‘Unexplained Wealth Order’ Comes to Singapore

The Singapore Parliament passed the Serious Crimes and Counter-Terrorism (Miscellaneous Amendments) Bill on November 19, 2018, creating the new Section 47AA of the Corruption, Drug Trafficking and Serious Crimes (Confiscation of Benefits) Act (CDSA) – a powerful new weapon for Singapore in the ever-evolving fight against international money laundering[1].

Section 47AA of the CDSA now makes it an offence for any individual or company to possess or use any property that may be reasonably suspected of wholly or partly being the proceedings of drug dealing or other serious crimes, unless the individual or company can satisfactorily explain the provenance of the property. Individuals or companies convicted of such an offence face heavy fines and imprisonment (for individuals), on top of the seizure and forfeiture of the property in question.

The most significant aspect of Section 47AA is its reversal of the traditional prosecutorial burden of proof – once there is a “reasonable basis” to suspect the property is derived from drug dealing or a serious crime, the accused individual or company bears the burden of satisfactorily proving to a court otherwise.

Section 47AA thus appears to be Singapore’s version of the Unexplained Wealth Orders (UWOs) enacted by the United Kingdom in January 2018. UWOs enable UK enforcement authorities to similarly target persons suspected of money laundering and apply to a court to require them to explain how they managed to obtain certain property, in light of their lawfully declared income. As with Section 47AA, the burden of proof is shifted to the target of the UWO to explain how they obtained the property, rather than for prosecuting authorities to prove that the property consists of proceeds of crime. Its effect is to lay down a presumption that property is recoverable by the UK authorities where they can show a court a reasonable suspicion that an individual is involved in wrongdoing.

However, a closer look at the two regimes shows that there are differences in the elements needed to be proved for each, and that the Singaporean regime is arguably tougher. We examine UWOs in England and Section 47AA in greater detail below.

UWOs in England

In England, the UWO is an investigation order issued by the High Court of England and Wales upon the application of various enforcement authorities in the United Kingdom. It is a civil power, an investigative tool which will normally be used by enforcement authorities in conjunction with other remedies to recover the proceeds of crime. The issuance of a UWO against a party does not mean that the party has been found guilty of a criminal offence. The party’s response to the UWO can be used in other investigations, including criminal investigations.

Under the English regime governed by the Proceeds of Crime Act 2002 (POCA), the High Court must be satisfied of all of the following elements[2]:

1. There is reasonable cause to believe that the target of the UWO (the respondent) holds the property, which must be greater than £50,000 (approximately $65,800)
2. There are reasonable grounds for suspecting that the known sources of the respondent’s lawfully obtained income would have been insufficient to enable the respondent to obtain the property
3. The respondent is a politically exposed person[3], or there are reasonable grounds for suspecting that the respondent or a person connected with him/her is or has been involved in serious crime[4], whether in the United Kingdom or elsewhere

Once the High Court makes a UWO, the respondent is required to provide a statement with the following details[5]:

1. Setting out the nature and extent of the respondent's interest in the property
2. Explaining how the respondent obtained the property (including, in particular, how any costs incurred in obtaining it were met)
3. Where the property is held by trustees, setting out details of the settlement as specified in the UWO
4. Setting out such other information as specified in the UWO

A contravention of this order results in the property being presumed to be “recoverable property”. This allows the enforcement authority applying for the UWO to subsequently bring civil recovery proceedings, which may result in a confiscation of the property by the English courts.

Respondents who recklessly or knowingly provide false or misleading statements could be sentenced to imprisonment or fines[6] upon conviction.

Section 47AA of the CDSA

Section 47AA of the CDSA is, in contrast, a penal provision within Singapore’s main anti-money laundering legislation. It creates a criminal offence where a person fails to account satisfactorily how he came to use or be in possession of property reasonably suspected to be part of proceeds of drug dealing or other serious offences. Unlike the UWO, it is not an investigative tool in and of itself but instead is a criminal provision penalising the inability to explain the provenance of the property.

