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Why are governments struggling with asset recovery?

Written by Robert Barrington on Friday, 15 November 2013

TI-UK recently published an Anti-Corruption Scorecard, in which we rated the government as ‘red’ for asset recovery. It is hard to think of any government in the world that would not be rated red for this. But why should governments be trying to recover assets?  

Transparency International UK recently published an Anti-Corruption Scorecard in which we rated the government as ‘red’ for asset recovery. It is hard to think of any government in the world that would not be rated red for this.

Why should governments be trying to recover assets? For two reasons. First, it is important that corrupt individuals who steal money should not be allowed to get away with it. Unless corruptly-obtained assets are frozen and seized, there is no deterrent to others. Secondly, the money that is transferred to, and via, the UK, represents misery for millions of people. It is money stolen from corruption-resources-corruption-resources-health and corruption-resources-corruption-resources-education budgets; from insfrastructure and law enforcement. It both degrades those services and removes funds that should rightfully be invested in their country of origin. The money – of course, with proper safeguards – needs to be returned to its rightful owners.

Paradoxically, we might have rated the UK Government as ‘green’ for effort – at least recently, and with regard to the recovery of Egyptian assets. As well as devoting unusually high levels of resource to the Egyptian problem, it has made asset recovery a top priority during its presidency of the Deauville Partnership a G8-Middle East forum. We have also heard from the Home Office recently, in its Serious and Organised Crime Strategy of a new willingness to consider legislation to close some of the gaps on money laundering and asset recovery.

However the scores are for results and not effort. And when looking at results, there is another case in the UK where the authorities have made a significant effort but the results are dispiriting. While the results are a notable improvement on anything that has gone before, they also serve to illustrate the difficulties in the current system. This is the case of James Ibori, a former Nigerian politician, who actually pleaded guilty to money laundering and is currently in jail with his lawyer. You would think these are the most favourable possible circumstances to recover his assets allegedly the proceeds of corrupt activity while he was in power. Stories such as this allege he stole at least $500m, but the new court case is trying to recover £90m. There may be no more in the UK to recover. However, the case shows that, even if the UK authorities succeed in their endeavours, there is a huge mis-match between the sums allegedly stolen and the sums likely to be recovered.

This does beg the question of what is stopping more assets being traced, frozen and recovered.

Transparency International UK will be publishing a research note on this later in the year, looking at the problems of Asset Recovery in more detail and making recommendations about how to improve the legislative, diplomatic, legal and law enforcement environment to get more stolen assets returned. Our researchers are already telling us that there are some obvious problems that need addressing. Here are seven of them:

  • Lack of political will in the country of destination. No assets will be recovered if governments lack the appetite. Indeed, some of them welcome the presence of overseas allies, however unsavoury their regimes. And some believe that attracting foreign money must be a good thing for the economy, with apparent disregard for the knock-on consequences – such as the effect on London house prices.
  • Lack of political will in the country of origin. Transparency International research shows that in many countries the police and judiciary are among the most corrupt institutions. Without their cooperation, the current architecture for asset recovery simply does not work.
  • Lack of capacity. Even when political will exists, many countries lack the technical expertise for international cooperation on complex cases. However, a note of caution: in places where there is a lack of political will, it is easy to hide behind the cloak of technical incompetence.
  • Local laws. These can get in the way. For example, principles such as the need for adequate levels of evidence and the right to a fair trial are fundamental in UK law. We tinker with them at our peril. But they also allow the corrupt to run rings around the legal system.
  • International laws and agreements. It is hard to escape the conclusion that the international architecture envisaged by the United Nations Convention Against Corruption is not delivering the goods.
  • The professional intermediaries or enablers. A corrupt overseas official wanting to buy a house in Kensington relies on a web of intermediaries. Sometimes there are well-known professional law firms or accountants. They can also work on behalf of the corrupt to protect their assets once they are under investigation. We all believe in the right to a fair trial. But is it right that corrupt individuals can use their stolen fortunes to buy the best legal talent the UK has to offer? It may be legal. It may be good resources-resources-business. It is questionable ethics.
  • Secrecy. It is too easy for the corrupt to hide their assets. The UK has long been implictated through its Overseas Territories and Crown Dependencies. Recently, there have been signs of change, notably in the announcements at the time of the G8. Now we need words need to translate into action.

It is evident from this list that improving asset recovery is a highly complex area, and there are no easy answers. Many of these areas will not be sorted out in a year, or perhaps a decade. A few years ago, the UK Government could have been justifiably accused of complacency. This appears to have changed. But two things could be happening right now:

1. The Government has made a good start by admitting publicly there are problems, in the Serious & Organised Crime Strategy. Now it needs to analyse the stumbling blocks, and set out a long-term plan to remove them.

2. We should not let corrupt assets into the UK in the first place. The weakness in our anti-money laundering regime is a related story. That also needs to be addressed, not just by the Government, but by the banks, regulators and tier upon tier of intermediaries.

Green for effort. Red for results. It’s a better picture than it would have been five years ago. But precisely because of the Government’s welcome efforts over Egypt and other recent cases, it is hard to escape the conclusion that the system is not fit for purpose.


Read 8715 times Last modified on Tuesday, 24 November 2015 11:47

Robert Barrington

Robert is TI-UK's Executive Director. You can view his full bio here, and tweet him @TIukED.

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