Tag Archives: asset recovery

Is the Kleptocracy Initiative Worth It?: A Tentative Yes

Posted on by
2

The New York Times ran a very nice piece last week (with a GAB mention!) about the U.S. Department of Justice’s Kleptocracy Asset Recovery Initiative, and its ongoing efforts to seize foreign assets held by corrupt foreign leaders (and their cronies) in the United States. We’ve already had a lot of blog commentary on some of the issues associated with the Kleptocracy Initiative (see here, here, here, here, and here). But I wanted to pause for a moment to consider a question raised in the NYT piece: Is the effort worthwhile, given its resource costs and the relatively modest successes to date? The answer is not obvious; as Rick (quoted in the article) put it: “In terms of really helping the global anticorruption struggle, I wonder if this is the highest use of resources.” (Rick further suggests that the DOJ’s resources would be better spent on assisting countries pursuing their own anticorruption and asset recovery cases.)

Rick is right to raise these questions about the Kleptocracy Initiative—but my instincts are different from his. Even if it is the case, as the NYT reports, that the DOJ has so far only been able to recover around 8% of the assets it has gone after under the Kleptocracy Initiative, this still strikes me as a good use of DOJ resources. Here’s why: Continue reading →

Impunity and Immunity: When (if Ever) Should We Sacrifice Accountability for Past Corruption Crimes?

Posted on by
8

I’ve been meaning to write a bit more about last month’s International Anti-Corruption Conference (other than my snarky reflections about anticorruption conferences generally). The conference theme was “Ending Impunity,” and indeed most of the panels and speeches emphasized, in one way or another, the importance of ending the culture of impunity and holding corrupt actors (criminally) accountable for their actions. I couldn’t agree more about the importance of ending the culture of impunity. Indeed, I suspect few people would dispute that objective; the controversies, such as they are, involve questions of means. And as a general matter, I’m also all for accountability. Who wouldn’t be? But here my commitment is more qualified, and I think the issue is a bit more complicated then some of the rhetoric sometimes implies. In fact, in the context of corruption offenses, there may be sometimes be good, or at least plausible, reasons for sacrificing accountability in order to advance some other interest.

I recognize that statement may be controversial, perhaps even heretical. Is it really ever OK to insist on less than full accountability for past corruption crimes? If so, when? The first panel I attended at the IACC, entitled “Breaking the Cycle of Impunity: Why Truth Telling and Accountability for Past Economic Crimes Matters,” brought these difficult questions to the fore. The four excellent panelists (Hennie Van Vuunen, Osama Diab, Gladwell Otieno and Transparency International Chair Jose Ugaz) all came out (unsurprisingly) against impunity and in favor of accountability. But as the subsequent discussion revealed, the impulse to hold the corrupt (fully) accountable sometimes conflicts with other legitimate interests. Although everyone agrees that those who commit corruption offenses should never have impunity, there are reasonable arguments for sometimes granting them (full or partial) immunity. Consider a few possible scenarios in which one might be tempted to exchange (full) accountability for something else: Continue reading →

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

Posted on by
3

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. Continue reading →

Guest Post: The UK Should Fight Corruption Using “Unexplained Wealth Orders”

Posted on by
2

Nick Maxwell, Head of Advocacy and Research at Transparency International-United Kingdom, contributes the following guest post:

UK Prime Minister David Cameron has made the fight against global corruption a high priority for his government, declaring that corruption is the cancer that is at the root of many of the world’s problems. But as much as we should applaud the UK’s efforts to support anticorruption measures and good governance abroad, it is equally important that the UK ensure that it is not a safe haven for the proceeds of corruption stolen throughout the world. Yet here the UK has fallen short: We have only seen limited asset restraint and recovery against the proceeds of corruption, especially against those currently associated to power. While estimates of total extent of the problem vary, it is generally agreed that large amounts of unexplained suspicious wealth enter the UK each year and are invested in the British financial system, in property, in luxury goods or in other areas of the economy. And despite the fact that UK law enforcement has the necessary expertise on this issue, the rate of asset recovery by UK agencies of the proceeds of grand corruption is undeniably very low compared to the scale of the problem.

Given the scale of the problem and the inadequacy of the government’s response to date, Transparency International’s UK chapter (TI-UK) established a taskforce of experts to review the legislation in place to deter grand corruption and recover stolen assets that have made their way into or through the UK. The results of the taskforce’s deliberations were published last month as a discussion paper entitled Empowering the UK to recover corrupt assets: New approaches to illicit enrichment and asset recovery; the paper sets out a new proposal for UK law enforcement: the use of an Unexplained Wealth Order (UWO), which would allow UK law enforcement to start proactively questioning suspicious unexplained wealth associated with foreign public officials, and to start civil recovery proceedings against the relevant assets.

