Tag Archives: Kleptocracy Asset Recovery Initiative

The U.S. Government’s New Anticorruption Proposals: A Cause for Cynicism, Optimism, or Both?

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Last Thursday, two United States cabinet departments – the Department of the Treasury and the Department of Justice – issued separate but thematically related announcements (see here and here) regarding new initiatives to combat corruption, money laundering, and related malfeasance:

  • Treasury announced the finalization of a new Customer Due Diligence (CDD) rule (discussed previously on this blog), which would require that financial institutions collect and verify the personal information of the beneficial owners of accounts held at those institutions. Treasury also announced a proposal for new regulations that would require certain foreign-owned entities (single-member limited liability companies (LLC)) to obtain a tax ID number and report comply with the associated reporting requirements—a move that would close a loophole that currently allows these entities to shield the foreign owners of non-U.S. assets.
  • Treasury also announced that it plans to send draft legislation to Congress (the text of which does not yet seem to be publicly available) that would require companies to know and report accurate beneficial ownership information at the time of a company’s creation, and to file this information with the Treasury Department.
  • Justice also submitted proposed legislation to Congress that would give the Department new investigative powers (including the use of administrative subpoenas, rather than slower and less flexible grand jury subpoenas, for money laundering investigations, enhanced authority to access foreign bank and business records, and the ability to restrain property based on a request from a foreign country for 90 rather than 30 days). The draft legislation would also creating a mechanism to use and protect classified information in civil asset recovery cases, and would expand the scope of the money laundering offense to include, as a sufficient predicate offense, any violation of foreign law that would be a violation of U.S. law if committed in the United States.

I have not yet had time to review the final CCD rule or the proposed LLC rule, and as I noted above, I don’t think the full text of the legislative proposals is yet available. So I’m not yet in a position to comment on the substance, but at least on the surface, all this seems encouraging. It’s possible to take the cynical view that most of this doesn’t mean very much or represent genuine progress. And I’ll admit part of me is inclined to embrace the cynical view. But on the whole, I do think that last week’s announcements are genuinely encouraging, and signal the possibility of building greater political momentum for real progress.

First, though, the reasons for cynicism: Continue reading →

When Should Governments Keep Stolen Assets?

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The Swiss government agreed in early March to return $321 million to the Nigerian government that was stolen by the late Sanni Abacha during his kleptocratic reign as the country’s president.   The agreement provides that the funds will be used for programs to benefit the Nigerian people in “an efficient and accountable way” and, to ensure the funds do indeed go to such programs, the World Bank will monitor their use.

World Bank oversight is one way to ensure returned assets are not again stolen, and in the case of Nigeria — a relatively open society with an elected government, a lively, unconstrained media, and a vibrant civil society – World Bank monitoring, when coupled with these conditions, may be sufficient to guarantee the funds are put to good use.  But what about in closed societies?  Those without elections, free media, an independent civil society.  Countries where the same tight-knit, authoritarian group which stole the assets in the first place remains in power?  Is there any way to ensure stolen assets returned to these countries will be used to benefit the nation’s citizens rather than going straight back into the pockets of the thieves? Continue reading →

Is the Kleptocracy Initiative Worth It?: A Tentative Yes

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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 →

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

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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: Settlements in Asset Recovery Cases—Neither Ethical Nor Effective

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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 →

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 →

The StAR “Few and Far” Report, and (Conflicted) Reflections on Civil Forfeiture

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A couple weeks back, Rick’s post on the US DOJ Kleptocracy Initiative’s settlement in the Obiang case prompted an interesting exchange among several contributors to this blog (including me) about the use of civil forfeiture proceedings to seize assets–suspected of being the proceeds of corruption or other illicit activity–without a prior criminal conviction. I recently had the opportunity to read the Stolen Asset Recovery Initiative (StAR)’s excellent new report, Few and Far, about recent developments in the asset recover field, and this report prompted me to reflect further on this issue. The Few and Far report is very positive about civil forfeiture, and recommends substantially expanding its use. To quote the report:

Both developed and developing countries need to ensure that they have a broad range of mechanisms in place, such as the ability[y] … to confiscate [assets] in the absence of a conviction. (p. 3)

Confiscation in the absence of a conviction (NCB confiscation) continues to be an effective mechanism for freezing and confiscating assets…. [H]owever, most OECD members have yet to adopt laws permitting the confiscation of assets in the absence of a conviction. (p. 43)

I want to use the Few and Far report to raise again an issue that I noted in response to Rick’s post on the Obiang case: I’m deeply conflicted about the use of non-conviction-based (NCB) civil forfeiture proceedings, and I think that perhaps the anticorruption community should engage in a bit more reflection about this mechanism, and how to ensure it’s not abused. Continue reading →

US Moves to Freeze and Seize Nigerian Dictator Abacha’s Assets–But Who Will Get the Money?

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Last week, the U.S. Department of Justice (DOJ) announced that it had frozen about $458 million in corruption proceeds that former Nigerian dictator Sani Abacha and his conspirators allegedly embezzled from Nigeria’s central bank, laundered through U.S. financial institutions, and deposited in bank accounts around the world. The freeze is a first step in the DOJ’s largest-ever forfeiture action under its recent Kleptocracy Asset Recovery Initiative (KARI).  There is much to say about this development, but the question that most immediately comes to my mind (and likely many Nigerians’ minds) is: What will the DOJ do with all this money? Continue reading →