Management of Stolen Assets
Asset management is an important component within the asset recovery process. This includes management of seized, frozen and confiscated assets in the country of seizure and transparent, accountable and effective disbursement of funds upon return.
About Management of Assets
The management of seized and confiscated assets pending return or final disposal has become a priority on the international anti-corruption agenda in the past few years. It is an important aspect of successful anti-corruption enforcement measures and an important step for the successful recovery and disposal of stolen assets. Effectively managing seized and confiscated assets reduces the risks associated with having instruments of crime in circulation and ensures that they are managed in a transparent and accountable manner while preserving their value.
The outcomes of the country reviews conducted in the framework of the Mechanism for the Review of Implementation of the Convention demonstrated that many States parties faced issues with regard to the administration of frozen, seized and confiscated property. In addition, the Mechanism identified technical assistance needs in connection with the implementation of article 31, paragraph 3, of the Convention.
Article 31, paragraph 3, of the United Nations Convention against Corruption requires States parties to adopt, in accordance with their domestic law, such legislative and other measures as may be necessary to regulate the administration by the competent authorities of frozen, seized or confiscated property.
In 2017, UNODC, one of StAR's constituting entities, published a study entitled Effective Management and Disposal of Seized and Confiscated Assets which presents the experience of 64 countries in the management and disposal of seized and confiscated assets. Currently, in response to a request from the Conference, UNODC is updating and complementing the study. In addition, UNODC is working on the development of non-binding guidelines on the management of frozen, seized and confiscated assets. At its fifth, sixth and seventh sessions, the Conference of the States parties to the Convention adopted resolutions 5/3, 6/3 and 7/1, in which it encouraged States parties and UNODC to share experiences and build knowledge on the management, use and disposal of frozen, seized and confiscated assets, and to identify best practices that address their administration. More recently, at its eight session, held in Abu Dhabi from 16 to 20 December 2019, the Conference, in its resolution 8/1 entitled “Strengthening of international cooperation on asset recovery and of administration of frozen, seized and confiscated assets”, decided that the Asset Recovery Working Group should, among others, continue to collect information on best practices from States parties on this matter.
The following case studies provide some examples of where governments have worked with civil society organizations and the World Bank (with StAR facilitation in some instances) to organize mechanisms that allow for management of asset returns in a way that benefits citizens, and incorporate strong monitoring systems to ensure accountability.
Case Study 1: BOTA Foundation (Kazakhstan)
In 1999, Swiss magistrates ordered freezing of $84 million held on a Swiss bank account, of which the Government of the Republic of Kazakhstan claimed to be the sole beneficiary. In 2003, following a criminal investigation by the DOJ in the US, prosecutors brought charges for violations of the Foreign Corrupt Practices Act (FCPA) wire fraud, and money laundering, against U.S. citizens for having paid bribes to Kazakhstani officials in exchange for obtaining prospecting rights for oil in Kazakhstan. The Governments of the U.S.A., the Swiss Confederation and the Republic of Kazakhstan agreed to enter into an agreement with respect to the funds involved. The U.S.A. initiated a civil action at the District Court of the Southern District of New York seeking the forfeiture of the funds to the U.S.A. The release of the funds was agreed to be contingent upon the establishment and implementation of three programs among the “BOTA Program”.
The “BOTA Program” provided for the establishment and administration of projects for the benefit of the poor children of Kazakhstan. It was agreed that it would be implemented through a non-profit, non-governmental foundation, the BOTA Foundation, established under the laws of Kazakhstan and supervised by the World Bank, which would receive and disburse the funds. The Governments of Kazakhstan, U.S.A., and Switzerland, and five Kazakhstanis founded the Foundation in 2008, with the mission to return more than $115 million in disputed assets associated with corruption. The assets were used to improve the lives of poor citizens of Kazakhstan and especially to support the poor children, youth and their families through investment in their health, education, and social welfare with conditional cash transfers, scholarships and grants. The BOTA Foundation had three program departments: a Conditional Cash Transfer Program, a Social Service Program, and a Tuition Assistance Program.
