Stolen asset recovery: making crime pay back
The trend started when ousted President Ferdinand Marcos of the Philippines and his associates made off with US$ 5 to 10 billion in stolen assets in 1986. The Swiss government set a precedent by taking spontaneous action to freeze their Swiss bank accounts and subsequently assist the Philippine authorities in tracing and recuperating the funds. They were able to do that because they had passed a new law permitting mutual legal assistance in criminal matters to countries even if they did not have a bilateral agreement with Switzerland.
Ever since then, more and more states that have been pilfered by corrupt leaders or high officials are taking the step of knocking at each other’s doors to recover their lost wealth. In the OSCE context, the subject has recently become particularly pertinent in light of the Arab Spring, with several Mediterranean Partners for Co-operation seeking to repatriate assets stolen by overthrown former regimes.
Since 2005, an international provision has been in force that deals specifically with the recovery of stolen assets as a fundamental principle of the fight against corruption. Chapter 5 of the United National Convention against Corruption (UNCAC) lays down mechanisms for co-operation on the identification, recovery and return of stolen assets to their country of origin. (All OSCE participating States have ratified the Convention, with the exception of Andorra, the Czech Republic, Germany, Holy See and San Marino.)
Unfortunately, clear as the UNCAC provisions may be, the percentage of stolen assets that are actually returned to the states that are their rightful owners remains small. The Stolen Asset Recovery Initiative (StAR), a partnership between the World Bank and the UN Office on Drugs and Crime that was established in 2007 to advise and assist governments with effectively recovering stolen assets, calculated that over the past 15 years, only $US5 billion in illegally held assets were returned. By contrast, $US20 to 40 billion in state revenues are lost by developing countries through corruption annually, StAR estimates. An OSCE Seminar entitled Identifying, Restraining and Recovering Stolen Assets in the OSCE Region was held from 3 to 5 September 2012 in Vienna to explore ways of narrowing this gap.
“Corruption and theft of public assets are now recognized to be among the world’s greatest challenges that impair economies, weaken democracy, fuel public distrust and undermine rule of law,” declared Goran Svilanović, Co-ordinator of OSCE Economic and Environmental Activities, whose office organized the seminar.
"We have realized that, while procedures of due process are very important and need to be respected, the current process by which asset recovery is being pursued does not really seem to deliver that much of an outcome in terms of returned assets,” declared Oliver Stolpe, Senior Advisor in the STAR Initiative, a key contributor to the seminar.
You have police and specialized law enforcement institutions such as anti-corruption agencies, as well as financial intelligence units, which have an important role to play.
“The big challenge has become how to translate the objectives of the UNCAC into practice, and of course the first step is its ratification and legal implementation, putting into place the laws, followed by putting into place a proper institutional framework and co-ordination mechanisms. One thing that makes asset recovery very complicated both at the national and international levels is that you have a multiplicity of actors and therefore communications and co-ordination challenges. You have police and specialized law enforcement institutions such as anti-corruption agencies, as well as financial intelligence units, which have an important role to play. You also have prosecutors, judges and central authorities designated by the country to issue and receive mutual legal assistance requests for the purpose of tracing, seizing, confiscating and returning assets, and all of these need to work together,” Stolpe explained.
One of the difficulties discussed in the seminar was the need for speed in going after stolen money and how to overcome obstacles that delay the handling of mutual legal assistance requests. Another question discussed was how to identify and treat politically exposed persons, prominent figures that by virtue of their position and influence present a higher risk for potential involvement in bribery and corruption and thus require special attention. Many countries have recognized the problem and introduced asset declaration and conflict of interest systems.
Heather Lowe, Legal Counsel and Director of Government Affairs at Global Financial Integrity, a US- based NGO, remarked that both civil society and the media have an important role to play in raising awareness of the challenges involved in recovering stolen assets: “Often in countries where corrupt leaders have been moving money abroad, you do not have a strong civil society, so something we do is to try to amplify those voices, push forward some of their ideas and what they are trying to accomplish.” She stressed the usefulness of international organizations like the OSCE for tackling issues of international corruption. “With globalization, money can move freely and easily around the world, but laws stop at borders, and the integration of legal systems that deal with this is so far behind as to be essentially ineffective. So you really need these international forums, the OSCE, UNODC, the World Bank, to promote the type of collaboration that is necessary to tackle the issues that stem from the ease with which money is moved around the world today,” she said.
Oleksiy Feshchenko, First Deputy Head of the State Financial Monitoring Service of Ukraine remarked on the usefulness of meeting foreign counterparts at such meetings: “Our agency is an analytical centre for anti-money laundering; we do a lot in the area of tracing criminal assets, both domestically and also in co-operation with agencies in other countries. This event is quite interesting for me because it is an opportunity to establish direct contacts, which is important in the area of asset recovery where time is pressing. If you just send a request for documentation by mail, it will land in some mailbox and maybe in a couple of weeks you will get a formal answer – or maybe not. But if the counterpart on the other side of the phone line knows who is speaking, you can solve the problem in a day. We have seen this happening in our office. So I think building trust is really important, and that is what the OSCE has been designed for,” he said.
