The asset recovery process continues to evolve, combating crime and corruption in an increasingly connected world
Asset recovery is a key part of anti-corruption operations across the world.
The majority of states have asset forfeiture and confiscation mechanisms in place, with some having additional ‘extended’ confiscation measures in operation, whereby prosecutors can target additional assets of a convicted person if that person is unable to prove their legal origin. It might seem like the potential for a criminal to lose their spoils is threat enough to put them off of their exploits, but unfortunately this is often not the case.
Speaking to AST, the Basel Institute of Governance states that “there is a growing recognition that these ‘baseline’ asset recovery mechanisms alone will never be sufficient for asset recovery to be an adequate deterrent to corruption and other serious and organised crimes”.
It’s a bleak overview, but one that organisations, governments and individuals are working tirelessly to improve.
Making Change
“We have long encouraged states to adopt and make use of less traditional forms of asset forfeiture mechanism,” the Institute says, two of which are non-conviction based and civil forfeiture mechanisms and illicit enrichment laws. The former allow the recovery of assets in cases where criminal proceedings do not take place or are not completed, while the latter combat what the UN Convention Against Corruption defines as “a significant increase in the assets of a public official that he or she cannot reasonably explain in relation to his or her lawful income”. This is a priority for other organisations, too, as demonstrated in the Financial Action Task Force (FATF)’s recommendations for international standards on combating money laundering and the finance of terrorism and proliferation.
The clarification and strengthening of asset recovery obligations was a feature of two of its October 2023 recommendations, building on its 2022 joint asset recovery prioritisation initiative with INTERPOL.
Recommendation 4 decrees that “countries should ensure that they have policies and operational frameworks that prioritise asset recovery in both the domestic and international context”.
In interpretive notes for the recommendation, FATF clarifies that “countries should have measures, including legislative measures, to enable the confiscation of criminal property without requiring a criminal conviction in relation to a case involving money laundering, predicate offences or terrorism financing, to the extent that such a requirement is consistent with fundamental principles of domestic law.”
Commenting on the FATF’s notes, the Basel Institute says: “This is a welcome move that we hope will lead to greater adoption and acceptance of non-conviction based and civil forfeiture mechanisms globally,” before adding that these types of mechanisms are becoming recognised as best practices in the asset recovery space.
Asset Management
Once assets are seized, the next challenge is keeping them safe.
According to the Stolen Asset Recovery Initiative (StAR), created by The World Bank, the management of recovered assets is high on the priority list for anti-corruption professionals. It’s important for seized assets to maintain their value before an official confiscation decision is reached. If this is not achieved, there could be serious implications on the full recovery of stolen assets; or, if the asset is returned to the defendant, the government may be held responsible for any loss of value.
Firms also face flack from the other side of the conflict in this case. If the value of an asset is not preserved, then the government may have to compensate a defendant for mismanagement using public funds, which is unlikely to go down well with constituents.
Even more risks emerge with cross-border cases. Shortfalls from particular jurisdictions may harm international relations, weakening trust between countries and prompting hesitancy when it comes to future asset recovery operations. This may reduce public confidence in the legal process and governmental control.
There are a number of challenges associated with this management process. The value of an asset may fluctuate over time for reasons outside of the control of the management company, and the duration that the management company must hold the assets is not always determined.
StAR’s ‘Managing Seized and Confiscated Assets’ report advises asset management offices to “take care of assets in their custody as if they were their own”, going on to say that assets in classes outside of their immediate field should be handled by experienced contractors.
It also advocates for the sale and use of seized assets prior to a confiscation decision, if this would help to maintain their value. This is not applicable to all assets and all jurisdictions, but such interim sales can be an important way to prevent value depreciation and, in certain cases, reduce maintenance and storage costs for the asset manager.
The Global Forum on Asset Recovery, hosted by The World Bank, affirmed in its 2017 ‘Principles for Disposition and Transfer of Confiscated Stolen Assets in Corruption Cases’ that the distribution of criminally acquired assets should be treated in a case-specific manner.
Education and Cooperation
StAR advises that asset management companies consult one another on their asset-recovery related initiatives, including issues of cost efficiency. In GFAR’s principles, partnership between jurisdictions and organisations tops the list, followed by the necessity of mutual agreements on asset transfer processes and early dialogues between countries.
“Among policy makers, greater awareness generally about the importance of asset recovery to sustainable development and crime prevention” is needed, the Basel Institute on Governance tells AST. Additionally, these individuals must be aware of “the different mechanisms they could adopt and implement to improve asset recovery rates.” For criminal justice practitioners, the Institute advocates for the development of practical skills.
