B.C.’s crackdown on unexplained wealth is a necessary experiment to repel dirty money

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British Columbia is giving itself a new tool to combat money laundering – one that will be closely scrutinized by other provinces also awash in dirty money.

Premier David Eby plans to introduce legislation in the spring to create “unexplained wealth orders.” Known as UWOs for short, they are legal instruments that make it easier for the province to seize residential properties or other valuables suspected of being purchased with the proceeds of crime.

In doing so, Mr. Eby is taking aim at organized criminals and corrupt foreign officials who exploit regulatory blind spots to wash their ill-gotten gains by purchasing real estate and other high-priced assets in B.C.

The creation of UWOs was one of the most provocative recommendations of the Commission of Inquiry into Money Laundering in British Columbia, which was headed by former B.C. Supreme Court justice Austin Cullen.

These mechanisms rely on a reverse-onus provision instead of a presumption of innocence, meaning the burden of proof falls on the accused party to substantiate their source of funds.

If a defendant fails to disprove the premise that an asset, such as a luxury home, was purchased with dirty money, then it could be subject to confiscation. Since this is being envisioned as a civil-law apparatus, no criminal conviction is required prior to forfeiture.

Although already in use in Britain, UWOs will certainly prove controversial in Canada because they risk contravening provisions of the Charter of Rights and Freedoms. Even so, their introduction in B.C. is a necessary experiment in the broader fight against financial crime.

Canadians aren’t exactly known for being audacious. So, it took courage for Mr. Cullen to recommend them and for Mr. Eby to vow to initiate their use.

UWOs are a novel way for B.C. to beef up its existing civil forfeiture regime.

Certain provinces and territories still don’t have civil forfeiture legislation, and some that do don’t necessarily use those laws. That’s why the rest of the country owes B.C. a debt of gratitude even if UWOs fail a Charter challenge.

“We don’t like reverse onus in Canada. It’s sort of not the Canadian way,” Peter German, a lawyer and former RCMP deputy commissioner, said during a keynote address at a recent anti-fraud conference in Toronto. As an anti-money-laundering expert, Mr. German wrote reports on dirty money for the B.C. government that laid the groundwork for the Cullen Commission.

“But Cullen did say UWOs in the civil context could survive in Canada; could be viable in our civil forfeiture legislation. And the opinion that he relied on was by Mr. Justice [Thomas] Cromwell who was formerly on the Supreme Court of Canada. So, it’s got a bit of oomph behind it.”

Indeed.

That’s why Mr. Eby is right to test out UWOs even though the BC Civil Liberties Association is already raising its hackles. After all, if the BCCLA keeps its former boss, Mr. Eby, on his toes, he might succeed in crafting legislation with suitable evidentiary standards.

As Mr. Cullen explained in his report, UWOs would not impact due process in criminal cases.

“I recognize that unexplained wealth orders are not without controversy and that some have raised concerns about the presumption of innocence and the right to silence. However, it is important to understand that the provincial Civil Forfeiture Act cannot be used to impose any criminal penalties,” he wrote.

Mr. Cullen further explained that UWOs would only be used in civil actions to seize property, stressing those details could not be used for criminal prosecution.

“I would add that people who legitimately own valuable assets are well placed to show the provenance of those assets,” he stated.

Any Canadian who has been subject to income verification when applying for a mortgage can attest to that fact. Law-abiding people should have no difficulty verifying their source of funds. That’s why UWOs are an effective deterrent.

“I think that for many British Columbians, it’s very frustrating to hear police say this individual is known to police, we have reason to believe this individual is involved in organized crime, they’re driving around in luxury SUVs with secret compartments where they hide weapons, they live in fancy homes, they have fancy jewellery and luxury goods, with no apparent source of income,” Mr. Eby said in November.

“And when we look at that situation, coupled with the report, the public inquiry into money laundering that says that we have a multibillion-dollar problem with money laundering in our province, action needs to be taken.”

No one is suggesting that UWOs are a silver bullet or a substitute for policing.

Other anti-money-laundering (AML) tools are also needed to stop criminals in their tracks, including databases that unmask the owners of shell corporations, said James Cohen, executive director of Transparency International Canada, a non-governmental anti-corruption organization.

“TI Canada would recommend that B.C. prioritize corporate beneficial ownership transparency in harmony with the federal government’s proposed registry as a quick win,” Mr. Cohen said. “Corporate beneficial ownership transparency will help make other AML efforts successful, including UWOs.”

Stamping out money laundering will certainly require more trial and error by all levels of government.

Trouble is, most of our politicians lack chutzpah. That’s why Canadians should be grateful that Mr. Eby isn’t afraid to fail.