Unexplained Wealth Orders: A Powerful Tool To Fight Financial Crime Or A Threat To Civil Liberties?

Supported By:

Net Patrol International Inc.  Data Investigation and Forensic Services
Bankruptcy and Insolvency Trustees

Imagine this, you own a multi-million dollar house and drive a luxury vehicle. You possess a designer watch collection amongst other high-end art collectibles. You’ve caught the eye of the B.C. Government who ask you how you’ve financially acquired these goods. In that moment, you are an ‘alleged’ launderer, and you have to provide a satisfactory (and hopefully honest) explanation to the government which describes where you got the money from.

You may have good and valid reasons for not wanting to disclose how you paid for the goods. Perhaps it was a gift from a benefactor; perhaps the goods were inherited; or perhaps, you simply want to maintain your privacy and discretion.

If you do not provide a satisfactory response, you could be faced with a civil claim, alleging that you obtained your wealth through illegal means.

This is what has recently happened to a couple who purchased a home on Salt Spring Island worth nearly $2 million dollars. Frankly, in today’s market in B.C., a $2 million dollar home is not beyond the realm of possibility for the average middle class.

Unexplained Wealth Orders

The B.C. Government recently amended the Civil Forfeiture Act to establish Unexplained Wealth Orders (UWOs). These orders seek to empower authorities in B.C. to confiscate luxury goods from owners who cannot explain where the money to pay for the items came from.

The first civil forfeiture action seeking a UWO in B.C. alleges that the couple bought the house on Salt Spring Island using proceeds from a $200 million international stock fraud. The government is looking to seize the house under the legislation.

UWOs are aimed to go after people who are alleged to have committed some sort of financial fraud, but civil liberties groups have described these orders as an invasive measure that undermines the presumption of innocence and erodes privacy rights. When sued under this legislation for a UWO, the plaintiff is presumed to be guilty until they can prove they are innocent. It forces the property owner to show it is more likely than not that their goods were acquired legally.

It’s Not Just for the Rich

The legislation does not discriminate. There is no threshold to what quantifies as a ‘luxury’ good. The purpose of UWOs is to ensure that nothing is purchased with monies obtained through financial crime.

There is no doubt that the basic intent of the UWOs is to discourage criminal activity. The Minister of Public Safety and Solicitor General has recently voiced his concerns about the increasing sophistication of money-laundering schemes and UWOs can play a pivotal role in combating organized financial crime by eliminating the incentives associated with such illicit activities.

However, when discussing the implementation of this recent law, it is essential to assess the balance between its potential benefits and drawbacks.

Considering the potential infringement on constitutional rights and the adverse effects on fundamental civil liberties and due process, there is real doubt that any potential benefits created by UWOs could outweigh the costs to Canadians. Similar regulations were enacted in the United Kingdom in 2017, but investigators have been hesitant to utilize the orders due to the high legal costs associated with litigating and enforcing the orders. Since 2017, only one successful case has come from the UWOs in the UK.

What to do if you are faced with a UWO lawsuit

If you are facing a UWO civil action, you should immediately seek legal advice. Typically once served with an action, you only have 21 days to respond or else a default judgment can be entered against you. If your property or goods are at stake, it would be wise to ensure that you have proper defense through legal means.