The Penrose Triangle is an impossible figure (or impossible object or undecidable figure): it depicts an object which could not possibly exist.
For most, if not all, the fight against corruption requires international cooperation and transparency, but at the same time, the right to privacy or private life is enshrined in the Universal Declaration of Human Rights (Article 12), the European Convention of Human Rights (Article 8) and the European Charter of Fundamental Rights (Article 7).
This tension between two equally important public policies has taken several forms and increasingly puts not only corporations but also governments in a dilemma.
The OECD, in its 2021 Recommendation on Foreign Bribery, set out a clear view on this by asking member countries to ensure that compliance with data protection rules and laws that prohibit transmission of economic or commercial information does not unduly impede:
i) effective international co-operation in investigations and prosecutions of foreign bribery and related offences, in accordance with Articles 9 and 10 of the OECD Anti Bribery Convention; and
ii) the effectiveness of anti-corruption internal controls, ethics, and compliance programmes or measures, including internal reporting mechanisms, due diligence, and internal investigation processes
However, an OECD Recommendation is not legally binding, and courts are often required to intervene. This is particularly the case in the European Union context in light of the very strong privacy and data protection legal frameworks. In an emblematic case still ongoing in front of the European Court of Justice, this tension even led to litigation between Europol and the European Data Protection Supervisor (EDPS).
Stronger United States Department of Justice policies on issues such as the preservation of “ephemeral messages” may indeed put European companies in a sort of catch 22 situation. The U.S. DOJ recognizes that there may be foreign data and information protection laws that prohibit the company from disclosing documents that may be relevant to the investigation but basically put the burden on the non-U.S. company to demonstrate it is not using national and/or European laws as a shield to withhold relevant information.
The bottom line is this – faced with confusing and even somewhat conflicting requirements, companies would be expected to find a legal way to “navigate” and to be able to preserve and produce, as necessary, key documents while respecting other applicable laws.
Is this a Penrose Triangle? It may be time to rely on a famous quote from Audrey Hepburn “Nothing is impossible. The word itself says I’m possible”.
International Lawyer, Former Director for Legal Affairs, OECD
In honor of National Whistleblower Appreciation Day, it’s important to take a look at the extensive history that whistleblowing has within the United States, and the implications that this courageous and critical role will have for bad actors.
In 1777, naval officers Samuel Shaw and Richard Marven reported their commanding officer, Commodore Esek Hopkins for torturing British prisoners of war. Hopkins retaliated against the two by dismissing them from the Navy and filed a criminal libel suit against them. They were arrested and awaiting their trial when Congress ultimately intervened and unanimously enacted the Whistleblower Protection Act in 1778. Congress authorized a financial reward for the two men and ordered that Hopkins be fired. Shaw and Marven eventually won the lawsuit.
In 1961, when the American Civil War broke out, it was evident that fraud was rampant in the country, both on the Union and Confederate sides. Contractors knowingly sold faulty rifles, unfit horses, and rotten food to soldiers. To address the issue, Congress passed the False Claims Act, informally known as the Lincoln Law, on 2 March, 1863. It included a qui tam provision, which allowed citizens to sue others on behalf of the government, thereby earning a fraction of the damages. Additionally, the False Claims Act provides protection from employer retaliation and provides relief to any whistleblowers.
Since then, whistleblowers have been active across the country, from Frank Serpico calling out NYPD corruption in the 60s and 70s, to Edward Snowden leaking information about the NSA’s activity regarding data privacy and protection in 2013. Snowden’s actions in particular spurred Congressional action that led to National Whistleblower Appreciation Day.
In more recent news, Donald Trump, the official candidate for the Republican Party, was impeached while in office, with the proceedings stemming from a whistleblower’s actions. The whistleblower complained that Trump used “the power of his office to solicit interference from a foreign country in the US 2020 election”. Without this complaint from a whistleblower in the intelligence community, it would have been nearly impossible to challenge the conduct of one of the most powerful heads of state.
On July 30th, 2015, National Whistleblower Appreciation Day was born to honor the day, 30 July, 1778, when Congress passed the Whistleblower Protection Act. Each year since 2013, both the United States Senate and the House of Representatives pass resolutions that designate 30 July as National Whistleblower Appreciation Day. In fact, in 2021, over 10,000 people attended the virtual celebration, which spanned over three days. Whistleblowing is a career-limiting act, especially in the federal space, so it’s important to acknowledge and appreciate the sacrifices they make to put a spotlight on bad actors.
