The StAR Quarterly 

April 2018


 

We hear you…

We are frequently asked to provide more information on what exactly StAR is up to these days. While we have been responding promptly to country requests, and have initiated a lot of new work on knowledge and policy, we want to do more to ensure that our constituency is better informed and up to date on StAR’s activities. So, welcome to StAR’s first quarterly newsletter.

As we all receive too much information already, we have done our best to keep this newsletter succinct, while still being informative. This means that:

  1. We will share some highlights of our country work over the past three months, and will discuss in greater depth one interesting aspect of our technical assistance or a particular engagement.
  2. In addition, the “Spotlight on…” section will highlight a research or policy topic that we are working on and explain its relevance to the wider asset recovery agenda.

The StAR Quarterly is meant for you—the StAR donor, the anti-corruption campaigner, the academic, the policy analyst, or the interested member of the public. We therefore want to make sure that it covers information relevant to you.

On behalf of the entire StAR team,
Emile van der Does de Willebois, StAR Coordinator
 


Follow-Up to the Global Forum on Asset Recovery 


 

On December 4th, 2017, the Federal Government of Nigeria, the Swiss Federal Council, and the World Bank signed a Memorandum of Understanding capturing the tripartite agreement on the World Bank’s monitoring role and the modalities of the funds repatriation and disbursement.

In December 2017, the United States and the United Kingdom hosted the first Global Forum on Asset Recovery (GFAR) in Washington D.C, with support from StAR, which focused on assistance to four countries: Nigeria, Sri Lanka, Tunisia, and Ukraine. The goal of the Forum was to provide a platform for bringing together investigators and prosecutors from the four focus countries with their counterparts from financial centers, and for enhancing partnerships and collective action for returning stolen assets.

Since the Forum, StAR has been busy following up with the four focus countries, to build further capacity and maintain the momentum generated at GFAR. Specifically, in the first quarter of 2018: 

  • In Nigeria: StAR provided support to the Attorney General's office in planning for the establishment of a new asset management agency and in the creation of a database of seized and confiscated assets;
  • In Tunisia: StAR supported the final two in a series of four training workshops on financial investigations organized by the UNODC, and discussed progress with relevant authorities on certain cases in financial centers that have frozen corruption-related assets.
  • In Sri Lanka: StAR organized two advisory missions to Colombo to advise on the drafting of the national Proceeds of Crimes Act and supported the Commission to Investigate Allegations of Bribery or Corruption on the reform of their asset declaration and prevention of conflict of interest system. StAR also continues to facilitate further interaction with financial centers following up on the bilateral case-related meetings held during GFAR.
  • In Ukraine: StAR assisted Ukrainian authorities (especially the National Anti-Corruption Bureau) in the follow-up with certain jurisdictions on specified mutual legal assistance requests. It also discussed ways to make the Anti-Money-Laundering (AML) system more effective as a tool in the fight against corruption. The legislative amendments required at the national level in order to put this into practice were discussed as well.

As part of the specific outcomes for GFAR, StAR has also been assisting national authorities in creating "Beneficial Ownership Guides" to help foreign investigators or other interested parties looking to find information on the identity of the beneficial owners of an entity incorporated under the laws of that country. This initiative was launched in 2014 during the Third Arab Forum on Asset Recovery and was continued as part of the work of the G-20 Anti-Corruption Working Group in 2016. In 2017-2018, new or updated beneficial ownership guides were published for Brazil, Italy, Latvia, Nigeria, Ukraine and the United Kingdom. A guide for Switzerland is forthcoming. You can view and download country-specific beneficial ownership guides here.

You can find resources on GFAR, including press releases, communiques, in-session summaries, and videos of the opening and closing ceremonies and a full report of the event on our website.