Continue reading →

Guest Post: Settlements in Asset Recovery Cases—Neither Ethical Nor Effective

Posted on by
5

Robert Packer, a Masters student at of the University of Nanterre, Paris, contributes the following guest post:

When governments attempt to freeze, seize, and repatriate the assets stolen by corrupt government officials and others, they often confront what is sometimes presented as a conflict between pragmatism and principles. Given that kleptocrats can often hire the best lawyers and take advantage of every legal protection available, attempting to secure convictions and/or confiscation of all ill-gotten assets may be an expensive, time-consuming, and uncertain prospect. As such, across multiple jurisdictions, cases like the Giffen Affair (Kazakhstan) and the Abacha Affair (Nigeria) have ended up with kleptocrats forfeiting a part of their assets and accepting a slap on the wrist—what Mohammed Moussa, in his post last April , referred to as a “golden handshake.” Proponents of such settlements argue that it’s preferable to secure the restitution of a part of the stolen assets rather than risk a long and expensive process resulting in nothing. Those taking this view assert that settlements are better for the victims, and point to the failed case against the Moi regime in Kenya as an example of the risks of pursuing an uncompromising approach. And there’s a certain logic to that view. Asset recovery practitioners and proponents might well ask ourselves, who are we to push for a conviction or for forfeiture of all illicit assets for the sake of some high vaunted principles (if not our own egos!) if this means that the poor (almost always the victims of corruption) are left with nothing?

That pro-settlement view may sound plausible, high-minded, and sophisticated. But it’s wrong. And no case better illustrates this than the Obiang affair, which is currently at various stages of development in France, the US, and Spain. That case nicely illustrates the serious problems with negotiating “golden handshake” settlements with kleptocrats and their cronies, rather than pushing to do full justice. Continue reading →

Announcement: London Conference on Asset Recovery and Procurement Corruption

Posted on by
Reply

As GAB readers are no doubt aware, two of the hottest topics in the anticorruption world — topics we’ve devoted a great deal of attention to on this blog — are stolen asset recovery (see here, here, here, here, and here) and fighting corruption in government procurement (see here, here, here, here, and here).

For those who are interested in these topics, I’ve recently learned that the London Centre of International Law Practice will be holding what looks to be a very interesting conference on both these subjects on June 22-23, in London. It looks like a very interesting set of speakers, with a lot of legal practitioners (but some good representation from TI-UK and other anticorruption NGOs as well). I regret I won’t be able to make it myself, but for those who are interested, you can find out more about the conference here.

The Golden Handshake: Background Rules and the Choice of Restoring Money or Doing Justice

Posted on by
4

The anticorruption community has recently put more emphasis on freezing, seizing, and repatriating the assets of corrupt kleptocrats. But while this move is in many ways welcome, it is still the case that essentially none of the most infamous kleptocrats have ended up behind bars. Even when governments go after the illicit assets of these kleptocrats, their cronies, and other “politically exposed persons” (PEPs), the governments seeking asset recovery often find themselves put to an uncomfortable choice: either to accept the return of only a part (sometimes a small part) of the looted wealth in a settlement, or to continue to pursue their attempts, often in vain, to seize and repatriate all (or at least most) of the stolen assets.

Sophisticated PEPs know this, and usually take advantage of the slowness of the asset recovery process (as well as their ability to use their ill-gotten wealth to hire top-notch legal talent to wage a protracted legal battle), to the point where the governments are willing to allow the PEP to secure the “golden handshake” of a favorable settlement. Nothing illustrates this better than the attempts to recover the assets of former Nigerian President Sani Abache and of former Kenyan President Daniel Arap Moi. Abache’s family’s lawyers stiff resistance to asset recovery efforts eventually led to a settlement whereby the Abache family returned $1 billion–but got to keep $300 million. In the latter case, the Kenyan authorities insisted on recovering the full amount–and have ended up with nothing. The Kenyan experience has served as a cautionary tale, inducing for example many of the Arab Spring countries to accept settlements they would have never accepted two years ago. This result frustrates the foundational principle of penology that a criminal who gets caught should end up worse off than he would have been if he did not commit the crime. A corrupt official who knows that the worst that can happen is that he might have to give back half or two-thirds of the money he stole is unlikely to be deterred.

