Tag Archives: stolen assets

Universal Asset Declarations Will Not Solve Kazakhstan’s Corruption Problem

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In March 2019, Kassym-Jomart Tokayev replaced long-serving President Nursultan Nazarbayev to become independent Kazakhstan’s second head of state. Apparently recognizing the scope and scale of Kazakhstan’s corruption problem, President Tokayev made combatting corruption a central focus of his agenda from the get-go. And he has continued to emphasize that the fight against corruption is a top priority.

Although it’s not unusual for heads of state to deploy anticorruption rhetoric, often without action to back it up, there are indications that President Tokayev is serious. Over the past year and a half, the Kazakh government has implemented several concrete anticorruption measures—both large-scale and quotidian. Perhaps most prominently among the former category, in January 2020 Kazakhstan joined the Group of States against Corruption, a corruption-monitoring organization run by the Council of Europe. Additionally, a law enacted in December 2019 provides for the dismissal of public officials in managerial roles if their subordinates are convicted of corruption-related charges. Most recently, President Tokayev himself announced a new policy under which high-ranking officials and their family members will be barred from keeping bank accounts abroad. Among the more “everyday” measures, the government has created “anticorruption centers” where citizens can speak directly with employees of Kazakhstan’s anticorruption agency. And to prevent price-gouging during the COVID crisis, the government has required pharmacies to post QR codes that allow customers to easily check the legal prices of medicines.

It remains to be seen whether these measures will be effective in helping to address Kazakhstan’s corruption problem. One additional measure, however, appears unlikely to make much difference: a new system of “universal” property and income declarations that the Kazakh government is beginning to implement (see here, here, and here). Kazakhstan has required public officials to declare their assets and income since 1996, but the new initiative will extend this requirement to all citizens and foreign permanent residents of Kazakhstan in a phased rollout over the next several years. By 2025, all Kazakhstanis will be required to file, in addition to their standard income tax return, a declaration listing the value of their assets and liabilities, including real estate, cars, bank accounts, and jewelry. According to the government, this new system of universal asset declarations will help counteract the shadow economy, increase compliance with tax laws, and reduce corruption.

The new disclosure regime may well be justified as a matter of tax policy or as a measure to combat the shadow economy. However, evaluated purely as an anticorruption measure, the policy is misguided, for two main reasons: Continue reading →

Must the IMF Quantify Grand Corruption? A Friendly-But-Skeptical Reply to Global Financial Integrity

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The World Bank and IMF held their annual meetings last week, and it appears from the agenda that considerable attention was devoted to corruption—an encouraging sign that these organizations continue to treat this problem as both serious and relevant to their work. But does addressing the corruption problem effectively require that these organizations make more of an effort to quantify the problem? In a provocative post last week on Global Financial Integrity’s blog, Tom Cardamone (GFI’s President) and Maureen Heydt (GFI’s Communications Coordinator) argue that the answer is yes. In particular, they argue that the IMF should “undertake two analyses”: First the IMF “should conduct an annual assessment of grand corruption in all countries and publish the dollar value of that analysis.” Second, the IMF “should conduct an opportunity cost analysis of [] stolen assets”—calculating, for example, how many hospital beds or vaccines the stolen money could have purchased, or how many school teachers could have been hired.

This second analysis is more straightforward, and dependent on the first—once we know the dollar value of stolen assets (or grand corruption more generally), it’s not too hard to do some simple division to show how that money might otherwise have been spent. So it seems to me that the real question is whether it indeed makes sense for the IMF to produce an annual estimate, for each country, of the total amount stolen or otherwise lost to grand corruption.

I’m skeptical, despite my general enthusiasm for evidence-based policymaking/advocacy generally, and for the need for more and better quantitative data on corruption. The reasons for my skepticism are as follows: Continue reading →

Uzbek Civil Society to Swiss Government: Hasty Return of Stolen Assets to Uzbek Government Not Warranted

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GAB readers know that the Government of Uzbekistan has been pressing countries to return some $1.0 billion under their control which Gulnara Karimova, daughter of the late dictator Islam Karimov, stole through corrupt schemes.   They also know that Uzbek civil society has urged a “responsible return,” one that recognizes that despite modest changes since Karimov’s death, Uzbekistan is still ruled by the same close-knit group in charge during Karimov’s time and with the same kleptocratic proclivities.  Responding to reports that the Swiss government, which holds several hundred million dollar of Gulnara’s corrupt monies, may soon send these funds back to Uzbekistan with little guarantee they will to go improve the welfare of the Uzbek people, members of Uzbek civil society living in exile wrote the Swiss government today asking it to refrain from any hasty repatriation. Their request is particularly urgent given the evidence they cite that stolen assets Switzerland returned to Kazakhstan through a World Bank program were misused. The request is joined by members of Kazakh civil society members in exile.

