Nigel Feetham KC MP

Minister for Justice, Trade and Industry

Thursday 24 October 2024

1. Madam Speaker, I have the honour to move that the Bill for the Proceeds of Crime (Amendment) Act 2024 be read a second time. The Bill amends the Proceeds of Crime Act 2015 (POCA) by inserting new provisions into POCA to allow for Unexplained Wealth Orders. It is an important piece of legislation. Serious crime corrodes the fabric of our society. It undermines our safety, our prosperity, and the rule of law. It inflicts significant, often irreparable, harm on the lives and wellbeing of its victims. 

2. The fight against money laundering and other serious criminal practices poses a major challenge to law enforcement around the world and more tools are needed to recover the proceeds of property acquired using illicit funds. Unexplained wealth orders serve as a proactive and powerful mechanism to tackle money laundering and serious crime, which has been introduced in many countries around the world including Northern Ireland, Australia and England and Wales.  

3. The Bill will therefore enhance the ability of our law enforcement officers to tackle serious crime in Gibraltar. It will make it harder for criminals to fund their lavish lifestyles and to benefit from their ill-gotten gains. Importantly, it will also ensure that Gibraltar remains at the forefront of the global fight against serious crime. This remains especially important in the context of Gibraltar’s next Moneyval evaluation. This House will, no doubt, recall that we came off the FATF “grey list” early this year following my address to the FATF plenary in Paris. It is essential that we maintain momentum with the 2027 evaluation now in sight. 

4. Madam Speaker, the proposed regime was unanimously recommended to the Government of Gibraltar by law enforcement and regulatory bodies earlier this year. There is therefore a strong consensus, by those who are on the front line, that the regime could make a real difference. I hope that this consensus will be echoed throughout the scrutiny of this House. 

5. The Bill will amend the Proceeds of Crime Act 2015 by inserting sections 166A to 166Y. It creates a new regime for the making of Unexplained Wealth Orders and Interim Freezing Orders. Also known as “UWOs” and “IFOs”. The regime has been transplanted from the UWO regime in the UK under Part 8 of the Proceeds of Crime Act 2002 as amended by the Economic Crime (Transparency and Enforcement) Act 2022. 

6. The UWO is an investigation tool. It will sit alongside other investigative measures in POCA, such as Disclosure Orders and Production Orders. It requires a person who is a Politically Exposed Person (PEP) or suspected of involvement in or association with serious criminality to explain to the origin of assets, where those assets appear to be disproportionate to their known wealth or there are otherwise grounds for suspecting that they have been obtained through unlawful conduct. It is therefore about information-gathering. 

7. However, it is an investigation tool which is fortified with real teeth. A failure to comply with a UWO without reasonable excuse will give rise to a statutory presumption that the property in question is recoverable for the purpose of any civil recovery proceedings. It can also be a criminal offence or a contempt of court. There is accordingly a strong incentive to comply with a UWO, by providing the information sought, and correspondingly strong consequences in the event of non-compliance. 

8. The main utility of the UWO is its ability to kick-start an investigation at the very genesis of a case. This is what sets it apart from the other measures. It enables an investigator to obtain information in respect of property about which minimal information is known or available. Where the officer may suspect something, but does not have enough to freeze or recover assets. Particularly in cases where there is an international dimension and the officer cannot rely on co-operation from other jurisdictions or cannot compel disclosure from persons located abroad. 

9. The UK has had its UWO regime for over 6 years. It has been tried and tested. There have been a several cases to date, in which the statutory regime has been challenged and interpreted. Whilst the tool has not been used as frequently as envisaged, it has enjoyed notable success. The cases of Hussain and Hajiyeva have resulted in civil recovery orders being granted by consent, without having to pursue costly proceedings, in respect of assets worth many millions of pounds. The case of Younis has not yet concluded but the High Court has already determined that the National Crime Agency can rely on the statutory presumption following the respondent's failure to comply with the UWO. 

10. There are no constitutional concerns. None were raised during the passage of the Bill in the UK. There are specific statutory safeguards. Moreover, and crucially, the granting of a UWO and any accompanying IFO is subject to significant judicial oversight and discretion, ensuring that justice is achieved in each individual case and that fundamental rights are not contravened without justification. For example, the UWO in the Hajiyeva case was challenged on the ground that it infringed the respondent’s Convention rights under Article 8. However, this was rejected by the High Court judge on the basis that any interference was proportionate and struck a fair balance in all the circumstances. 