The OSCE meeting, many participants concurred, was particularly useful because it united a broad range of different actors: representatives of participating States and Asian and Mediterranean Partners for Co-operation, national financial intelligence units, international regulatory bodies, civil society organizations and also the banking sector.
In one of the most interesting discussions of the seminar, Shane Riedel, Director of Compliance at CITI Group, reflected on the responsibility of the banking sector to detect and report suspected cases of corruption. He noted that one challenging aspect is that different countries have different thresholds for filing suspicious transaction reports. The relevant country representatives and heads of regulatory bodies present participated in the ensuing exchange.
“This sort of exchange is an opportunity to be welcomed,” commented Stolpe. “What does the financial sector need from the public sector, what does the public sector want from the financial sector? There is a communications gap that needs to be met and the only way is to start having people sit much more frequently together and developing a shared understanding of the difficulties they are facing. We see quite some readiness within the private sector in its own co-ordination mechanisms to invite the public, but perhaps not likewise to honour the invitation of the public sector to come to the table when they are discussing. The two parties really need to come together and understand what the challenges are on both sides in terms of making the anti-money laundering machine work, preventing the influx of illegal funds in the first place, making the paper trail work so that there is a good chance of detection when suspicious transactions occur,” he said.
Arab Spring
The events of the Arab Spring, and the efforts that are being undertaken by the new governments in Tunisia and Egypt to recover assets that have been removed from their respective countries by the former regimes gave urgency to the discussions of mutual legal assistance for the return of stolen assets in the OSCE area.
“Tunisia has made several requests for mutual legal assistance, with precise and exhaustive information concerning the assets, bank accounts and account holders and also real estate or company shares. We have provided proof that these are shell companies providing money laundering services to the ex-president and his entourage,” recounted Mohamed Askri, Advisor to the Ministry of Justice of Tunisia.
“We have encountered two types of problems,” he said. “Firstly, legal problems: some states from which we have requested mutual legal assistance have opted for applying internal legislation which is incompatible with the UNCAC. Also, we have encountered excessive recourse to decisions. For instance, when we ask for bank documents in order to be able to trace assets, the decision to release them can be appealed, even before the Supreme Court, which takes a lot of time and blocks the situation,” he said.
“The second problem is the absence of political will. Some states, including some in the European Union, have refused to respond to our request at all. These states have invoked neither lack of information, nor incorrect formulation of the request, nor non-compliance with the required procedures. That is to say, implicitly the request is accepted. But there has been no response. Other states provide information bit by bit, but the co-operation is very slow and we are not able to reconstruct the spider’s web of transactions to be able to arrive at a confiscation order and formulate the request for recovery of these assets,” he added.
Heba Negm of the Egyptian delegation to the OSCE also spoke of the challenges encountered in the practical implementation of UNCAC: “We found the provisions of UNCAC are clear enough but what really needs to be done is to foster international co-operation on those provisions. We submitted two draft resolutions on international cooperation on asset recovery at the Conference of the States Parties to the UNCAC in Marrakech in October 2011 and both were adopted by consensus,” she said. “Also at the Human Rights Council in Geneva we submitted a draft resolution through the African group calling for money in the banks of some countries to come back to the country of origin to be used for reconstruction and development. Egypt, but also other countries like Tunisia are now suffering from the economic crisis and they are badly in need to have this money back, also for their development, especially after the revolutions,” she said.
Like Askri, Negm stressed the importance of political will. “This is actually what we really need. Some countries are more responsive than others, so when you interpret that and you see that both are party to the UNCAC and sometimes their legal fabric is almost the same, the only difference between them is political will,” she said.
“We need to harmonise the procedural rules of the fight against corruption and we must not stop with the recommendations and non-binding rules of international law as in UNCAC. The Convention’s implementation should be evaluated with respect to particular cases such as the case of Tunisia’s efforts to recover the assets stolen by the ex-president,” recommended Askri.
It is important that these problems are brought to the attention of international forums like the OSCE. Meetings like these are beneficial and positive because we can raise the problems that hinder the good functioning of the system of fighting against corruption and restitution of assets and we can reflect on possible solutions to solve these problems and to make the international measures more effective and more rapid.
“The recent uprisings in North Africa are a powerful reminder that failure to curb corruption can directly affect the legitimacy and stability of political regimes. Fighting corruption should be in the interest of every government as a means to enable sustainable development, ensure social peace and avoid internal conflicts,” said Svilanović. “For these reasons, the fight against corruption, including the recovery of corruption-related assets, is so high on the agenda of a regional security organization like the OSCE,” he concluded.