It provides that: “any person who possesses or uses any property that may be reasonably suspected of being, or of in whole or in part, directly or indirectly, representing, any benefits of drug dealing or benefits from criminal conduct shall, if the person fails to account satisfactorily how the person came by the property, be guilty of an offence.”

It appears that the following form the elements of the offence:

1. The offender must possess or use some property that is reasonably suspected of being wholly or partly representing the benefits of drug dealing or criminal conduct[7], whether directly or indirectly
2. The person cannot satisfactorily account for how he came by the property

Accordingly, the prosecution merely has to establish a “reasonable suspicion” that the property used or possessed represents the benefits of drug dealing or a serious offence (whether in Singapore or otherwise). There is no requirement to prove that (i) the property be of a certain value; and (ii) there are reasonable grounds to suspect that the respondent’s income would be insufficient for him to obtain such a property. It bears noting as well that the test of a “reasonable suspicion” is significantly lower than the civil standard of burden of proof on a balance of probabilities.

However, it bears noting that the Singaporean regime requires the prosecution to clear another hurdle that the English POCA does not; it requires that a link be established between the suspected property and a serious offence, i.e., that one represents the proceeds of the other.

Individuals committing such an offence are liable upon conviction to fines of up to 150,000 Singapore dollars (approximately $111,800) and imprisonment terms of up to three years, while other entities can be fined up to 300,000 Singapore dollars (approximately 221,670). While there is no direct reference to a civil remedy of forfeiture in Section 47AA, the CDSA already provides for seizure and confiscation of benefits of drug dealing and criminal conduct in Part II of the CDSA. One can expect that the Singapore authorities will utilise both Section 47AA and the confiscation powers under Part II of the act in tandem.

Comparison Between the Two Regimes

It appears from a comparison between the two regimes that the Singapore regime is more encompassing, i.e., it applies in wider factual situations to trigger the shift of the burden of proof to the respondent to explain the provenance of the property. Section 47AA is also a criminal provision and will no doubt be utilised by the Singapore enforcement agencies to ensure suspects cooperate on pain of further prosecution. The Singapore enforcement agency need not apply to the Singapore courts for a UWO; it simply has to alert a suspect to the operation of Section 47AA and this alone is likely to compel cooperation.

Contrast this to the position in the United Kingdom where, to establish a basis to make a UWO under the English POCA, enforcement authorities must prove to a court that (i) the property reasonably believed to be possessed by the respondent is of a certain value (above £50,000); (ii) there are reasonable grounds to suspect that the respondent’s income would have been insufficient to enable the respondent to obtain the property; and (iii) there are reasonable grounds to suspect that the respondent or a person connected to him/her has been involved in a serious offence in the United Kingdom or elsewhere (or the person is a PEP).

Takeaways

Shortly after being enacted, the UWO has already been successfully deployed in the United Kingdom’s fight against international money-laundering. In February 2018, the UK National Crime Agency successfully obtained a UWO against the wife of the former chairman of the International Bank of Azerbaijan, Zamira Hajiyeva, to force her to account, among other things, for the purchase of a London property valued at £11,500,000 (approximately $15,147,000) when her husband’s salary was reportedly £54,000 (approximately $71,125) a year.

When Ms. Hajiyeva attempted to avoid providing any account by applying to discharge the UWO, the High Court refused the application, holding that the UWO had been correctly made (National Crime Agency v Hajiyeva [2018] 1 WLR 5887.)

If Ms. Hajiyeva were under investigation in Singapore, Section 47AA would have likely negated the need for a UWO application to the court. Ms. Hajiyeva would have been required to account satisfactorily for the receipt of the property in question. If she could not, she would have been charged with an offence.

We see the enactment of Section 47AA as a powerful weapon for the Singapore authorities to combat money laundering, which may even surpass the effectiveness of the UWO. It cements Singapore’s position as a global financial centre with laws meant to deter an abuse of its financial system. Time and eventual prosecutions under the POCA and the CDSA will tell whether the English or the Singaporean regimes will be the more successful.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

London
Chris Warren-Smith