Explaining the unexplained: Consultation on unexplained wealth orders in Ontario

Ontario’s Ministry of the Attorney General ("MAG") recently announced that it is considering potential amendments to the Civil Remedies Act, 2001 (the "CRA") to introduce unexplained wealth orders ("UWOs") in Ontario and other changes aimed at combatting organized crime and money laundering.

If enacted, the proposed amendments would give Ontario authorities a new investigative tool to compel information about the origin, ownership, possession and control of property where there is a significant mismatch between known lawful income and apparent wealth, and where the property or respondent is connected to unlawful activity. While a UWO would not itself result in forfeiture, information obtained could be used by the government in support of a forfeiture application.

A UWO is a court order that compels a person to explain where their property came from. According to the consultation paper released by MAG in tandem with its announcement:

• a UWO is designed to address circumstances “where there is a disparity between a person’s known lawfully obtained income and the value of property the person owns or possesses, and the person is linked to unlawful activity”
• a UWO itself does not result in forfeiture—a failure to respond or the providing of false information gives rise to a presumption that the property is proceeds of unlawful activity
• a UWO focuses on unexplained accumulation, “rather than the precise underlying illicit conduct that generated the wealth,” thus responding to “the practical challenges faced by law enforcement and prosecutors in establishing a full evidentiary chain”
• a “key feature” of UWOs is “they shift the burden of evidentiary production to a respondent where a court is satisfied that there may be a discrepancy between the person’s lawfully-obtained income and the value of property in their possession”

Ontario’s proposed UWO regime

If enacted, Ontario would be following other provinces that have enacted UWO schemes, including British Columbia (where 2023 amendments to the province's Civil Forfeiture Act introduced a UWO regime following a recommendation of the Cullen Commission), Saskatchewan, Manitoba, and Nova Scotia, and the United Kingdom, which introduced the tool in 2018.

MAG is proposing that Ontario amend the CRA to introduce UWOs based on Manitoba’s legislation, The Criminal Property Forfeiture Act (the "CPFA"). The CPFA permits UWOs to be obtained before or at the same time as a civil forfeiture proceeding under Part 2 of the Act—these proceedings are aimed at the government obtaining an order forfeiting the property that is proceeds or an instrument of unlawful activity.

What information could a UWO require?

In Manitoba, the CPFA permits the director responsible for administering the legislation to apply to the court to obtain a UWO that requires a “respondent” or a “responsible officer of a respondent” to provide a written statement, provide specific records and documents, and answer questions at an examination about the property that is the subject of the application.

How could information obtained through a UWO be used?

Although the compulsion powers are broad, the CPFA provides that a statement, record, or document provided in response to a UWO “must not be used or disclosed except in proceedings under or for the purpose” of the Act.

In Miller, in considering a similar provision under the BC legislation, the Court agreed that a UWO is no more unreasonable or invasive than any other discovery tool available in civil actions, which was a factor in the Court’s reasoning in finding the UWO regime compliant with section 8 of the Charter.

Would cryptocurrency and digital assets be covered?

The CRA currently defines "property" as "real or personal property, and includes any interest in property," which is silent on digital assets. MAG proposes to amend that definition to clarify that it captures digital assets such as cryptocurrency and non-fungible tokens, aligning it with Manitoba's legislation, which expressly includes "cash and crypto assets such as cryptocurrency." The change reflects the Cullen Commission's finding that virtual assets are highly vulnerable to money laundering given their anonymity, ease of access and complexity.

The consultation paper also expressly situates UWOs in the context of increasingly complex asset-holding and transfer methods, including cryptocurrency.

Who could be subject to a UWO?

The targets of a UWO in Manitoba include a “respondent” and a “responsible officer of a respondent”. Respondents may be:

• The owner of the property;
• Any person other than the owner who is in possession of the property;
• Any person who the director believes may have an interest in the property.

A respondent includes corporations and partnerships.

Can a UWO be made without notice?

The legislation permits the application to be made without notice “unless the court orders otherwise.”

When can a court grant a UWO?

“Unless it would clearly not be in the interests of justice,” Manitoba’s legislation provides that a UWO “must” be granted if the court is satisfied that the director “has reasonable grounds to suspect” that:

• the respondent owns, possesses or has an interest in the property;
• the fair market value of the property exceeds $125,000;
• the known sources of the respondent's lawfully obtained income and assets would be insufficient to enable the respondent to acquire that interest; and
• the respondent, or a person who does not deal with the respondent at arm's length, is or has been involved in unlawful activity.

What happens if a UWO recipient does not comply?

A UWO under the CPFA does not result in forfeiture—a failure to respond or the providing of false information gives rise to a rebuttable presumption that the property is proceeds of unlawful activity in a forfeiture proceeding.

• Increased efforts to combat money laundering and other financial crimes: The proposed amendments to add UWOs to the arsenal to combat money laundering signals a shift towards increased focus and enforcement in this area.
• Property affected is potentially broad: Although UWOs are typically framed as tools directed at unexplained personal wealth and organized crime, the proposed regime may have broader implications for businesses and intermediaries. Financial institutions, payment service providers, money services businesses, cryptocurrency exchanges and custodians, real estate participants, lenders, trustees and other record-holders may hold information relevant to the ownership, movement or control of property. Even where those entities are not themselves respondents, the design of the regime could affect how records are requested, how quickly they must be produced, how confidentiality and privilege are protected, and how information may be used in related proceedings.
• Preliminary steps: More generally, clients should consider the operational impact of a UWO regime before it is enacted. Potential issues include record retention, escalation procedures for production orders, privilege review, treatment of confidential customer information, coordination with anti-money laundering and sanctions compliance functions, and governance over responses to civil forfeiture-related requests.

For questions about how these developments may affect you or your organization, McCarthy Tétrault’s White Collar Defence and Investigations Group can provide strategic advice on addressing associated criminal, civil and regulatory risks.