Update on StAR Activities


 

Apart from the GFAR follow-up country work, StAR continues to build capacity and provide technical assistance on asset recovery-related issues to other countries. Notably, in the first quarter, StAR:

  • Assisted Guatemala by bringing together international asset recovery experts to share expertise for the establishment of an asset recovery unit.
  • Assisted Argentina in the reform of its financial disclosure and conflict of interest framework, helped redesign the disclosure form for the new e-filing system, supported a legal review and drafting of new legislation (including the obligation to declare what is owned beneficially) and convened  an open-source investigation workshop for all relevant authorities on asset recovery.
  • Continued to provide advice to the Inspectorate of Government of Uganda on the use of the asset declaration system to identify red flags in the submissions. Future verification will include automatic cross-checks with registries and government databases.
  • Advised the Agency for the Recovery of Criminal Proceeds of Moldova on the draft regulation on the evaluation and management of seized and confiscated assets and the Ministry of Justice on amendments to the legal framework on asset declarations.

Emerging good practice on beneficial ownership for income and asset disclosure: 

For many years, StAR has been supporting the strengthening of the legal framework on asset declarations by public officials in countries around the world. In recent years, StAR has been adding a new element to that assistance - advocating that countries impose an obligation to ensure that public officials not only declare what they own directly, assets to which they hold legal title, but also what they own beneficially. StAR has been providing assistance to make this change in many jurisdictions. Thus, under this obligation, public officials will not only be obliged to declare ownership of a controlling stake in a shell entity, but will also have to declare the property held by such entities. That’s a significant step forward. Moreover, in the case of assets for which they are the beneficial owners, they will also have to identify the legal owner (either the natural person or the legal entity).

In some countries, a false statement in an asset declaration constitutes a criminal offence. StAR has been advising and supporting such reforms both through its country engagements and policy work given the substantial gaps in transparency when officials are only obliged to declare what they own directly. Introducing such an obligation to declare assets owned beneficially significantly affects the utility of asset declarations for prosecuting false statements and the use of declarations in the investigation and prosecution of corruption in the context of money laundering investigations.


Spotlight on... StAR Asset Recovery Watch


 

The recovery and repatriation of stolen assets—if it happens at all—typically occurs behind closed doors. In this regard, ironically, the return of kleptocrats’ loot sometimes shares a key characteristic with the underlying corrupt act itself: being shrouded in secrecy.

Global norms on grand corruption and the corresponding duty to locate, freeze, and repatriate proceeds of corruption to victim countries have already undergone a major shift since Nigeria’s president Olusegun Obasanjo bluntly criticized Western complicity in facilitating the stealing of billions of public funds from developing countries, in a 1999 speech at the UN General Assembly: 

“It is morally reprehensible, unjust, unfair and against all established human values to engage in actions that actually encourage corruption in poor countries to fatten your own country…. The thief and the receiver of stolen items are guilty of the same offense.”
 
In shaping global anti-kleptocracy norms and in codifying them into international law, the strong provisions on asset recovery in the United Nations Convention Against Corruption (UNCAC) contained in Chapter V are of critical importance.

Yet, despite these provisions, the particulars of too many cases of international recovery of proceeds of corruption are known only to government officials, courts, law enforcement, implicated financial institutions, corrupt politicians themselves, and their lawyers. For other interested parties, such as the media, and the general public, reliable information on the amounts of assets frozen, confiscated, or returned is hard to come by.

Sometimes, there is a public announcement or press release when stolen funds are finally returned. For example, at the Global Forum on Asset Recovery (GFAR) in December 2017, Switzerland, Nigeria, and the World Bank signed a memorandum of understanding and publicly announced the return of $321 million in assets stolen by President Abacha over two decades ago to Nigeria. But for the majority of cases, there are few readily accessible public records.

The lack of transparency around corruption-related international asset recovery is problematic for several reasons:

  • It denies countries that make a concerted effort and devote significant resources towards locating and returning illicit gains from kleptocracy the credit that they deserve. Collecting, systematizing, and showcasing asset recovery efforts reflects the hard work being carried out by investigators, prosecutors, and courts all over the world.
  • It prevents the fruitful exchange of best practices and of innovative new legal tools among prosecutors, investigators, and private actors seeking to initiate legal action to return stolen assets.
  • It denies civil society and the public the opportunity to verify whether proclamations of political will are matched by actions, and to demand accountability for a failure to do so.
  • Additionally, the regular collection of case information will ensure that returned funds are accounted for. And if not, someone will be able to ask: “So what happened to those stolen millions?”

