that under the statutory scheme set forth in POCA, a UK court responding to an “external request” made by an authority of a foreign country did not have jurisdiction to restrain or order the confiscation of assets held outside the UK.
In King, the South African prosecuting authority petitioned the UK for assistance in obtaining restraint and disclosure orders against the assets of a British subject residing in South Africa who had been charged with large-scale fraud, money laundering, and racketeering. The petition referred to assets “whether . . . in or outside England and Wales.” The SFO therefore requested a worldwide freezing order.
The Crown Court judge determined that he had the power to make such a worldwide order.[3] He found that POCA provisions requiring that an external request identify “relevant property in England and Wales” were merely a “gateway” to the exercise of the court’s jurisdiction over property located overseas.[4]
The Court of Appeal disagreed, as did the House of Lords. Both courts found that orders made in response to external requests were limited to property in England and Wales.[5] The House of Lords decision noted that to allow otherwise would lead to a “confusing, and possibly conflicting, overlap of international requests for assistance.”[6] In interpreting POCA’s arguably conflicting provisions regarding overseas property and external requests, the decision cited the long-standing presumption against extra-territoriality in criminal law.[7]
The Bribery Act 2010 significantly expands worldwide jurisdiction
The Bribery Act 2010 created several new bribery-related offences applicable to individuals[8] and a new offence applicable to commercial organisations that fail to prevent bribery by their employees or agents.[9] In doing so, the Act significantly expanded the extra-territorial jurisdiction of UK courts, particularly with respect to business organisations.
The Act provides that courts enforcing the new individual bribery offences have jurisdiction over conduct which occurred entirely overseas if the individual who committed the act or omission has a “close connection” to the UK.[10] This sweeps in all British citizens and nationals, regardless of their residence or the location of the relevant conduct, as well as any foreign nationals committing bribery-related offences anywhere in the world if they ordinarily reside in the UK.
The failure-to-prevent offence for commercial organisations establishes still broader extra-territorial jurisdiction. Section 12 of the Act provides that any commercial organisation carrying on a business or even part of a business in the UK may be prosecuted in the UK, regardless of where the relevant conduct took place or whether the person who committed the act or omission has any ties to the UK.[11] This constituted a substantial extra-territorial extension of the jurisdiction of UK criminal courts and enforcement agencies, going beyond what had been granted by previous legislation or the general criminal law.
Perry v SOCA: international civil recovery orders constitute “exorbitant jurisdiction”
In the 2012 case Perry v SOCA, the Supreme Court once more considered POCA proceedings with respect to overseas property, this time in response to a POCA Part 5 civil recovery action initiated by UK authorities.[12]
In Perry, the appellant was convicted by an Israeli court for offences relating to a complex pension fraud scheme that took place entirely in Israel. He subsequently served a prison sentence and paid a £3 million fine. UK authorities then learned that the appellant and several of his family members had bank accounts in London containing approximately £14 million. The Serious Organised Crime Agency (SOCA) therefore sought and obtained disclosure and property freezing orders against the appellant and his family members in respect of all of their assets worldwide. None of the respondents were located in the UK at the time the orders were issued.
The Supreme Court held that POCA did not permit courts to issue freezing orders, disclosure orders, or civil recovery orders regarding property or persons located outside the jurisdiction. The Perry decision reasoned that permitting civil recovery proceedings in respect of property outside the court’s jurisdiction would involve an “exorbitant jurisdiction in personam without any basis in international law [and] would also be likely to prove ineffective.”[13]
The Crime and Courts Act 2013: Parliament expands scope of civil recovery powers
This strict interpretation of POCA’s extra-territorial powers did not last long. The Perry decision was expressly overridden by Parliament in the Crime and Courts Act 2013, which amended POCA to authorise the making of a civil recovery or freezing order under Part 5 in respect of property “wherever situated” and a person “wherever domiciled, resident or present” as long as there was some connection between the case and the UK.[14] This would prove a precursor to the equally broad powers soon to be granted with respect to UWOs.
R v. Rogers: Court of Appeal establishes jurisdiction over extra-territorial money laundering
Similar principles were soon extended to overseas money laundering. In the 2014 case R v Rogers, the Court of Appeal found that an individual can be prosecuted under POCA Part 7 for committing a money laundering offence even if the relevant conduct took place entirely outside the UK, so long as a significant part of the underlying criminal scheme took place in the UK and the scheme had harmful consequences in the UK.[15] The Rogers case involved a UK citizen and monies derived from a criminal scheme which took place within the UK—only the money laundering itself took place overseas.