In the international corporate world, whistleblowing is a way to hold companies accountable for possible FCPA violations. The United States Securities and Exchange Commission, and the United States Department of Justice have launched programs to encourage whistleblower activity. Beginning in 2012, the SEC has provided whistleblowers with the SEC Whistleblower Program, and since its launch, the program has awarded hundreds of millions of dollars in whistleblower awards. In fact, on 5 May 2023, the SEC issued the largest whistleblower award to date, $279 million, over Ericsson’s violation of the FCPA by bribing government officials and falsifying company records.
On 22 April, 2024, the DOJ announced a pilot program designed for individuals to disclose wrongdoing, allowing the government to investigate, identify, and prosecute the culpable individuals responsible for corporate misconduct.
The role that whistleblowers play will continue to change the compliance landscape. With more governments and enforcement agencies recognizing the importance of whistleblower protections, the hope is that, as time passes, more and more individuals will feel empowered to speak up against misconduct and hold corrupt leaders accountable – furthering the goal of international transparency, cooperation, and good governance.
J.D. Candidate, The George Washington University Law School, Class of 2026
In 2020, the courts in Kenya, after lengthy litigation, upheld an unexplained wealth order (UWO) against former public servant Stanley Mombo Amuti. The courts observed that the “scourge of money laundering, economic crimes and corruption” were threatening the moral and social fabric of Kenya. Amuti had accumulated significant assets, even though he was modestly paid as the former National Water Conservation and Pipeline Corporation Finance Manager. He challenged the order to pay a sum equal to the value of his “unexplained assets.” [i] Amuti’s case opened up anti-corruption possibilities for Kenya, resulting in numerous successful UWO cases. [ii] There are over 100 jurisdictions that use UWOs, frequently in the fight against bribery and corruption. [iii] This post addresses two questions: What are UWOs? and How are they working in practice in Canadian cases before the courts?
UWOs operate, generally, as part of the non-conviction based (NCB) forfeiture process that allows states to seek, in civil court, the forfeiture of property that is the proceeds or instruments of crime including bribery and corruption. A UWO is a court-order to obtain information from a respondent about the provenance of their property. In 2022, following an extraordinary series of hearings, a judicial inquiry into money laundering recommended that the Province of British Columbia enact a UWO process. [iv] Following consultations and study, [v] the government amended their civil forfeiture legislation to include a UWO process. [vi] To obtain an order, the Director (who brings civil forfeiture proceedings on behalf of the government) must prove to the court that they have reasonable grounds to suspect that the respondent is involved in unlawful activity or is a politically exposed person (PEP), the property must be in British Columbia and must be worth more than $75k. The Director must also show to the court that the property is a proceed or instrument or that the known sources of lawfully obtained income would have been insufficient for the respondent to acquire the property. If the grounds are satisfied, the court will require the respondent to explain how they purchased and maintained the property in question. If the respondent does not comply with the order, a rebuttable presumption arises: the property is presumed to be a proceed of unlawful activity for the purposes of forfeiture. The first three Canadian UWO orders are being actively litigated. [vii]
Baker, the United Kingdom, and Discouraging Case Law
Anti-corruption activists in the United Kingdom were hopeful that UWOs might be the solution to all of the corrupt money and kleptocratic wealth washing around London. The Proceeds of Crime Act was amended to enable UWOs [viii] but the courts subsequently dampened hopes. In a case known as Baker [ix] a UWO was sought against the complex property holdings of a wife and a son. Properties were held through various offshore entities, companies in the British Virgin Islands, and Private Interest Foundations in Panama and Curacao. The mother’s ex-husband had died in prison following charges and the mother was the daughter of the former President of Kazakhstan. The court ruled that the National Crime Agency’s (NCA) presentation of a complex and opaque holding structure was not enough to ground a UWO. The court found that the government was unable to displace the wife’s claim that the assets came from a divorce settlement. Wealthy people, the court found, used complex structures for tax and estate planning all the time. To add insult to injury, the court issued a significant cost award against the NCA (the legislation was later amended to reduce potential costs awards). The Baker decision appears to have had a chilling effect on the use of UWOs as an anti-bribery and corruption measure in the UK.
Canada’s Developing Case Law
British Columbia is one of two Canadian civil forfeiture jurisdictions (Manitoba is the other) that use a UWO process. The first two Canadian UWO cases can be traced to a pre-UWO civil forfeiture case in 2020. The U.S. Securities and Exchange Commission (SEC) investigated a $165 million securities fraud known as the Silverton Exchange. The fraudster, Mr. Roger Knox, set up platforms designed to evade securities laws by hiding beneficial ownership positions. Insiders could run “pump and dump” fraud schemes from the shadows. Knox pled guilty and the SEC provided disclosures to Canadian authorities. One disclosure traced funds into luxury properties in Kelowna, owned by a Hong Kong shell company run by a Mexican national with no other connections to British Columbia. The court froze the properties in a civil forfeiture action with some reticence: the money had been carefully laundered and the Director had information gaps. That case later settled with the forfeiture of one of the two properties. [x] In 2023, BC’s British Columbia’s Civil Forfeiture Act was amended to create a UWO process and their first two UWO cases relate to the Silverton Exchange.
