Friday Highlight  

Are your clients vulnerable to foreign law enforcement action?

Can we trust them with the keys to the POCA armoury?

For some countries the answer is clear: probably not.

Russia, for example, has demonstrated a repeated willingness to use other international co-operation measures, such as extradition requests and Interpol Red Notices, against persons who have been placed on the political naughty list or whose business rivals have paid for a ‘prosecution to order’.

Thankfully, our courts and defence lawyers are vigilant to this abuse of international criminal co-operation, but the personal, reputational and financial impact on the person subjected to it can still be profound. 

The NCA, as a rule, will carefully assess the evidence before acting, and the quality of that evidence ultimately can be tested by the court.

By contrast, an MLA request will contain only an evidential summary, of unknown and untestable accuracy. Because MLA operates on the basis of mutual trust and reciprocity between nations, the assertion that the suspect has unlawfully enriched him or herself will be presumed to be true and the UK will be obligated to give effect to the request.

This can effectively reverse the burden of proof, by placing the onus on the defence to disprove the allegations.

Legal safeguards against abuse do exist, and ultimately a UK court will have to decide whether to grant the order, but the MLA process is far less open to scrutiny than a domestic investigation, and the good faith of the requesting state can be difficult to challenge.  

Whether making UWOs and AFOs available to other countries will result in their increasing use is difficult to predict, but financial advisers will need to be aware of the risks.

A single suspicious activity report shared by the NCA with an overseas agency, could trigger an MLA request coming back the other way.

UK-based HNWIs and Peps with potential enemies abroad may find themselves targeted, even when they are of no interest whatsoever to UK law enforcement. De-risking in the financial sector may lead to enhanced due diligence and unexpected account closures. 

Funds held in bank or building society accounts are more vulnerable to an unscrupulous MLA request than property or other investments, because of the relatively low evidential threshold for an AFO, so liquid assets will always be more exposed to risk.

Moreover, the whole account can be frozen even if only part of the balance is suspected to be the proceeds of crime.

Therefore, where there is a known risk that foreign investigators might be eyeing some of a client’s money suspiciously, it would be wise not to mix it with other assets.