The court accepted the government’s argument that, in spite of the historical presumption against extra-territoriality in criminal law, “more modern views on jurisdiction” hold that in the absence of any express geographical limitation in a statute, principles of international comity allow the court to look to where the “essence or gist of the offence” took place.[16] The court also found that money laundering is “par excellence” an offence which transcends international boundaries, and it would therefore be “surprising” if Parliament had not intended the Act to have extra-territorial effect, in spite of the lack of any express language so providing.[17]
Some commentators have questioned the wisdom of the Rogers decision, noting its potentially significant impact on practitioners providing client services abroad.[18] Jonathan Fisher points out that the decision leaves unaddressed the scope of the UK criminal courts’ jurisdiction over non-UK citizens handling money outside the UK or those handling money derived from criminal conduct committed outside the UK.[19] Fisher suggests that the case may have been wrongly decided, particularly given that Parliament had not yet spoken to the issue as it had in context of POCA Part 5 and the Bribery Act offences.
Corporate Facilitation Offences
The Criminal Finances Act 2017 (CFA) created two new corporate facilitation offences—sections 45 and 46—for failure by a company to prevent facilitation by its agents or employees of the evasion of UK or foreign taxes.[20] For a firm to be liable under these provisions there must have been criminal tax evasion by a tax payer (either an individual or a firm) of UK or foreign law, criminal facilitation of the offence by a representative of the firm, and a failure by the firm to prevent its representative from committing the criminal facilitation. A business may mount a reasonable procedure defence, wherein it will not be held liable where it can show that it had implemented reasonable prevent procedures or where it can show that, in the circumstances, it would have been unreasonable or unrealistic to have expected it to have had procedures in place.
The worldwide reach of these new offences mirrors that of the Bribery Act. Where there has been evasion of UK taxes, any company based anywhere in the world can be haled into a UK court, regardless of whether it conducts any business at all in the UK. Where foreign taxes have been avoided, a company may be liable if it is incorporated under the law of the UK, carrying on a business or part of a business in the UK, or the conduct constituting the criminal facilitation takes place within the UK.
UWOs and the on-going expansion of extra-territorial jurisdiction over financial crimes
As noted above, the introduction of UWOs by the CFA represents the latest advance in the steady expansion of the extra-territorial powers of UK criminal courts and law enforcement agencies over financial crime, money laundering, and corporate crime.[21]
UWOs are a civil investigatory tool requiring a non-EEA Politically Exposed Person or a person suspected of involvement in a serious crime—whether in the UK or elsewhere—to account for the source of any property valued at over £50,000 that cannot be explained by a known legitimate source of income.[22] A UWO may be made in respect of “any property” so long as the other requirements for issuance are met.[23] Failure to provide an adequate explanation for the property’s origin will result in a presumption that such property is recoverable in any proceedings under Part 5 of the Proceeds of Crime Act 2002 (POCA). Moreover, knowingly or recklessly providing a materially false or misleading statement in response to a UWO is a criminal offence.[24]
Although the extra-territorial dimension of UWOs has received considerable attention, it is likely that practical difficulties in gathering information from other jurisdictions will be the biggest impediment to their widespread use overseas. Thus far, the focus of the prosecuting agencies requesting UWOs appears to be property situated in the UK.[25] Time will tell whether the full promise (or threat) of UWOs with respect to extraterritorial property will be realised.
While it remains to be seen to what extent this new power will actually be put to use overseas, this new addition to POCA indicates Parliament’s apparent willingness to continue expanding international jurisdiction over financial crime, money laundering and corporate crime whilst largely maintaining traditional territorial limitations in other areas of criminal law.
[1] Air India v Wiggins [1980] 71 Cr App R 213.
[2] King v Director of the Serious Fraud Office, [2009] UKHL 17.
[3] Id. [25].
[5] Id. [31]-[32].
[6] Id. [31].
[7] Id. [32].
[8] The Bribery Act 2010 (Commencement) Order 2011 (SI No. 1418 of 2011) §§ 1, 2 and 6.
[9] Id. § 7.
[10] Id. § 12(2)-(4).
[11] Id. §12(5); Ministry of Justice, The Bribery Act 2010 – Guidance [15]-[16].
[12] Perry and Ors. v SOCA [2012] UKSC 35.
[13] Id. [69].
[14] CCA s. 48.
[15] [2014] EWCA Crim 1680.
[16] Id. [36]-[37].
[17] Id. [52].
[18] See Jonathan Fisher, “Case to answer: R v Rogers – implications for practitioners,” BLL Portal (6 May 2015). https://www.brightlinelaw.co.uk/bll-portal/case-to-answer-r-v-rogers-implications-for-practitioners.html (https://www.brightlinelaw.co.uk/bll-portal/case-to-answer-r-v-rogers-implications-for-practitioners.html)
[20] Criminal Finances Act 2017 s. 45-46.
[21] Criminal Finances Act 2017 s. 1-3.
[22] POCA s. 362A-362B.
[23] POCA s. 362B.
[24] POCA s. 362E.
[25] See Mattha Busby, “First Ever UK Unexplained Wealth Order Issued,” Organized Crime and Corruption Reporting Project (2 March 2018).
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Wednesday, 04 April 2018 UWOs and the steady expansion of extra-territorial jurisdiction over financial crime