A number of mechanisms can be put in place to improve collaborative efforts, the organisation explains. Many of these are based around education; peer learning networks, capacity building initiatives and tailored training programmes are all important and effective routes to follow, with the organisation offering a number of eLearning courses and international conferences and forums to encourage industry-wide conversation and problem solving.
Alongside education, it’s also vital that the infrastructure is in place to allow international cooperation to take place and run smoothly. These include public-private information partnerships such as the Joint Money Laundering Intelligence Taskforce (JMLIT), which aims to combat complex, multi-institutional and multi-jurisdictional money laundering operations. Established in 2015, the UK National Crime Agency reports that more than 950 law enforcement investigations have been supported and developed, more than 280 arrests have taken place and over £86 million has been seized or restrained. More than 6000 internal investigations have been conducted, and 7400 accounts suspected of being connected to money laundering have been identified.
Informal information and cooperation channels also need to be created, says the Basel Institute. For example, organisations like the Camden Asset Recovery Inter-agency Network (CARIN) connect law enforcement and judicial practitioners involved in the asset recovery space in an “informal” manner. By linking individuals across countries, CARIN aims to “increase the effectiveness of its members’ efforts on a multi-agency basis” and facilitate more effective recovery of illicit, criminal profits.
Legal Variations
“There’s a huge variety not only of laws and practices but of legal systems generally,” the Basel Institute says, “starting with common law and civil law”. The disparities between different regions and systems, whether negligible or major, can prove challenging when it comes to effective international cooperation and operations, but the Institute also highlights the learning opportunity that it provides between regions.
Variations can also be useful when it comes to supporting other jurisdictions. The Basel Institute points out examples from H2 of 2023, when Jersey concluded a 10-year asset recovery operation involving Indonesia. Switzerland’s assistance to Ukraine is also a key example of international cooperation, with the country stepping in to launch administrative confiscation proceedings after Russia’s invasion prevented Ukraine from actively pursuing criminal proceedings.
Using the full extent of a country’s laws, including legal pathways that have long been irrelevant or unused, can be a lifeline for regions without the sufficient resources or legislation to conclude operations.
Crossing Borders
This is particularly relevant given findings from the International Centre for Asset Recovery (ICAR), part of the Basel Institute of Governance, that low- and middle-income countries suffer the most from the impact of corruption, a fact that emphasises the need for international cooperation. In addition to legal assistance, high-income countries “can, of course, fund anti-corruption and asset recovery efforts to support sustainable development in low- and middle-income countries”, the Basel Institute affirms. Setting an example, the ICAR is working with funding from Jersey, Liechtenstein, Norway, Switzerland and the UK to reach other jurisdictions, and is running a number of specific projects across its partner countries.
It’s clear that programmes like these are both necessary and welcome, but there’s still a long way to go. Further partnerships need to be established and curated globally and, particularly as financial crime becomes increasingly global and cross-border, collaboration is key.
“According to the 2023 Basel AML Index report, states are getting better at tracing and seizing illicit assets domestically, but confiscations are still far too rare when assets are hidden in a foreign jurisdiction,” says a Basel Institute representative. Gaps in implementation and international cooperation remain prevalent, and developments in recovery laws will only go so far in such a connected world.
This issue was addressed in the recommendations on international cooperation for anti-corruption, published by the Basel Institute, Transparency International and the Government of Moldova in March 2023. The paper, while acknowledging the global progress that has been made over the past 10 to 15 years, warns that a number of key challenges remain in the space. These include non-cooperative territories, the slowness of mutual legal assistance, its lack of resources and excess of bureaucracy, a lack of political will and the combative nature of corrupt individuals and organisations.
ICAR
ICAR is coming to the end of its 2021 to 2024 operational strategy. Five priorities were outlined in the document, namely taking a more chain-linked and technical approach to the asset recovery value chain, increasing value for money and economies of scale through stronger regional clusters and expanding to become a “global player” in the asset recovery space. Connected to this, the centre stated its intention to further engage with partner countries through comprehensive country investments and develop its educational and advocacy operations worldwide.
With less than a year to go, the centre will soon be releasing the next phase of its strategy. Although significant progress has been made in recent years, the asset recovery process must continue to evolve and adapt to changing circumstances. The job of ICAR, the organisations it works with and the legal and financial sectors as a whole, is far from over.
