Illicit Enrichment: Worth How Much?!

Why is it so hard to take dirty money away from crooked politicians and public servants?

About the author: Nick Staite is an Anti-Corruption & Asset Recovery Specialist and part of Stream House’s global expertise network.

The Background

Despite numerous multilateral instruments to prevent and combat corruption and the measures recommended in the 2005 United Nations Convention Against Corruption (UNCAC) to establish transparency and integrity, elected and appointed public officials[1] in developing countries continue to be generously enriched through corruption[2]: every year, their people lose tens of billions from national resources.  Despite the foreword’s assertion that “Corrupt officials will in future find fewer ways to hide their illicit gains”, sadly, the opposite is the case.

Often, this enrichment is not only conspicuous but flaunted: it is an affront to the public, when everybody “knows” that the salary of public officials cannot support their lifestyles.  The public may not know the form their corruption took but are witness to it everyday, may not know the name of their offence but could describe it. Recent data expose’s like the Pandora Papers reveal the methods used to hide their illicit assets from domestic law enforcement agencies and tax authorities, magnifying the perceived extent and scale of the problem.  There is outrage when corruption is not punished but the crook enjoys his or her affluence: it is plainly not fair or just and most observers are mystified that it is not simple to take it off them.

The Position

Chapter III of the UNCAC identifies corrupt activities to be criminalised, alongside penal code offences like theft, forgery, fraud, false accounting:

• Bribery – in the public and private sectors (articles 15, 16 and 21)
• Embezzlement – in the public and private sectors (articles 17 and 22)
• Trading in influence (article 18)
• Abuse of functions (article 19)
• Money-laundering (article 23)
• Concealment (article 24) and
• Obstruction of justice (article 25), in relation to those other activities

Article 20[3] of the UNCAC also encourages States Parties to make illicit enrichment a criminal offence.

The Problem

Apathy and inaction by ruling parties, whose election manifestos routinely promise zero tolerance of corruption and recommend draconian anti-corruption measures, induces cynicism in the electorate.  If there are not even disciplinary consequences for corruptly enriched public officials, others will emulate them. When appropriate offences are in the toolkit, trust and confidence in law enforcement agencies are damaged when they seem to condone corruption by inaction.

Sadly, bribery and extortion offences, committed in secret with no independent witnesses, are notoriously difficult to investigate and prosecute.  Offences related to paid advocacy (lobbying), cartels, cronyism and clientelism are as problematic to prove.  Money-laundering and concealment of the proceeds of crime usually require proof of the commission of a predicate offence, which it may not always be possible to identify.  Under-resourced law enforcement and anti-corruption agencies will find these problems especially challenging.

An offence of illicit enrichment can be investigated covertly, be based on documentary evidence (and ‘source and application’ techniques) and does not demand proof of the offence/s creating the significant increase in the suspect’s assets[4].  However, it sometimes provokes dispute about human rights, and due process, such as the rights to quiet enjoyment of property and to a fair trial (presumption of innocence, silence, burden of proof).  The merits of a case then become obscured, through complaints to constitutional and appeal courts about breaches of those rights.

Moreover, as long as not all jurisdictions treat illicit enrichment as an offence[5], it may be complicated or impossible to seek mutual legal assistance for cross-border investigations and tracing, preserving and recovering suspect assets.

The Situation

It is time to revisit the legal framework for addressing the issue of illicit enrichment.

In the UK, there is no offence of illicit enrichment, despite a long history of statutes and case law reflecting the policy justification, within limits of fairness, for the ‘reverse burden’ [which imposes on an accused person an ‘evidential burden’, namely, to adduce or elicit evidence in support of his/her case].  The European Court of Human Rights, as long ago as 1988, also recognised that the measure can be constitutional.  Many common law jurisdictions which introduced the offence have created precedents for accepting the reverse burden, as proportionate and necessary, without infringing the right to a fair trial[6].  Nevertheless, there is no international consensus on how to make it easier for states to strip their dishonest public officials of the suspect wealth.[7]

That is an overriding objective: although it is right that crooked public officials should be punished, conviction and penalty may be less important than confiscation/forfeiture of what they should not have.  Civil actions for the recovery of the proceeds of crime (“tainted property”) are becoming popular and there are other remedies for victimised states, such as actions based on contract or tort.

Tentative Legal Basis

If we regard “the people” as the principal and public officials as agents, state powers and discretion are delegated to them and, whether or not they like or admit it and however they came to be in office, they owe fiduciary duties to their principal, the people. Any form of abuse of authority, in the exercise of their delegated powers or discretion, is a breach of trust and confidence by those agents.  If done for personal advantage, in the broadest sense, a breach of a fiduciary duty is, per se, an act of corruption. The unjust enrichment of a corrupt agent, even if not at the expense of the principal, stands to be reversed by judicial or administrative deprivation and restitution to the principal, the people.  This holds for those jurisdictions in which the concept of equity applies or could be enacted and in civil law jurisdictions:[8]  In truth the doctrine rests on such obvious principles of good sense, that it is difficult to suppose that there can be any system of law in which it would not be found.

Let us rise to the challenge by the citizens of victimised countries and make it easy for the spoils of corruption to be removed from the public officials who betray their trust.

[1] UNCAC Art.2(a)

[2] There is no UNCAC definition of corruption but Transparency International has offered ‘the abuse of public office’ and ‘the abuse of entrusted power’ for private gain, the second used by the World Bank.

[3] ‘Subject to its constitution and the fundamental principles of its legal system, each State Party shall consider adopting such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, illicit enrichment, that is, a significant increase in the assets of a public official that he or she cannot reasonably explain in relation to his or her lawful income.’

[4] Resorting to an offence of illicit enrichment signals that the prosecutor cannot prove the provenance of the suspect wealth because there is insufficient evidence to convict the holder of a predicate offence – or s/he elects not to attempt to prove it.

[5] Many rich countries opted not to, because of the (misconceived) doubts about constitutionality, although Art.46(9)(c) says that ‘each State Party may consider adopting such measures as may be necessary to enable it to provide a wider scope of assistance pursuant to this article in the absence of dual criminality.’

[6] In 2018, the UK introduced a mechanism, Unexplained Wealth Orders, which requires ownership and funding for suspect property to be evidenced.

[7] https://learn.baselgovernance.org/pluginfile.php/51644/mod_resource/content/8/Illicit_Enrichment_Main-Text-PDF-pages.pdf provides a helpful overview and commentary.

[8] Aberdeen Railway Co. Ltd. v Blaikie https://www.bailii.org/uk/cases/UKHL/1854/1_Paterson_394.html Cranworth LC: ‘A corporate body can only act by agents; and it is of course the duty of those agents so to act as best to promote the interests of the corporation whose affairs they are conducting.  Such an agent has duties to discharge of a fiduciary character towards his principal.  And it is a rule of universal application, that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has or can have a personal interest, conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect.’  THE ENACTMENTS OF JUSTINIAN, THE CODE ~ Book IV ~ Title 35. Concerning the action of mandate, and the counter action: 13. The Emperors Diocletian and Maximian to Zosimus – ‘It is plainly stated by the law that an attorney is liable for fraud and every kind of negligence, but not for unforeseen accidents.’