At the moment, it does not seem realistic to expect more severe criminal punishment for many kleptocrats, so reliance on settlement will continue for a while. Accordingly it is important to figure out how to use settlements to guarantee the maximum restoration of assets. The two most important factors that shape the content of a settlement are national and foreign justice. Consider each in turn. Continue reading →

Guest Post: Money Laundering and Asset Recovery in Vietnam

Posted on by
Reply

Mathieu Tromme, co-founder of the Partnership for Research in International Affairs & Development (PRIAD), contributes the following guest post:

In 2012, the Financial Action Task Force (FATF) placed Vietnam into its International Cooperation Review Group (ICRG) mechanism–often referred to as FATF’s “blacklist”–due to FATF’s determination that Vietnam was not making sufficient progress in addressing deficiencies in its anti-money laundering and combating financing of terrorism (AML/CFT) regime. For Vietnam, this blacklisting was most unwelcome news. Like many other countries, Vietnam had suffered from the global economic downturn, and FATF’s blacklisting threatened its tenuous recovery. Landing on FATF’s blacklist increases a country’s risk profile, affects its credit rating, hampers international trade and investment, and impedes access to the international banking system (due to the enhanced customer due diligence which FATF requires). In response, Vietnam enacted a Money Laundering and Counter-Terrorism Law in 2012 (which took effect in early 2013). After the Asia Pacific Group made an on-site visit to verify Vietnam’s action plan, FATF once more declared Vietnam technically compliant. The country came off the FATF blacklist in February of 2014.

At the same time as this was happening in 2012, FATF issued a revised and consolidated set of 40 AML/CFT recommendations (from an original 40 + 9 “special recommendations” on terrorist financing), which ushered in a number of new standards and evaluation criteria. Of particular interest in Vietnam is Recommendation 30 on “Responsibilities of Law Enforcement and Investigative Authorities,” according to which jurisdictions are now expected to conduct pro-active parallel investigations into both the predicate offence and possible money laundering and terrorist financing offences. Moreover, under this Recommendation, jurisdictions are expected to designate a competent authority which can expeditiously identify, trace, and initiate actions to freeze and seize proceeds of crime. In Vietnam, meeting this new recommendation will be a real challenge, and might again threaten to land it on the FATF blacklist. Continue reading →

Guest Post: Hosting Proceeds Down Under — Australia and the G20 Anticorruption Agenda

Posted on by
2

Professor Jason Sharman of Griffith University, Australia, contributes the following guest post:

On November 15th–two days from now–the latest G20 leaders’ summit kicks off in my home town of Brisbane, Australia, with anticorruption once again on the agenda. Though the G20 Anti-Corruption Working Group has made some important progress, many of the member states have been letting down the side. Specifically, Australia tends to receive less critical scrutiny than it should when it comes to international action against corruption, particularly in terms of hosting stolen assets from other countries in the region. And the G20 leaders’ summit is as good a time as any for the international community to press Australia for its many failures to deal with its status as a regional haven for money laundering in the Asia-Pacific. Continue reading →

Yet Another Misguided Proposal to Solve Corruption with an International Convention

Posted on by
1

Entrenched corruption is a frustrating problem, so it’s tempting to invent a new international regime that can take bold action against it without relying on or being encumbered by corrupt or incompetent domestic law enforcement. An article published last week in Foreign Affairs by Alexander Lebedev and Vladislav Inozemtsev, succumbs to that temptation by proposing a “universal anticorruption convention” as a solution to grand, systemic corruption (as distinct from low-level bribery). In broad terms, Lebedev and Vladislav envision a convention that would “clearly define the crime of corruption, codify the principles of good governance,” and “establish a supranational governing body, dedicated investigative and police forces, and a specialized court,” with signatories agreeing to “allow[] international investigators to act freely on [their] territory, and permit[] international prosecution of [their] citizens for corruption crimes.”

The article is short on details about these proposed institutions; the bulk of the article is devoted instead to the proposed convention’s enforcement mechanism. And there the proposal is quite radical: Signatories would be required to “radically curb their financial ties” with non-members, to “identify all assets controlled on their territories by the subjects of nonmember states (both individuals and companies)”–regardless of whether the assets are the proceeds of corruption–and, by an agreed deadline, to “monetize[e] and repatriate[e]” all of these assets. Under the convention, citizens of non-member states could not “open[] accounts in member countries’ banks, establish[] companies on their territories, [or] acquir[e] local real estate.” And member states would also be required to bar immigration from non-member states (at least of “young, independent people”), because the “freedom to leave” a corrupt state reduces the pressure to change from within.

I agree with Lebedev and Inozemtsev that grand corruption is a serious problem, and I commend them on their willingness to explore radical new solutions. But their proposal is absurd. I can’t imagine any state signing on to it, and I don’t think any state should. Their proposal would not only be ineffective. Its implementation would be catastrophic.  Continue reading →