Asset Recovery and the Department of Justice’s Discretion to Return

The U.S. Department of Justice’ trumpets its so-called “Kleptocracy Asset Recovery Initiative,” which seeks to freeze and seize illicit assets stashed by corrupt foreign leaders in the United States. When Attorney General Eric Holder had introduced the Initiative before the African Union in 2010, he described it as a program for recovering public funds for “their intended – and proper use”. For his audience, “proper use” was no doubt understood as implying return of the looted assets to the victim countries. Yet over the past few years, these expectations have been eroded, as the US has proved reluctant to turn over seized asses, and the DOJ’s public statements regarding asset return now increasingly incorporate qualifying language to the effect that forfeited assets will be returned to the originating jurisdiction “where appropriate“. This is inequitable and harmful to global anticorruption efforts.

That return of looted assets to originating jurisdictions has been poor and inconsistent is clear. For example, StAR’s 2014 report showed that OECD countries returned 16.1% of forfeited assets within a seven-year period. Last year, the DOJ settlement with Equatorial Guinea’s notoriously kleptocratic Second Vice President led to an agreement to return 67% of forfeited assets through a charitable institution. There were no reasons given for the decision.

The root of poor return rates lies in a misplaced sense of ownership, of or assumption of discretion over, recovered assets. It appears that possessor states like the United States have come to consider that assets that have been illegally transferred to their jurisdictions belong to such states. In private law, the analogy would be having a finder of stolen property claim title against the owner of the asset. This cannot be the case.

Civil or criminal forfeiture actions must be linked to an offense. For kleptocracy cases, these are typically embezzlement and bribery offenses. Money laundering actions apply where corrupt actors seek to conceal the origin of these funds. Of these, embezzlement cases are the most straightforward. The 2014 Abacha forfeiture, where money was directly and indirectly stolen from the public treasury, is one scenario where ownership clearly belongs to the public treasury. Cases involving assets received as bribes are only slightly different. Many jurisdictions, including China, Hong Kong, and Singapore, recognize a “constructive trust” doctrine for these cases. This principle confers ownership of illicitly acquired assets by a fiduciary on the party whose trust was betrayed–that is, the state where the assets originated. The US also recognizes this doctrine in fiduciary cases, such as in a 1980 case that found the proceeds of a book by a former CIA employee accrued to the state. (Fines levied on the bribe-payers–the “supply side” of bribery–are different. Despite valiant arguments, it is difficult to compel the return of fines levied on the supply side to the victim state. Indeed, any return here is voluntary.)

Accountability for forfeited assets is emphasized by the UN Convention Against Corruption as a fundamental principle, and the recovery of stolen assets requires a sense of predictability that seized and forfeited assets will be returned. For these reasons, forfeiture cannot be for the benefit of, or at the discretion of, the possessor state. Returning stolen assets is as important as recovering them for the welfare of ordinary citizens. If anticorruption efforts are to be of truly global benefits, recovered public resources must be used as intended.

3 thoughts on “Asset Recovery and the Department of Justice’s Discretion to Return

  1. Pingback: Development Channel » This Week in Markets and Democracy: U.S. Fights Corruption, Preventing Mass Atrocities, and More

  2. Pingback: Is the Kleptocracy Initiative Worth It?: A Tentative Yes | Anti Corruption Digest

  3. Pingback: Is It Lawful Under UNCAC to Attach Conditions to Asset Returns? | Anti Corruption Digest

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