11. As we look ahead to the upcoming Moneyval evaluation in 2027, timeliness and effectiveness with which we address financial crime and money laundering will be a determining factor in our remaining off the FATF “grey list”. In the original evaluation, Moneyval pointed out: "198. Given the fact that Gibraltar is an international financial centre, even when one takes the size of the jurisdiction into account, the number of ML cases investigated is low and the number of ML investigations leading to ML prosecutions is extremely low." (Fifth Round Mutual Evaluation Report, 2019, page 63).

12. Whilst the Government sees no reason why these powers should not be used as frequently as necessary, and indeed confidently, it will ultimately be up to the law enforcement bodies to determine when and how to use these powers. The legislation does not undermine the operational independence of law enforcement. The use of these provisions is entirely a matter for law enforcement. 

13. For the benefit of this House, allow me to outline the relevant legislative provisions and the purpose behind them.

14. As I have explained, the UWOs are measures primarily intended to assist in building evidence to support a case for civil recovery of the proceeds of crime under Part 5 of POCA using civil, rather than criminal, powers.   

15. The Bill mirrors the UK provisions contained in POCA 2002 which were introduced in the UK by the Criminal Finances Act 2017 and were more recently amended by the Economic Crime (Transparency and Enforcement) Act 2022 to strengthen and reinforce their existing powers. The Bill reflects the most up to date version of the unexplained wealth orders provision as currently contained in sections 362A to 362U of UK POCA 2002.  

16. We have consulted widely with other jurisdictions and UK experts.  In particular, we have done so in order to identify any limitations to the UK or other regimes and any changes that could be made to make our provisions more useful for law enforcement agencies and a more efficient tool against money laundering and serious crime.  As a result, we have made a few changes I will refer to in due course below.

17. This Bill inserts new sections 166A to 166Y into the Proceeds of Crime Act 2015.  

Obtaining a UWO (section 166A)

18. An unexplained wealth order is defined in section 166A as an order requiring the respondent (or a responsible officer of the respondent) to set out the nature and extent of their interest in the property in question, and to explain how they obtained that property.   

19. It is the enforcement authority that can make an application to the Supreme Court for an unexplained wealth order. The enforcement authority is defined as the RGP, HM Customs, the Attorney General or such other person as may be designated by the Minister.

20. The application must specify or describe the property in question and the person whom the enforcement authority thinks holds the property.  

21. An unexplained wealth order can be made in respect of any property if the court is satisfied that each of the requirements for the making of the order is fulfilled.

22. There are a few slight differences in this section to the UK regime.  Firstly, in subsection (4)(b) where we have added the words “or any other specified person” to ensure that information can be sought not just on how the respondent obtained the property but also any other specified persons who may have obtained an interest in the property.  Whilst reliance can be placed on the wide residual category in subsection (4)(d) (such other information in connection with the property) we felt it would be best to make it absolutely clear that this may be required by the Order.

23. Secondly, we have clarified that a statement may be made in writing or by video recording. Whilst this may be implicit, we thought it made sense to remove any argument that video statements are permitted.  Video statement were ordered in two recent UK cases and have a number of benefits including ensuring accountability and creating the best contemporaneous record of the explanation given by a respondent.

24. Thirdly, we have ensured by way of subsection (6) that where accompanying documents to the statement are required the form and manner in which these are provided can also be specified in the Order.  This is to avoid a dump of a huge volume of information without any particular order or categorisation in order to conceal difficult documents and waste limited investigative time.

25. Finally, we have made clear too that a single order may be made in respect of more than one item of property.   

Requirements for making a UWO (section 166B).

26. There are four main requirements to be satisfied for the making of an unexplained wealth order that can be summarised as follows: 

1. The Holding Requirement - the court must be satisfied that the respondent holds the specified property;

2. The Value Requirement - the value of the property must be greater than £50,000;

3. The Income/Unlawful Conduct Requirement - this means that either the known sources of the respondent’s lawfully obtained income are insufficient to have enabled the person to have acquired the property legitimately/lawfully OR that the property was obtained through unlawful conduct. Here we have made a change to the requirement so as to ensure that it applies not only to property obtained directly through unlawful conduct but also to property which represents property obtained through unlawful conduct such as is the case in Part V of POCA with recoverable property (under sections 136 to 142);

4. The PEP or Serious Crime Requirement - the court must be satisfied that the respondent is either a politically exposed person or is or has been involved in serious crime.

