New routes to recover corrupt funds: StAR’s updated Asset Recovery Handbook

Grand corruption cases—from Siemens to Lava Jato and, as highlighted in the Panama Papers and the Luanda leaks—have made headlines and plagued countries in every region, depriving citizens of public funds, starving emerging economies of development resources, and undermining trust in governments. Today, in the context of the coronavirus crisis and the need for large public stimulus packages, it is even more important to build trust and deter corruption. Asset recovery is more crucial than ever, both as a sign that leaders are held accountable and as a means for governments to mobilize all available resources.  Fortunately, we’ve learned new strategies for retrieving stolen assets over the past decade.

Acknowledging the high price of corruption, the UNODC-World Bank Stolen Asset Recovery (StAR) Initiative was created in 2007 to support efforts to recover ill-gotten gains. StAR today is releasing a new edition of its Asset Recovery Handbook, the go-to reference manual for practitioners since its first issue in 2010. 

Asset recovery remains an uphill battle. Proceeds of crime are typically stashed in offshore financial centers through a multitude of legal arrangements and shell companies, allowing their real beneficial owner to hide behind opaque structures.  Even if a corrupt official’s assets are detected, complex investigations and legal proceedings are often necessary to prove that the assets are derived from a crime. This process is heavily dependent on international cooperation with foreign authorities and mutual legal assistance processes, which are often too lengthy and ineffective to result in the timely freezing and confiscation of corrupt assets.

The updated Asset Recovery Handbook serves as a guide for navigating challenges in asset recovery and maximizing chances of success.  This new version benefits from five lessons learned from past experiences: 

Jurisdictions must mobilize and coordinate all their relevant investigative and prosecution agencies.  Too many jurisdictions fight corruption in silos with different parts of the government pursuing their own cases and not sharing information internally. That renders their own efforts inefficient and makes it very hard for other jurisdictions to know whom to engage with. A more coordinated approach helps engaging foreign counterparts through informal or administrative channels for the exchange of information, rather than relying too early on formal and lengthy mutual legal assistance processes. For example, in Tunisia, in the Ben Ali case, as well as in Malaysia, in the 1MDB case, enhanced domestic coordination and political will were instrumental in driving the case forward. This is crucial in multijurisdictional investigations: the 1MDB case for example involved France, Guernsey (a British Crown dependency), Luxembourg, Malaysia, Singapore, the United Kingdom, and the United States, among others. 

Choosing the right legal avenue is key, and sometimes that means initiating a civil, instead of a criminal case. In criminal confiscation cases, prosecutors need to prove that the defendant is guilty of a crime, and this often requires evidence beyond a reasonable doubt. In an increasing number of countries, non-conviction-based confiscation and private civil cases have led to successful asset recovery  because they are decided on a lower standard of proof, the “balance of probabilities”, and thus can be used to hold facilitators, such as lawyers and banks, accountable when their conduct does not rise to the level of a criminal offense. In addition, by becoming a “civil party” to corruption or money laundering cases launched by foreign authorities, jurisdictions harmed by corruption can get compensation for damages caused by the corrupt act. 

Going after enablers can be the game-changer. In most cases, banks or law firms provide an indispensable service in big corruption schemes, enabling money launderers to pose as legitimate investors. Too often investigations focus exclusively on the “king-pins” and the senior officials in power, without targeting those facilitators, who were, at best, willfully blind to the blindingly obvious or, at worst, complicit and part of the conspiracy. Pursuing criminal or civil cases against deep-pocketed facilitators can bring huge rewards.  The $3.9 billion settlement agreed between Malaysia and Goldman Sachs in 2020 shows the effectiveness of pursuing this approach. 
 
Using creative legal tools and mechanisms helps. In normal cases, the burden is on the prosecutor to prove the criminal origin of an asset before she can conduct a confiscation procedure. For people who wield significant political power, however, it may be justified to oblige them to prove the legitimacy of the source of their assets if there is an apparent mismatch between their wealth and their legally declared income. For example, the UK has introduced and used legislation on Unexplained Wealth Orders (UWOs) to confiscate “unexplained” assets unless the defendant proves that they are legitimate. Assets can also be returned by way of an agreement. In 2017, Nigeria, Switzerland, and the World Bank signed a memorandum of understanding for the return of $321 million of funds to Nigeria. These funds are now being used for direct cash transfers to poor households as a safety net. 

Civil Society Organizations (CSOs) play an increasing role in asset recovery. CSOs often detect suspicious activities and assets through independent research. Investigative leaks such as the Panama Papers, Luanda Leaks, and FinCEN files have provided a treasure trove of information, triggering law enforcement action worldwide. When countries won’t act, anti-corruption CSOs speak for the population that has suffered the consequences of corruption. In a landmark case a few years ago, the French courts recognized the right of Transparency International, given its statutory purpose as an anti-corruption organization, to bring a case against politically exposed persons in power in several African countries. One of these cases resulted in the confiscation of a 110 million-pound Paris mansion, a fleet of sports cars, and a 76-meter luxury yacht. 

The new Asset Recovery Handbook captures good practices in asset recovery from across the globe. StAR hopes that it will continue to help practitioners choose the strategies and the methods that are best adapted to bring their cases to fruition.