In 2015, the SEC brought a complaint against Kevin Miller respecting a Silverton Exchange pump and dump scam involving the securities of the Jammin’s Java Corp. Miller settled with the SEC, paying around US$900,000 as disgorged profit, but he didn’t admit the allegations. Miller, a UK national believed to reside in Malta, wired money in 2016 into the account of his Vancouver lawyer. Canadians love irony: his lawyer was later disbarred for money laundering. A UWO was obtained against the trust account, and Miller is litigating, claiming that his money is legitimate, and, in any event, the SEC settlement absolves him in Canada. [xi]
The second Silverton Exchange case involves a beautiful property on Salt Spring Island. Four wire transfers, purporting to be loans, went to a Vancouver lawyer which enabled the purchase of a $1 million home in 2017. British Columbia alleges the money was the proceeds of a Silverton Exchange securities fraud committed by Skye Lee. He put the house in the name of his (now) ex-wife. She is challenging the order in court, disavowing any knowledge of the fraud, saying the house purchase settled her divorce and claiming it would be unjust to dispossess her and her children of their home. [xii]
The third UWO relates to Quadriga CX, once one of Canada’s largest crypto exchanges which, like FTX in America (Sam Bankman-Fried), turned out to be a massive fraud ($169 million in losses). The founder, Gerald Cotten, allegedly died at the age of 30 in 2018 while vacationing in India. Investigations by a bankruptcy trustee and the Ontario Securities Commission have yielded limited recoveries. [xiii] In British Columbia, a UWO was issued for a safety deposit box holding cash, gold bars, jewels and other valuables (worth about $600,000). The box belongs to Quadriga’s co-founder, Michael Dhanani, last seen in Thailand. Dhanani has changed his name several times since being deported to Canada following his 18-month sentence served in the US for fraud and trafficking in stolen credit cards. Dhanani faded into the background when Quadriga, at its height, contemplated raising funds in the capital markets (the co-founders figured his priors for fraud might be looked down upon by investors). The safety deposit box is frozen and the UWO is being challenged. [xiv]
What’s Next?
The Financial Action Task Force amended their 40 recommendations in November 2023 to push all jurisdictions towards the use of non-conviction based forfeiture to recover tainted assets. [xv] UWOs are a complimentary tool, particularly in the context of bribery or corruption. Stolen assets are often secreted away using professional money laundering techniques. If such a tainted asset found its way into British Columbia, for example, in the right case the Director would have the tools to start an NCB proceeding, seek a UWO, forfeit the asset and return the property to the victimized country. In other words, UWOs are a tool that can help jurisdictions recover stolen assets.
Barrister and Solicitor in Toronto and expert for the Vancouver Anti-Corruption Institute
[ii] See for example: Case study: Upholding an unexplained wealth judgement in Kenya’s Anglo Leasing affair: https://baselgovernance.org/news/case-study-upholding-unexplained-wealth-judgement-kenyas-anglo-leasing-affair
[iii] Dornbierer, A Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth (2021) https://baselgovernance.org/publications/illicit-enrichment-guide-laws-targeting-unexplained-wealth
[v] Dornbierer, A; Simser, J Working Paper 41: Targeting unexplained wealth in British Columbia (2022) https://baselgovernance.org/publications/wp-41
[vi] Division 1.2 of the Civil Forfeiture Act, SBC 2005, c 29
[vii] Simser, J Civil Asset Forfeiture in Canada (Canada Law Book) 2011-2024 §4:30.30
[viii] Proceeds of Crime Act, 2002, s. 362A
[ix] National Crime Agency v. Baker [2020] EWHC 822 leave to appeal denied.
[x] British Columbia (Director Civil Forfeiture) v. Cuatro Cienagas Inversiones Ltd. 2020 BCSC 2177
[xi] Director of Civil Forfeiture v. The Miller Funds (2023) BCSC File No. S238940
[xii] Director of Civil Forfeiture v. 435 Stewart Road, Salt Spring Island (2023) BCSC File No. S235937
[xiv] Director of Civil Forfeiture v. $250,200 and other property (2024) BCSC File No. S-S-234364