A growing minority of people are suddenly becoming inexplicably filthy rich. While the number of homeless people, those in imminent danger of no longer having a roof over their heads, those who are continually striving to make both ends meet and those resorting to soup kitchen facilities keeps on increasing, the remaining majority of us are gripped by this rising sudden wealth phenomenon.
Yet, our legislators keep on shunning any attempt to legislate for addressing and punishing any unexplained wealth that, in all probability, has a suspicious or difficult-to-prove illicit or criminal activity origin.
In 2020, then justice minister Edward Zammit Lewis attempted to introduce an ‘unexplained wealth order’ law that aimed to provide for executive powers to clamp down on unexplained wealth and the accumulation of assets such as cars, boats and property without properly justifying the origins of the money.
Regrettably, it was placed on the back burner as it was not met with unanimous favour inside the cabinet.
In 2022, then, the Nationalist Party drafted a proposed law that incorporated all the major recommendations made by the Daphne Caruana Galizia public inquiry. In that draft, there was a law that would force criminals and politicians to disclose unexplained wealth. They would have no option but to disclose the source behind the unexplained wealth or risk having their assets seized.
A breach of the so-called unexplained wealth order law proposed by the opposition would have resulted in a prison sentence of up to two years, a move aimed at clamping down on politicians and criminals accumulating assets without disclosing the source of funds behind them.
Apart from forcing the individuals to disclose the source of their unexplained wealth, the law would also have given the authorities the power to seize assets suspected of being financed by criminal activities.
Once more, nothing came out of it as Prime Minister Robert Abela decided to dismiss PN calls for such a law.
To date, Maltese legislation allows freezing orders in the country’s fight against money laundering and assets and gains from criminal activities. Contrary to unexplained wealth, however, a criminal conviction is required for the order to be definite and it is then left to the person convicted to prove before the civil courts that such property was not derived through criminal activity.
With this background, one reasonably doubts whether the tools that the government has at its disposal are sufficiently yielding the desired results in recovering the proceeds of corruption.
Legal actions to recover assets are often unsuccessful when they fail to establish that a property is derived from a given offence, as required by criminal as well as civil confiscation. This link can be difficult to establish when there is no money trail leading from the jurisdiction harmed by corruption to the one in which the ill-gotten gains are laundered.
Maltese legislation allows freezing orders in the country’s fight against money laundering and assets and gains from criminal activities- Mark Said
For example, a government official may receive bribes in foreign bank accounts held by shell companies and invested in real estate. When there is no specific information about a specific corrupt transaction, opening an investigation on the origin of the property may be legally challenging; moreover, obtaining evidence for criminal, or even civil, confiscation may require years of complex investigations without guarantee of success.
To overcome these obstacles, several countries, including Australia, Kenya, Mauritius, the UK, Trinidad and Tobago and Zimbabwe, have introduced the unexplained wealth order. It is a civil court order that can assist in investigating or confiscating assets that are incommensurate with a person’s known sources of income.
Investigations start off if authorities show a manifest discrepancy between legitimate earnings, as evidenced, for example, by tax statements or declarations of income, and the assets they own. Once that discrepancy has been demonstrated, the person concerned will generally have to prove, to the satisfaction of the court, the legal origin of those assets.
If this person does not, the consequence depends on the legal provisions adopted by the jurisdiction. In the UK, where the order is an investigative measure, authorities can seek civil confiscation following the rules of non-conviction-based confiscation. In other jurisdictions, the system encompasses both the ability of certain authorities to compel the production of information as well as the ability of courts to confiscate any wealth that is not explained to the satisfaction of the courts.
Unexplained wealth orders can result in an increase in proactive investigations where the discrepancy between assets and legitimate sources of income has not traditionally been sufficient to legally open a formal corruption or money-laundering investigation.
The legislation would provide the legal justification for initiating investigations based on findings from various sources (including tax and customs administrations, whistleblowers or chief security officers). This may prove particularly fruitful in the case of investments in financial centres by politically exposed persons (PEPs), high-net-worth individuals or shell companies. It will help to overcome evidentiary challenges linked to criminal confiscation provisions.
Above all, such legislation would contribute to reinforcing our asset recovery regime in line with G20 high-level principles and FATF standards in the coming years.
Unless the government gets serious about legislating for the possibility of unexplained wealth orders, the sudden wealth syndrome is bound to spread among all those dealing in suspicious, corrupt and fraudulent transactions, while we will surely not see any sudden wealth fatigue soon enough.
Mark Said is a lawyer.