It is getting increasingly difficult for corrupt officials to escape. In 2007, in order to help countries recover assets stolen by corrupt officials, the World Bank and the United Nations Office on Drugs and Crime (UNODC) jointly launched the Stolen Asset Recovery Initiative (StAR).
The recovery of assets stolen by corrupt officials from overseas presents - at every stage - a highly complex legal challenge, involving a number of critical steps including - tracing, freezing, confiscation and repatriation.
The advancements in financial services, transportation and communications technology have made it easier for corrupt government officials to conceal large amount of stolen assets. Differing legal systems, the high cost of collaborative investigation, the lack of international cooperation as well as the principle of confidentiality by banks have also all been useful to corrupt officials.
The Director of the Stolen Asset Recovery (StAR) Initiative Jean Pesme, speaking in an exclusive interview with this reporter, says that his unit aims it to build capacity for those seeking the recovery of assets, enabling illicit funds to be traced quicker and more effectively. Currently StAR works with a range of countries, including Libya, Tunisia, Egypt, Nigeria, Peru, Guatemala and South Sudan.
When it was created in 2007, the Stolen Asset Recovery had two major priorities: reducing the barriers for asset recovery in the major financial centers, and helping the victim countries build capacity by providing technical advice. StAR does not investigate specific cases, Pesme says. His unit’s job is to help countries to establish contact with the right people, using a variety of tools available through international cooperation.
"As the Stolen Asset Recovery database shows, there are 91 ongoing asset recovery cases and 89 cases have been completed. There are different estimates in terms of the amount of stolen assets. It is difficult to determine exactly how much money has been stolen. For example, in the past 10 years, only $5bn has been recovered; no one knows the exact figure of the assets stolen which is certainly much higher than this figure." Pesme says.
Great skills required
"This is a very challenging task. Recovery of stolen assets requires a high level of skills." Pesme remarks.
Stolen asset recovery is a long and complex process. First, the country involved must be able to track the stolen assets; and second, the country involved must request collaboration from the judicial authorities of the country where the stolen funds is located. Third, the entire legal process usually must be initiated by the requesting country and success also depends upon actions in response by the country were funds are located.
When assets flow through the financial system, the transfer from one account to another usually leaves an audit trail record, which can be tracked and detected by financial investigators. But because the stolen assets are often distributed among different accounts and under different corporate names, investigators usually also need to refer to external information, such financial documents and suspicious transfer reports filed in banks and with law enforcement agencies. Given the speed of money transfers in the global financial system, it is not easy - even for a seasoned investigator - to identify and track the bank accounts of the criminals.
Additionally, if non-public information emanating from the judiciary of another country is sought, an application for mutual legal assistance or a request for an investigation must be submitted through diplomatic channels.
Once financial investigators have confirmed possible corrupt assets, the freezing of such assets becomes particularly critical. However, premature freezing procedures can hinder the progress of the investigation. If the target beneficiaries are alerted, they are likely to transfer the assets beyond the reach of investigators and the process is delayed.
"Much of our training focuses on how to apply knowledge in practice." Pesme says. “Those involved in enforcement may know what is on mutual legal assistance, and the process of asset confiscation, but they do not know how to apply this knowledge into practice.
Another challenge lies in the determination of countries to recover stolen assets. "We spend a lot of time concentrating on the political will," says Pesme. “The United Nations Convention against Corruption established in 2005 is the first international agreement of its kind to have as its goal the recovery of stolen assets. Despite the fact that more than 130 countries have ratified the Convention, greater international cooperation is needed in order to successfully recover stolen assets.”
Protracted Nigeria Global Asset Recovery
Recovery of stolen assets is a long and protracted project. In some well-known cases, it has taken fifteen or twenty years to complete. Even though it is hugely difficult, the overseas asset recovery is not impossible. In the past 21 years, the Philippines has recovered more than $1bn of funds stolen by former President Ferdinand Marcos.
Nigeria has also successfully recovered hundreds of millions of dollars stolen by former leader Sani Abacha. He was listed by Transparency International as one of the world's four most corrupt people. With a military background, Abacha ruled Nigeria from 1993 to 1998. During his reign, about $20 - $40bn of state assets were misappropriated and most of transferred to overseas. In June 1998, Abacha died suddenly of a cardiac attack. After his death, the transitional government led by Abubakar Sani put Abacha's family under house arrest. His son, Mohammed Abacha and his assistant confessed the whereabouts of $ 670 million and 50 million pounds of assets.
These assets are mostly stored in a number of banks in Switzerland. Following various legal twists and turns, in 2005 the Swiss Federal Supreme Court issued a final judgment, ordering $480m to be returned to Nigeria, and another $70m to be retained in Switzerland due to unclear ownership, and a further $10m to be transferred through a third party custody account. Despite the judgment of the Swiss Supreme Court it still took a long time for the transfer to be completed. During the period, the Swiss government and the Nigerian government disagreed about the fate of the returned assets. Ultimately, President Obasanjo of Nigeria made a commitment to the Swiss authorities ensuring that Abacha’s assets would be used for the development of health, education and infrastructure development projects. As part of the final agreement, the World Bank played a supervisory role.
Arab Spring triggered a wave of asset recovery
The Arab Spring movement injected added vitality to the issue of stolen asset recovery. “Libya, Tunisia and Egypt have made great efforts in asset recovery, and they have strong expectations for stolen asset recovery." Pesme told this reporter. He mentions that, the World Bank began cooperating with these countries following the regime changes.
For the Arab Spring Countries of Tunisia, Egypt and Libya ‘justice’ is important and for their citizens this means recovery of the assets seized by the officials.
After the fall of Tunisian President Zine Abidine Ben Ali, the European Union announced a freeze on all of his and his wife's assets in the EU countries. The Swiss government also froze assets of approximately $63m. In July of last year, the former Tunisian leader said that he would give up the assets in Switzerland and have them transferred to the Tunisian authorities.
However, even if the stolen assets are found and frozen, the restitution process is not easy, and can lead to strained relations between the new governments and Western countries. In March last year, the Egyptian government sued the British Treasury to try to force the latter to provide information on the restitution of $135m bank accounts belonging to nineteen individuals said to belong to the core group around former Egyptian President Hosni Mubarak. But British officials said that according to UK law, they needed Egypt to take the first step by providing exact information concerning crimes that may have been undertaken.
In Libya under Colonel Gaddafi, an even greater amount of assets were allegedly embezzled. In June last year, the Libyan authorities unveiled a list of stolen assets involving 338 individuals and entities. Libyan officials pressed for the quick recovery of these assets, adding that some African countries were in the process of nationalizing Libyan assets. In January of last year, Zambia nationalized the country's largest telephone company which was primarily held by Libyan African Investment Fund.
There is much work to do on the issue of Asset Recovery according to Jean Pesme. In positive moves, major financial centers, such as Switzerland, the United Kingdom, France, Spain, Italy, and Belgium, are strengthening cooperation with Arab Spring countries, and importantly the G-8 is also participating in a held a special Arab Forum on asset recovery.
by Jiang Wei reported from Washington and Beijing
Chinese Newspaper