27. A PEP is defined as an individual who is or has been entrusted with prominent public functions by an international organisation or state other than Gibraltar, the UK or an EEA State.  It also includes a family member of a PEP, close associate or connected person.

28. “Serious crime” is defined in section 166X by reference to a list of offences set out in Schedule 10 and includes drug trafficking and money laundering. It is not necessary to prove to the criminal standard that the respondent, or other persons, are involved in such offences.

Effect of making a UWO

29. The effect of making an unexplained wealth order is that the respondent will have to provide a statement setting out the nature and extent of their interest in the property in respect of which  the order is made and how the respondent obtained the property (including how any costs incurred in obtaining it were met).  

30. Where the property is held by trustees of a settlement, the respondent must set out the details of the settlement as specified in the order and other information in connection with the property as may be specified in the order.

31. Failure without reasonable excuse to comply with the requirements imposed by an unexplained wealth order will result in the property presumed to be recoverable property for the purpose of any proceedings taken in respect of the property under Part V of POCA (section 166C).  It is a rebuttable presumption and therefore it is open to the respondent, or, if applicable, the specified responsible officer, to call evidence should they wish in any linked subsequent civil recovery proceedings.

32. It is an offence to knowingly or recklessly make a statement that is misleading to the court in response to an unexplained wealth order.  

33. The general rule is that any statement provided by the respondent under an unexplained wealth order cannot be used in any subsequent criminal proceedings with various exceptions.

Interim Freezing Orders

34. The court may also make an interim freezing order in respect of the property if the court considers it necessary to do so for the purposes of avoiding the risk of any recovery or other order that might subsequently be obtained being frustrated.

35. An interim freezing order is an order that prohibits the respondent to the unexplained wealth order, and any other person with an interest in the property, from in any way dealing with the property.

36. An interim freezing order can only be made on the application of the enforcement authority that applied for the unexplained wealth order and must be made in the same proceedings as those in which the unexplained wealth order is made.

37. We have added the words “or confiscation order” to section 166L so as not to confine the test only to the making of a recovery order but in order to allow for another type of order that may be sought after a UWO.

UWOs and the Civil Recovery Regime

38. A failure to comply with an unexplained wealth order will put any respondent, or if applicable, the specified responsible officer, very much at a disadvantage in civil recovery proceedings.  In effect, it creates a reverse evidential burden on the respondent to civil recovery proceedings to demonstrate, on the balance of probabilities, that the property in question is in fact the proceeds of lawful conduct.

39. However, the obtaining of an unexplained wealth order does not necessarily mean that the enforcement authority will necessarily proceed with a civil recovery investigation. Unexplained wealth orders are necessarily obtained at a stage where the investigation, and any underlying evidence, is still at an early stage. It all depends on what the respondent does, what the ongoing investigation uncovers and what the statement in response to the UWO discloses.

Recent changes in UK to UWO regime

40. The UK recently introduced significant reforms to the unexplained wealth order regime which we have incorporated here and include extending the statutory provisions to allow applications for UWOs against organisations to include the name of a ‘specified responsible officer’ within that organisation.  This broadens the scope of individuals who can be made subject to a UWO as a ‘property holder’ and therefore the scope of individuals who could potentially be subject to civil recovery proceedings under Part 5 of POCA.  

41. It also includes a provision enabling legal costs to be limited for the enforcement authority unless they have used the powers unreasonably, improperly or dishonestly which is intended to remove a barrier to the use of UWOs (section 166W).

42. Currently, POCA does not have provisions to issue a Code of Practice so we have included this power for the purposes of the UWO regime.

43. Madam Speaker, the Government has bolstered resources for agencies in Gibraltar. We have also coordinated additional support wherever possible and have established a clear policy direction aligned with our commitments to the FATF.

44. Madam Speaker, in conclusion, I wish to extend my sincere thanks to my Justice and Tax Ministries team, the GLO, the DPP, the UK counsel with whom we consulted extensively, Gibraltar’s law enforcement and regulatory bodies, and the foreign agencies. Each contributed, whether through recommending the UWO regime to the Government, offering valuable insights, or providing direct assistance in the development of this Bill.

45. I commend this Bill to the House.

ENDS