Case information is required to inform the debates on anti-corruption policy and repatriation of proceeds of corruption in international and multilateral forums, such as the G20 Anti-Corruption Working Group or the UNCAC Asset Recovery Working Group. Knowing which factors contribute to successful asset recovery or why a particular case failed helps policy makers put in place a functional asset recovery framework.

Solid evidence also provides the foundation for designing effective preventive measures and policy reforms to stop assets from being stolen in the first place. Grand corruption can only be curbed by stopping the entry of stolen funds into the financial systems, and by closing avenues of hiding money by using anonymous corporate structures. We need to know which jurisdictions are most popular among corrupt officials in order to focus our efforts on strengthening beneficial ownership regimes where it matters most.

There is inherent value in documenting innovative approaches and emerging practices in initiating recovery actions, for example NGOs going beyond more familiar roles as advocacy organizations and taking direct action by bringing cases to court or becoming parties to ongoing court corruption-related cases (e.g. in France and Spain) or authorities using unexplained wealth orders (UK). Case examples of successful civil legal action in corruption-related asset recovery can help encourage private actors to bring cases against entities or individuals that benefitted from corruption. This raises awareness of new avenues for action and educates practitioners about new legal toolsand cooperation mechanisms.

The systematic collection and publication of case information will also inform the risk-based calculus of financial institutions and increase reputational risks for intermediaries that turn a blind eye towards offering financial shelter for gains from corruption.

StAR’s Asset Recovery Watch database, which was launched in 2011, is the first systematic effort to track efforts by prosecution authorities worldwide to go after assets that stem from corruption. The database contains 240 entries that detail cases involving over 50 requesting and over 40 requested jurisdictions.
 
Asset Recovery Watch currently documents approx. $6 billion in stolen funds that have been frozen, adjudicated, or returned to affected countries since 1980. Our next update will detail an additional approx. $2.5 billion in stolen funds. In all likelihood, these figures represent only a fraction of actual gains from corruption that have been returned or are in the process of being located, frozen, or returned.
 
We, at StAR, would greatly appreciate your help in collecting case information. If you have relevant information on international asset recovery cases (related to corruption offenses) in your jurisdiction, please share it with us. We document and track any corruption-related asset recovery cases where stolen assets have been deposited abroad, i.e. outside the victim country. We only include publicly available documents, such as court documents, press releases, or government reports. You can email us at: arw@worldbank.org.
 
Sustained data collection efforts and regular reporting by public authorities are needed to systematically collect case examples of international asset recovery. Without this, we are all just tapping in the dark. 


New Asset Recovery Resources


 

Guidelines for the Efficient Recovery of Stolen Assets: an online tool:

Together with the Swiss Federal Department of Foreign Affairs  and International Centre for Asset Recovery, StAR launched an online tool on Guidelines for the Efficient Recovery of Stolen Assets. The guidelines and their corresponding steps of action constitute a set of international good practices aimed at improving the efficiency of requesting and requested States in the asset recovery process. They were developed by experts from around 30 requested and requesting States and international organizations following the Lausanne seminars. The online tool is available in English, Arabic, French, and Spanish here.


Looking Ahead


 

Upcoming programming:

UNCAC Asset Recovery Working Group: 6-7 June 2018, Vienna
UNCAC International Cooperation Expert Meeting: 7-8 June 2018, Vienna



The StAR initiative would not be possible without the generous support from our donors:
Australian Department of Foreign Affairs and Trade (DFAT)
Norwegian Ministry of Foreign Affairs
Swiss Agency for Development and Cooperation
UK Department for International Development (DFID)
U.S. Department of State, Bureau of International Narcotics and Law Enforcement Affairs (INL)