International asset recovery
International asset recovery is any effort by governments to repatriate the proceeds of corruption hidden in foreign jurisdictions. Such assets may include monies in bank accounts, real estate, vehicles, arts and artifacts, and precious metals. As defined under the United Nations Convention against Corruption, asset recovery refers to recovering the proceeds of corruption, rather than broader terms such as asset confiscation or asset forfeiture which refer to recovering the proceeds or instrumentalities of crime in general.
Often used to emphasize the "multi-jurisdictional" or cross-border aspects of a corruption investigation, international asset recovery includes numerous processes such as the tracing, freezing, confiscation, and repatriation of proceeds stored in foreign jurisdictions, thus "making it one of the most complex projects in the field of law". Even considering the difficulties present, Africa specialist Daniel Scher counters that international asset recovery's "potential rewards in developing countries make it a highly attractive undertaking".
Despite domestic legislation in some countries allowing for the confiscation and forfeiture of proceeds of corruption, it is improvements in finance, transportation, and communications technologies in the 20th century that have made it easier for corrupt leaders and other "politically exposed persons" to conceal massive amounts of stolen wealth in offshore financial centers.
By taking advantage of differences in legal systems, the high costs in coordinating investigations, lack of international cooperation, and bank secrecy in some recipient countries, corrupt officials have been able to preserve much of their loot overseas.
Social impact
Recovering stolen assets is important for a variety of reasons. According to the World Bank, the cross-border flow of proceeds from criminal activity, corruption and tax evasion is estimated between US$1–1.6 trillion per year—half of this amount is looted from developing and transition economies. US $20–40 billion of this flow originated in bribes to public officials from developing and transition countries. A 2005 report by the Commission for Africa cites a European Commission estimate that "stolen African assets equivalent to more than half of the continent's external debt are held in foreign banks accounts". As stated by the World Bank in 2004, "corruption is... the single greatest obstacle to economic and social development. Corruption undermines development by distorting the rule of law and weakening the institutional foundation on which economic growth depends. The harmful effects of corruption are especially severe on the world's poorest, who are most reliant on the provision of public services, and are least capable of paying the extra costs associated with fraud and corruption".Deterrence to future corruption
Several countries, especially economically deprived nations, have endured the brunt of systemic corruption as their public wealth illegally flowed into bank accounts and properties in developed countries and offshore financial centres. Successful conviction of criminals and/or confiscation of their assets creates a strong deterrent for potential corrupt officials that there is no safe haven for hiding illicit wealth.Current feasibility
Successes in recent years in recovering billions of dollars of stolen assets has demonstrated that asset recovery is feasible. For example, by 2005 Nigeria had recovered $1.2 billion stolen by former President Sani Abacha by requesting assistance from multiple jurisdictions including Switzerland, Jersey, and Liechtenstein. To recover Nigerian assets, the Swiss government designated the Abacha family a "criminal organization", allowing it to bypass the need for a conviction.Additionally, asset recovery was recognized as "a fundamental principle" of the UNCAC. The signing and ratification of the UNCAC by over 160 countries is seen as a major step in furthering cooperation between countries to join forces to fight corruption and assist each other in recovering looted assets. Legal precedents, increasing international cooperation, as well as enhanced capacities make asset recovery more possible now than ever.
The asset recovery process
Managing the stages of an asset recovery investigation can be extremely time consuming, complex and requires a great deal of resources, expertise, and political will. First, a victim country must succeed in tracing the stolen assets. Second, the victim country must request cooperation from authorities in the jurisdictions where the assets reside to seize the assets; these requests usually come in the form of a Mutual Legal Assistance request or a letter rogatory, though some common law countries allow the filing of a Mareva injunction in civil courts to achieve the same end. Third, legal processes must usually be initiated in the requested country in order to confiscate the assets. Following this, requested authorities must repatriate the assets back to the requesting country.Each of the necessary steps—tracing, freezing, confiscation and repatriation—presents its own unique challenges.
Tracing
Determining the existence of assets through an exhaustive financial investigation is the first requirement in any asset recovery case. Assets must be followed not only to their final hiding place, but causality must be established between the asset and the criminal activity. This poses a particular challenge when dealing with developing countries that have a cash-based society where monies often do not flow through the recorded financial system, other techniques must be used.When assets do go through the financial system, tracing from one account to the next will usually leave an audit trail that can be exploited by financial investigators. As stolen assets are often layered through several different accounts and corporate vehicles, investigators will often benefit from outside information such as seized financial documents and suspicious transaction reports filed with banking regulators and other law enforcement agencies. Given the speed that monies can be transferred in the global financial system, identifying and tracing the bank accounts of the perpetrators is not an easy task, even for a seasoned investigator. A high degree of expertise, resources and cooperation between multiple intelligence and law enforcement agencies is essential for successful tracing.
Though not often, occasionally investigators may come across documentation that leads directly to the stolen assets. For example, investigations seeking to trace Ferdinand Marcos' looted billions were greatly accelerated by finding Marcos' bank records in the former presidential palace. Additionally, suspicious activity reports filed with national financial intelligence units can often uncover connections that can expose cases of grand corruption.
To obtain non-public information in foreign jurisdictions requires the submission of either a "Mutual Legal Assistance" request, obtain a disclosure action through a tort claim, or submit a traditional letter rogatory through diplomatic channels. These requests are more likely to be successful when all countries involved have treaties in place, either bilateral or multilateral, to allow for legal cooperation. Notably, the UNCAC purports to provide a legal basis for international cooperation for asset recovery.
Freezing
Once financial investigations have identified assets as being possible proceeds of crime/corruption, freezing those assets becomes critical. However, premature freezing prevents investigators from following the money trail in real time. If alerted, the beneficiaries of targeted assets will most likely try to transfer the assets to make them unreachable. If delayed, there is a risk that the assets may be transferred beyond the investigator's reach. Confidentiality is key at this point. To prevent suspects from moving assets yet to be discovered, courts can place a gag order to prevent banks or officials from informing their clients until a transfer request is made. Recently some banks have also begun proactively cooperating with their national financial intelligence units by requesting consent on suspicious transfers.In March 2006, a Guernsey branch of Banque Nationale de Paris Paribas refused to transfer funds beneficially controlled by Tommy Suharto and instead froze the funds based on guidance from Guernsey's Financial Services Commission.
Confiscation/forfeiture
Whether by criminal or civil actions, a judgment is essential to transfer legal ownership of assets already frozen back to the requesting country. See Legal Avenues to Obtaining Judgment below.Repatriation/monitoring
There is no standard procedure for the restitution of illicitly acquired assets, as no two cases are exactly alike. Certain cases involving asset recovery have seen difficulties emerge during the repatriation stage.While stolen money is unquestionably the sovereign property of the requesting government, enforcing asset recovery requests is often complex and costly. Often there are complex issues around the claims of legitimate third parties, as corrupt proceeds can be mixed with legitimate income.
Additionally, requested countries and the international community as a whole do not want to see repatriated assets embezzled all over again. Although determining the disposal of assets is handled on a case-by-case basis, the World Bank has acted as a neutral third party to ensure that assets are invested into development efforts such as health and education.