OPEN LETTER OF CIVIL SOCIETY ORGANIZATIONS TO THE SWISS GOVERNMENT

We, the undersigned representatives of civil society organizations advocating for transparent and responsible repatriation of assets stolen from the Uzbek people, are urgently calling upon the Swiss government to ensure that any decision regarding the ill-gotten assets of Gulnara Karimova, currently the subject of litigation in several countries, be made with due consideration to the rights and development prospects of the Uzbek people.

We urge the Swiss government not to act hastily and to consider that the promise of reform by the Mirziyoev regime have not yet materialized in practice. Based on all available information we strongly believe that return of these assets without sound conditionalities developed in consultation with major stakeholders, including civil society – which has been in a stranglehold in Uzbekistan for more than two decades – would only further perpetuate corrupt practices in Uzbekistan, leaving the systemic causes of the original criminal conduct untouched. The Swiss government can and should use these assets as an incentive to promote and support the course of reforms in Uzbekistan in the long-term interests of the Uzbek people. Continue reading →

A Different Kind of Quid Pro Quo: Conditional Asset Return and Sharing Anti-Bribery Settlement Proceeds

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In my last couple of posts, I’ve returned to a theme I’ve written about before: My skepticism about claims that the U.S. government either should (as a matter of policy) or must (under UNCAC or other legal obligations) share settlement proceeds in FCPA cases with the governments of the countries where the bribery took place. I’m also skeptical that there’s any obligation on the part of U.S. or other supply-side enforcers to use any of this settlement money to fund NGO-sponsored projects in (or for the benefit of) those countries.

Asset recovery, however, is different. When the U.S. (or some other country) identifies – at its own initiative or pursuant to the request of another government – assets held in the U.S. that have been stolen from a foreign government, my reading of the law (both conventional domestic legal principles and Chapter V of UNCAC) is that the U.S. has an unconditional legal obligation to return those assets to their rightful owner. At times, the U.S. has indicated that, although it has a general policy of returning stolen assets to the governments from which they were stolen, it does not view this as a legal obligation. Rather, the U.S. seems to want to leave open the option, in some cases, of attaching conditions to the return of the assets, or funneling them through NGOs or other bodies, rather than simply turning them over to the claimant government. I understand why the U.S. has taken this position: Returning assets stolen assets to a claimant government with a reputation for pervasive corruption—where it seems highly likely much of the money will be stolen again—seems awfully unappealing, and doubly so in those cases where the government officials who stole the money in the first place, or their family members and cronies, retain their power and influence in the claimant country. Hence the instinct to attach conditions to the return of the assets, or to use the money to fund NGOs rather than simply turn it over to the claimant government. The problem, though, is that I’m hard-pressed to come up with a legal basis (notwithstanding some valiant attempts) for doing anything other than handing over the money.

So, the situation as it stands looks something like this (and I acknowledge simplifying quite a bit to make things a tad neater than they actually are): On the one hand, many developing countries want wealthy countries like the U.S. to share foreign bribery settlement proceeds with the countries where the bribery took place, but for the most part the wealthy countries do not want to do this, and assert—correctly—that they are under no obligation to do this under UNCAC or any other legal instrument. On the other hand, many wealthy countries would like to retain the flexibility to attach conditions to asset return (or to use seized assets to fund NGO programs rather than turning the money over to the governments), but the claimant countries in the developing world assert—correctly—that there is a legal obligation (enshrined in UNCAC) to return stolen assets, without strings attached.

Framing the issue this way suggests a possible compromise. (In the interests of disclosure, I should say that this is not my original idea: It came up in a conversation I had recently with an analyst at an anticorruption NGO, but since I haven’t had the chance to clear it with him, I won’t name the person or organization here.) The trade would go like this: Continue reading →

How Asset Return Agreements Can Bolster Reform: The Kazakh Experience

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Guest contributor Robert Packer last week highlighted what can be the most contentious issue presented by the U.N. Convention Against Corruption – a request for the return of assets stolen as a result of corruption.  One reading of the convention seems to give countries victimized by corruption an absolute, unrestricted right to the return of the proceeds of corruption located in a second state.  But as Robert observed, states holding stolen assets can be reluctant to return them to a country where the chances the assets will again be lost to corruption are high and can find language in the convention arguably giving them the right, if not to keep the assets, to make return conditional on the requesting state taking steps to ensure the returned assets benefit citizens rather than again being stolen.  While there is always the danger that conflict over whether a return should be unrestricted or conditional will become acrimonious, a recent experience shows the result can also lead to a solution that benefits all parties. 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 →

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

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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 →

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 →

Yet Another Misguided Proposal to Solve Corruption with an International Convention

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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 →