The World Bank contracted an international non-governmental organization (IREX) to oversee the operations of the Foundation, offer administrative support, and ensure that the Foundation’s goals were met. In addition, the local financial management officer of the World Bank periodically checked the Foundation’s accounting records.
From 2009, when the Foundation started its operations till the end of its operation in December 2014, the Foundation managed to improve the health and poverty status of more than 208,000 children and youth. The Foundation has left a significant legacy serving as a model for asset recovery and management of assets cases worldwide, demonstrating how assets recovered from corruption can be used to improve the living conditions of thousands of people. Apart from the positive impact it had on the life of its programs’ recipients, the Foundation hired and trained more than 100 local staff who are currently sharing their experience in various international agencies.11 The successful repatriation of more than $115 million through the BOTA Foundation also demonstrated that responsible repatriation via civil society is possible and that it can have a role to play in every step of the asset recovery process.
Case Study 2: MANTRA Project (Nigeria)
In 2014, Switzerland confiscated $321 million in assets from the Abacha family, implicated in corruption in Nigeria, and in April 2017, a Swiss court ruled that the Swiss government should repatriate the funds to Nigeria on the condition that the World Bank monitor the process. In December 2017, Nigeria, Switzerland, and the World Bank signed a tripartite MoU that states that: the recovered funds would be used to finance targeted cash transfers; the World Bank would “monitor the use of the Funds;” and Nigeria will engage “civil society organizations (CSOs) to participate in the monitoring” of the project. This agreement was signed during the Global Forum on Asset Recovery (GFAR) which was organized by the Stolen Asset Recovery (StAR) Initiative and co-hosted by the UK and US governments. This StAR facilitated platform afforded bilateral engagement between the two countries and presented the opportunity for meetings with the World Bank team.
As per the MoU, it was agreed that the returned funds would finance the poverty alleviation focused National Social Safety Net Program (NASSP), targeted toward providing financial assistance to the poorest and most vulnerable population in Nigeria. The NASSP provides cash transfers to the poorest households in order to smoothen consumption, promote savings and allow for start-up capital for small businesses to generate income and improve livelihoods. The NASSP aims to support over 10 million citizens living in extreme poverty from across the country and over 90 percent of NASSP beneficiaries who collect the payment on behalf of the benefitting households are women. This cash assistance program is financed through the International Development Association loan of the World Bank Group in the amount of $500 million as well as the $321 million Abacha Restituted Fund (ARF).
To ensure the World Bank’s role in monitoring ARF is iterative, reflective and reflexive, the World Bank embarks on regular and robust monitoring to keep track of project activities on an on-going basis. The implementation of NASSP activities financed through both IDA and the returned Abacha assets is monitored through these existing World Bank operational policies and procedures to ensure that the resources are effectively used for the intended purpose and reaching the appropriate beneficiaries.
At the end of June 2020, Nigeria has seen the disbursement of $113.3 million to over 800,000 households (constituting over 4 million individuals) of the $321 million in corrupt funds that were returned by Switzerland during GFAR in 2017. What makes this achievement even more laudable is the strong delivery system and accountability mechanism established by the project with the technical and financial support provided by the World Bank and joint efforts of Nigerian civil society organizations which have effectively contributed in monitoring these returns and ensuring that the funds reached the most vulnerable and disadvantaged members of society.
The African Network for Environment and Economic Justice (ANEEJ) along with a group of non-governmental organizations dedicated to social, economic and environmental justice, are spearheading the Transparency and Accountability in the Recovery and Management of Looted Assets (MANTRA) project which oversees the disbursement of the returned Abacha assets in conjunction with the World Bank Country Office. MANTRA’s large-scale monitoring exercise provides a transparent overview as to how the money stolen by ex-Military Head of State, Abacha, and his family is successfully being returned to the most deserving beneficiaries through the NASSP direct cash transfer program. These unconditional cash transfers continue to benefit Nigerian citizens from low-income households.