Friday, December 5, 2014

Return to sender: confiscation and repatriation of stolen assets, by Alessandra FONTANA

Question: What do these three men have in common – beyond having governed areas in the same region?
  • James Ibori (former Nigerian governor)
  • Teodoro Nguema Obiang Mangue (son of the president of Equatorial Guinea)
  • Sani Abacha (former president of Nigeria)
Answer: According to the Stolen Asset Recovery Initiative and media reports, all of them have been – or are still being – investigated in connection with stolen assets and are in the process of having them confiscated. These investigations are often cumbersome but necessary to prove that the assets in question are linked to corruption and fraud.

The media reported that Ibori was jailed in the UK in 2012 for laundering state funds. Obiang has reportedly been involved in legal proceedings for the recovery of assets in two countries – France and the US. Reports suggest that the Abacha family has been involved in an ongoing saga of the recovery of stolen funds, according to news articles. These cases made headlines due to the nature of the involved assets. Luxurious homes in Paris and Malibu, Michael Jackson memorabilia, yachts and jets were reportedly seized. These examples represent a small sample of the ongoing asset recovery cases involving senior political officials. The group is large, covering several areas around the world and officials of different rankings (see a database created by the Stolen Asset Recovery Initiative).

The seizure of goods belonging to officials around the world is a sign of the effectiveness of asset recovery processes to prove that crime does not pay.

The individuals involved may pay a price because they could end up in jail like James Ibori, and because the illicit funds and assets are likely be taken away. Granted – the process might take a long time, as was the case with the Abacha assets, but the deterring effect is still powerful. Asset recovery processes are a powerful tool to discourage corruption. Basically, engaging in corruption becomes unattractive when you take the profit away and the stolen money from the hands of the criminal. Who would take the risk when enjoying the spoils is uncertain? The incentive for engaging in corrupt activity is weaker if there is a higher risk of losing all those riches. That is why authorities suspecting that their country harbours stolen funds should ensure quick and effective asset recovery.  

However, OECD countries have not been so quick in recovering and repatriating stolen assets belonging to foreign jurisdictions. The OECD and the StAR Initiative conducted a survey, comparing OECD members’ performance on recovering such assets. The results are meagre. UK, US, and Switzerland are among the OECD countries with the best performances, although even they can do better. As reported in a joint OECD/StAR publication launched in September 2014, Switzerland froze around 56 percent of all stolen assets in the period 2010-2012 (USD 786.1 million), followed by the UK (USD 451.2 million) and the US (USD 112 million). Other OECD countries (Luxembourg, Portugal, Canada, Netherland and Belgium) also reported smaller amounts frozen. But not everything that is frozen is also returned: In terms of repatriation, the UK came first, returning USD 67.5 million, followed by the US (USD 59.5 million) and Switzerland (USD 20.2 million). No other OECD countries performed any repatriation. 

The extended time it takes to go through the investigation and judicial procedures to recover assets may explain the lack of returns: Belgium, Canada, the Netherlands, and Portugal froze assets, but have not returned anything.  To improve these results, countries could strengthen their practices from simple statistics gathering to increasing resources to investigate these cases. A few of the recommendations coming out of the OECD/StAR report include:

  • Gather statistics on case achievements. Make laws and statistical information publicly available at a central source. This will be helpful for countries requesting legal assistance, as they understand which investigative strategies worked well in a particular jurisdiction in past cases.
  • Dedicate more resources to legal and technical expertise to handle complex and costly cases. A current example of such a complex case is Ukraine.
  • Allow for rapid freezing of assets. Why? The official process to investigate and freeze assets is slow and formalistic: In most cases, you can only freeze assets after having received a court order. Meanwhile, criminals can use the time to transfer funds around the world. Rapid freezing means that an administrative order is enough – for example by a government to a bank. You don’t need the same process as you would for a court order. Such measures are typically reserved for specific situations, such as political upheaval in the foreign jurisdiction. They are not meant to replace or circumvent the official mutual legal assistance channel which will still be required.
  • Allow for non-conviction‑based asset confiscation (NCB). This is much easier than finding hard and fast proof for criminal activity. NCB means that a criminal conviction is not necessary. The asset itself (not the individual who committed the crime) is at the centre of proceedings: therefore, the confiscation can be decided based upon a ‘balance of probabilities’ that the asset is linked to a criminal activity. Currently, the opposite of NCB is done most often: conviction-based confiscation requires a criminal trial and a conviction.
  • Support the asset recovery institutions and practitioners in developing countries. Recovery processes are legally complicated and include complex investigations on financial crime. Often, capacities for these processes are weak. Yet, the evidence gathered in the developing country is crucial to conclude asset recovery proceedings.

Engaging in stolen asset recovery certainly requires a whole of government effort; but it is an even larger effort than that. Civil society and the media can provide particularly useful input (many cases are, in fact, brought to official investigation after investigative journalists unearth the story). OECD countries are committed to making development cooperation more effective -- most recently through the Global Partnership for Effective Development Cooperation. Asset recovery is part of that, and should be strengthened as a powerful anti-corruption tool. 

The views expressed in our blogs remain those of the authors and do not necessarily represent the views or policies of the OECD or its members