Over the last ten years, only one third of international asset recovery cases have resulted in returns, according to the preliminary results of a recent survey by the Stolen Asset Recovery (StAR) Initiative. As Transparency International's Gillian Dell found out the US$2.4 billion that has been reportedly recovered is disappointingly low compared to the US$400 billion that developing countries are estimated to have lost to corruption during the same period.
Barriers to international cooperation, weaknesses in national legal frameworks and lack of enforcement are said to be among key impediments to asset recovery in cross-border corruption cases.
The Transparency International, therefore, wants countries where proceeds of cross-border corruption and other illicit assets are stashed to step up for the common good, including taking proactive steps when the countries where the assets originated are not doing their part.
By way of an example, TI's Newsletter dated November 20, 2020 refers to France's campaigning for the safe and responsible return of assets to countries of origin - especially after French courts delivered much-welcome rulings in the cases of Rifaat al-Assad of Syria and Teodorin Obiang of Equatorial Guinea.
To fix the problem in the long-term, the TI is asking the international community to initiate a new multilateral agreement on asset recovery during next year's first-ever UN General Assembly Session against Corruption, UNGASS 2021.
UNGASS 2021 could have a transformative impact on societies if it agrees to concrete measures to prevent and combat grand corruption - or corruption involving vast quantities of assets.
The reign of Yahya Jammeh in the Gambia is a textbook case of grand corruption: how it dramatically inhibits a country's development, the blind violence that accompanies it and the crushing poverty it leaves in its wake. Last summer, the Gambian people rejoiced when the US Department of Justice announced it was going after the former dictator's mansion in Potomac, Maryland. Authorities believe that US$3.5 million Jammeh's family paid for the house may be linked to corruption proceeds.
But the question remains: if recovered, will the Gambian people see this money and, if so, when?
According to rough estimates, developing countries have been robbed of approximately US$400 billion in proceeds of corruption in the last ten years. If one counted the uncompensated consequential damage done by that corruption, the amount turns out to be much larger. It is in the trillions if one added other illicit financial outflows such as tax evasion. These are funds according to TI missing for the financing of the Sustainable Development Goals.
The Stolen Asset Recovery (StAR) Initiative of the United Nations Office on Drugs and Crime (UNODC) and the World Bank, has just released the preliminary results of a multi-country survey that investigates challenges and barriers to asset recovery. The responses from national governments so far show that over the last ten years, fifty countries were involved in asset recovery processes with a total of 286 reported cases and 92 completed returns amounting US$2.4 billion. The largest amount went to Malaysia in connection with the 1MDB case, involving a total of US$740 million.
Compared to the estimated amount of proceeds, the rate of return is disturbingly low.
To be effective, TI says the following elements must be included in a multilateral agreement for stolen asset recovery:
- Measures to overcome key barriers
StAR's recent survey identifies the execution of confiscation orders, including non-conviction-based confiscation, as a key problem area. This needs to be addressed.
The StAR survey also finds that identification and verification of the beneficial ownership of suspected corruption proceeds is another key barrier. In TI's Exporting Corruption 2020 report, TI likewise identified the lack of beneficial ownership transparency as a key obstacle to cross-border foreign bribery enforcement. The same is true for cross-border enforcement against organized crime and tax evasion.
More than 20 years after the OECD Anti-Bribery Convention was adopted, TI's research shows nearly half of world exports come from countries that fail to punish foreign bribery.
There should be, therefore, a common agenda across institutions to eliminate the secrecy that hinders achieving justice for cross-border crimes. Central public registers of beneficial ownership of companies and trusts should be adopted as the global standard to be used by the UN, OECD and the Financial Action Task Force (FATF) and implemented by countries. A Global Asset Registry covering tangible and intangible assets could also be established by the new agreement.
- Compensation of victims of corruption
A new multilateral agreement should also address compensation for the harm caused to state and non-state victims of corruption. The recent Interim Report from the High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) highlights some of the challenges in this area.
The way forward requires a coordinated effort to address the problems underlying the fight against corrupt money flows - the problems that the FACTI Panel has recognized. The TI asks the FACTI Panel to ensure that its recommendations, expected in a few months, address the systemic, interlinked challenges.
In grand corruption cases, non-state actors may be the most appropriate party to bring claims for compensation and this should be recognized in a new international agreement.
- Transparent and accountable return
An international agreement could also cement emerging international standards for the transparent and accountable return of assets such as are outlined in the Global Forum on Asset Recovery Principles and the Common African Position on Asset Recovery.
Moreover, special measures are needed in cases of grand corruption - high-level, large-scale - to deal with the situation when those in power do not claim or are disqualified from claiming proceeds of crime and compensation for victims.
- International coordination, oversight and dispute mediation
Last but not least, a new agreement should provide a role for regional or international institutions in coordination of investigations, oversight of asset recovery processes and dispute mediation. Multi-country asset recovery investigations are complex and sometime contentious. By pooling resources, an international coordination function would yield better results, and an international dispute resolution mechanism could resolve differences of views between states involved in asset recovery processes.
Meanwhile, according to a recent OECD report on enforcement of anti-bribery laws, the United States continues to demonstrate an increasing level of activity, having convicted or sanctioned 174 companies and 115 individuals for foreign bribery and related offences under the Foreign Corrupt Practices Act (FCPA) between September 2010 and July 2019.
The United States has also helped foreign partners build their capacity to fight foreign bribery through joint conferences and peer-to-peer training thus enabling the law enforcement authorities of these countries to better investigate and sanction prominent foreign bribery cases.
What is more worrying is that governments around the world are losing $427 billion each year to tax avoidance and evasion as companies and wealthy individuals shift their money to tax havens, according to a comprehensive new report that urges an overhaul of the "broken" tax system.
Jeanne Whalen who covers business around the world, writing in Washington Post (Tax cheats deprive governments worldwide of $427 billion a year, crippling pandemic response: study, published on November 19, 2020) says that poorer countries, meanwhile, are losing a larger share of their total tax revenue to the abusive practices - about 5.8 percent vs. 2.5 percent in high-income countries according to the report, which analyzed data from 2016 and 2017.
Quoting from the report by the Tax Justice Network, the Global Alliance for Tax Justice and a trade-union group called Public Services International the writer maintains that corporations are shifting $1.38 trillion worth of profit each year into tax havens that charge little-to-no tax, causing the governments where that profit is actually earned to miss out on $245 billion in annual revenue.
Using different data sets, the researchers found that countries are losing an additional $182 billion a year from wealthy individuals hiding their fortunes in tax havens.
Nearly 2 million corporations and limited-liability companies are registered each year in the United States, at the state level. Few states today require companies to disclose their true owners, with Delaware and a few others turning the registration of anonymous companies into big business.
The researchers also point a finger at the U.K. and its tax-haven territories and crown dependencies, including Bermuda, Cayman, Jersey and the British Virgin Islands. This network is responsible for 37 percent of all losses governments suffer from corporate and private tax abuse.
And when it comes to corporate tax avoidance, the Netherlands, Switzerland and Luxembourg are also said to be big enablers.
Copyright Business Recorder, 2020