Workshop on Sub-thematic areas
Sub-theme 4: Law Enforcement
Topic: Illicit Proceeds
Chairperson: Mr Gangloff, the Deputy Director of the United States Office of Government Ethics, who had served in the Department of Justice for almost 30 years, stated that: there is broad agreement that effective tools and processes for the recovery of illicit proceeds and the denial of safe havens for these proceeds and the corrupt actors who obtain them must be implemented in order to meaningfully fight corruption.
Mr Hofmeyer of South Africa dealt with the issue of illicit proceeds of crime. He stated at the outset that trying to trace hidden money is both difficult and frustrating.He went on to say that the UN Convention Against Corruption recognises asset recovery as a key component in dealing effectively with corruption. To date most asset recovery is undertaken through private litigation because state mechanisms are ineffective.
South Africa has two models of asset forfeiture. The first is based on the UK model of conviction-based forfeiture. This requires conviction within a civil process. The advantages of this model are that the value of that forfeited property is a gross value with no deductions. Should the criminal have further assets, any attachment order can be applicable to those as well. The state can recover “gifts” made by a corrupt official within the last seven years. Forced disclosure of assets is possible coupled with immunity against use in criminal procedures and, as with normal civil litigation, there is no compelling need to prove that the forfeited assets are a product of crime.
The second model is based on the USmodel, which has two central features: firstly, forfeiture through civil action evidence based on a balance of probabilities and secondly the ability to “freeze” property. In civil forfeiture although a criminal conviction is not a necessity, proof must be produced that the property is tainted by criminal activity. Additionally, action can be instituted directly against property, not against the person.
The advantages of civil forfeiture in corruption cases are that:
- It is only necessary to prove facts on the balance of probabilities, which is useful, where convictions are difficult to obtain and where the evidence is not strong enough to support a conviction.
- Perpetrators have often not contested civil forfeiture as it involves making statements under oath, which can be used against them.
- Proceedings are civil; the law can be made retrospective to recover “old” proceeds.
Concerningcorruption involving heads of state civil forfeiture may be the answer to difficult issues in dealing with those persons who are politically exposed. This begs the question: what is to be done when illicit proceeds of a serving head of state are uncovered through the new enhanced due diligence duties incumbent on financial institutions? Furthermore, with civil forfeiture the host state can freeze property on behalf of a victim state even if that state has not requested such action despite theperpetrator still being head of state. Finally, evidence and diplomatic consideration still play a role in these instances and finding the correct institutional form to carry out mechanisms to mitigate against corruption are still a challenge.
He went on to say that with regard to international co-operation, it was imperative to acquire mutual legal assistance (MLA) and co-operation through inter-governmental bodies. There are three mainmechanisms that can facilitate this:
- Bilateral MLA treaties providing for such co-operation.
- Multilateral agreements and conventions
- Domestic legislation allowing for easier, more direct MLA.
In conclusion Mr Hofmeyer stated that asset forfeiture is a vital part of the war against corruption as it hits where it hurts most – in the pocket. Asset forfeiture is a weapon, which reduces the profits of corruption, and this is especially important in economically motivated crimes where deterrence is low. Finally, to deal effectively with crime -“crime does not pay” must become a truism.
I Pam of ICC (Nigeria)gave an outline of the scope of the problem of corruption and some of the legal and policy responses which have been put in place.He stated that in Nigeria billions of dollars crosses its borders every yearfor western banks. China alone loses approximately US$50 billion and Nigeria US$100 billion.
Nigeria has adopted some main policy instruments based on the principles of effective banking supervision. These include supervisory guidelines and a general framework for effective banking systems. It has also established the Financial Action Task Force on Money Laundering (FATF).Recommendations were made relating to the financing of terrorism and the regulation of money laundering.
The main legal instrument used to enforce legislation is the freezing of assets, asset seizure and repatriation, where possible. The recovery of assets was initially based on the premise “he who confiscates, disposes” (Article 14(1) UN TOC). Now, however, consensus has been achieved based ona “balance of mutual frustration”. Article 51 makes the return of assets a fundamental principle. Embezzled funds must be returned to the state of origin and assets to their primary owners.
The major constraints to the recovery of assets are:
- A lack of political will.
- An inadequate legal framework.
- Legal and technical difficulties.
- Technological challenges.
These efforts are further hampered by the difficulties experienced in tracing assets, money laundering, and “fuzzy” financial systems aided by competing claims in multiple jurisdictions.
Law enforcement beings with the prevention of corruption and this can be achieved by creating a climate in which criminals find it difficult to operate. This climate can be achieved by increasing the odds of criminals being convicted; reducing the rewards of crime and rewarding the efforts of the law enforcement agencies.
Mr Pam concluded his presentation by recommending that national integrity systems be strengthened and a system of best practices be established and shared among states. The provisions of legal instruments must be vigorously applied, both internationally and on the domestic front. The resources of UNCAC must be used, along with more sophisticated technical assistance.
Ms Earl of the United Kingdom opened her presentation with an overview of the UK Criminal Act of 2002 which brought together a number of legislative powers in an effort to boost anti-crime tactics. The Act allowsaction to be taken against those convicted in the UK in respect of confiscation orders. It also significantly strengthens the role of regulated bodies in reporting suspicious activities.
An individual suspected of holding cash in excess of Euro 1 000 can be stopped and questioned as to where the money came from. If no satisfactory explanation is forthcoming, the money can be confiscated pending further enquiries. This tool has been particularly effective at border posts and other points of entry in the UK.
In criminal cases, a judge has the power to order an investigation into the financial assets of any person convicted of a crime. Since 2003 the legal system has been improved to allow for criminal convictions and subsequent confiscations which were not possible prior to 2003. The Act takes cognisance of human rights issues and has a 12-year limitation period applicable. Furthermore, the law enforcement agencies have the power to apply taxation considerations to confiscated assets and these powers are used extensively with regard to those involved in drug dealing and money laundering. The UK has an efficient intelligence service which is widely used by many law enforcement agencies and for civil recovery actions; the first port of call is the Assets Recovery Agency.
The results of the improvements in both the systems and applications of the law have been significant with inroads being made into criminal activities within the UK. Thus, UK law enforcement agencies are keen to share their experiences and assist other states in their war against corruption.
Ends
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Global Forum V Illicit Proceeds - Tuesday 3 April AM Session