Tag Archives: forfeiture

Fixing India’s Anti-Money Laundering Regime

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In the past year, India has been among the most zealous countries in the world in stepping up the fight against money laundering and related economic and security issues. The effort that probably got the most attention was last year’s surprise “demonetization” policy (discussed by Harmann in last week’s post), which aimed to remove around 85% of the total currency in circulation. But to assess India’s overall anti-money laundering (AML) regime, it’s more important to focus on the basic legal framework in place.

The most important legal instrument in India’s AML regime is the Prevention of Money Laundering Act, which was enacted in 2002, entered into force in 2005, and has been substantially amended since then. The Act defines a set of money laundering offenses, enforced by the Enforcement Directorate (India’s principal AML agency), and also imposes a range of reporting requirements on various institutions. Furthermore, the law gives the Enforcement Directorate the authority to freeze “tainted assets” (those suspected of being the proceeds of listed predicate offenses), and to ultimately seize those assets following the conviction of the defendant for the underlying offense.

How effective has India been in its stepped-up fight against money laundering? On the one hand, over the past year (since the demonetization policy was announced), banks logged an unprecedented increase of 706% in the number of suspicious transaction reports (STRs) filed, and reports from last July indicated that the total value of the assets frozen under the Prevention of Money Laundering Act in the preceding 15 months may have exceeded the cumulative total of all assets frozen in the prior decade-plus of the law’s operation. And the government further reported that its crackdown on shell companies had discovered around $1.1 billion of unreported assets.

Yet these encouraging numbers mask a number of serious problems with India’s AML system, problems that can and should be addressed in order to build on the momentum built up over the past year. Here let me highlight two areas where greater reform is needed: Continue reading →

Policing Private Parties: How to Get Kleptocrats’ Seized Assets to their Citizens

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As Rick has pointed out, it is exciting to see the successful forfeiture of U.S.-based assets owned by sitting Vice President of Equatorial Guinea, kleptocrat and international playboy Teodoro Nguema Obiang Mangue (“Obiang”). The Department of Justice estimates that the assets are worth an estimated $30 million. Also encouraging is the fact that the bulk of the settlement funds will be returned to the people of Equatorial Guinea. This is the first case in which the assets of a current leader’s cronies will be seized and repatriated to the country of origin by the U.S. Disbursing millions of dollars transparently in country that ranks 163/177 on Transparency International’s Corruption Perception Index will be challenging.

In stolen asset repatriation cases, the debate over disbursement typically boils down to whether to channel reclaimed cash through the government or through private actors. In Equatorial Guinea, returning the money directly to the government is a non-starter: the Obiang family has an extensive record of human rights and corruption abuses and a tight grip on power. The DOJ settlement accordingly cuts the government and its henchmen out of the forfeiture proceeds and channels repatriated funds through a private charity. But simply relying on private actors will not eliminate corruption challenges; there are pitfalls in channeling aid through private NGOs as well.

The DOJ should keep the following risks in mind as works out a disbursement plan for the Obiang settlement funds: Continue reading →