Monday 9 December saw the launch of Transparency International UK’s (“TI-UK”) latest policy paper ‘Closing down the safe havens: ending impunity for corrupt individuals by seizing and recovering their assets in the UK’ (“the Paper”). The audio of the event is available here and the Paper itself can be downloaded here.

The launch of the TI Paper, coinciding with the UN’s International Anti-Corruption day, featured discussion from a number of speakers chaired by Ian Trumper including: Jacques Terray of TI France, Jeremy Carver of TI-UK, Paul Crome of the Home Office, Justine Walker of the BBA, and the lead author of the Paper, Antonio Suarez-Martinez of Edwards Wildman.

Introducing the key findings and recommendations of the Paper, Antonio Suarez-Martinez commented that the tables need to be turned on the corrupt, giving law enforcement and prosecutorial bodies and those committed to asset recovery, including the victim states and their citizens, the upper hand. He added that whilst there is no verifiable data on corrupt flows in the UK, and understandably it is difficult to fully ascertain true figures, it is undeniably the case that globally and in the UK the rates of detecting corrupt flows, let alone seizing them, are very low. Given the sense of a mood change for review of asset recovery mechanisms following the Arab Spring, and considering the UK’s status as a major financial hub and attractive jurisdiction for the corrupt to launder illicit funds, now presents an opportunity for the UK to take the lead on asset recovery, taking the best practices of other countries such as Switzerland and Canada, and introducing new ones to become “best in class”.

The TI-UK Paper highlights the need to review the overall strategic approach in the UK to asset recovery, stating that pro-activity, de-politicisation and an unrestricted approach to potential cases are the principles that should guide change in the UK. Those principles lead to several short term recommendations for change made in the Paper:

  • Enabling the rapid freezing of assets. The Paper highlights the need to look at Switzerland’s ability to quickly freeze assets that are suspected to be the process of grand corruption and existing and proposed legislation such as Switzerland’s ‘Lex Duvalier’ which codifies existing practice to provide assistance to a foreign country when it is incapable of satisfying due process standards when its legal or political system has collapsed. The Paper also refers to Canada, a common law country like England, which has created legislation, similar to Switzerland, which allows for rapid freeze where: (1) there is a written request to do so from the origin state; (2) the person whose assets are to be frozen must be a politically exposed person (“PEP”); (3) there is an uncertain political situation in the victim state; and (4) the making of an order to freeze the assets in question would be in the interest of international relations.
  • Stopping reliance on other jurisdictions. Tackling corruption only where there is strong bilateral support from the origin country is prone to an array of problems. Jeremy Carver stated at the launch that the idea of waiting for regime change or a Mutual Legal Assistance request from a victim state is a “recipe for catastrophe”. Antonio Suarez-Martinez explained that the traditional model of waiting for a conviction followed by a confiscation order that must then be enforced in the UK is unrealistic, and such an approach is not working. He pointed to the recommendation in the Paper that it may be more sensible to focus on arresting the asset rather than the individual. Looking to mechanisms such as non-conviction based asset forfeiture allows for some of the traditional problems of the conviction plus confiscation-based approach to be overcome. Non-conviction based asset forfeiture focuses on seizing the asset as the proceeds of crime, does not require a conviction and the prosecution need only prove its case on the balance of probabilities – not the criminal standard.
  • Focusing and coordinating law enforcement resources. The Paper highlights the need for a single well-resourced unit with a mandate to pursue the corrupt assets in question, if not the individuals, rather than having a number of under-resourced agencies.

The Paper also makes some longer term recommendations:

  • Consideration of a new law against corrupt enrichment. The Paper recommends that the UK Government considers creating new legislation allowing for suspicious assets of a PEP clearly in excess of reasonable expectations of their wealth to be seized unless that PEP can prove legitimate acquisition of the assets. Such legislation would shift the burden of proof onto the PEP (once a prima facie case is established), and it is envisaged that such legislation would have extra-territorial effect much like the UK Bribery Act, so would capture the ill-gotten assets of foreign corrupt officials that try to launder them through the UK.
  • Improvement of front line defences in the private sector. Antonio Suarez-Martinez commented that millions of pounds each year are poured into anti-laundering procedures in the UK. However, as it stands there is little evidence to suggest that these efforts are effective. Justine Walker noted it is not just the banks which need to shoulder the responsibility but the ‘gatekeepers’ to the financial system, including lawyers, accountants and trust and company services. The Paper notes that the financial and professional services sectors should engage with law enforcement as allies in the asset recovery process; and if not, they should be forced to do so through sanctions. Assistance to the financial and professional services sectors, in relation to their due diligence exercises of PEPs, would be assisted by a robust international framework of interest and asset declarations (“IADs”). These IADs should be made accessible to law enforcement for its investigations, and to financial institutions and professional service firms for the purpose of due diligence on prospective or existing clients.
  • Investment in asset recovery. Resources currently allocated to investigation and prosecution of asset recovery are inadequate to the size of the task, and concerns over the funding of investigations through DIFD can restrict geographical scope. The Paper suggests there needs to be greater consensus on a more sustainable funding method, for example, part-funding of investigations from the assets seized as part of any successful recovery. This is suggested by Article 57(4) of the UN Convention Against Corruption but rarely practiced.

In addition to introducing the Paper’s recommendations, Monday night’s launch encompassed an open discussion by the expert panellists and audience. Much discussion focussed on the difficulties surrounding asset recovery in the UK, including inadequate detection, slow freezing of assets, difficulties in seizure due to a reliance on conviction in the origin state, and the deterrent effect of costs.

Paul Crome noted that the current framework of evidence based asset recovery means that where evidence is abroad, and there is an uncooperative regime in power, asset recovery becomes incredibly difficult.

Adding to this discussion, Jacques Terray spoke about the experiences of TI-France in instigating formal corruption investigations in France, including investigations by the French authorities into PEPs connected to non-cooperative origin countries such as Equatorial Guinea and Syria. He also highlighted the need to place emphasis not on who owns the assets in question (because they won’t be in the name of the corrupt official but more likely a shell corporate vehicle), but on who is using them in the jurisdiction.

Justine Walker of the BBA highlighted the difficulties in tracing corrupt assets from the outset, noting that assets are concealed in increasingly sophisticated ways; the corrupt do not simply walk around trying to deposit bags of cash. She commented that “sometimes this discussion needs a bit of a reality check in terms of how you identify corrupt funds if you’re not a forensic accountant”.

Justine Walker also highlighted the challenges the Arab Spring has posed: “The difficultly we have at the moment, and Egypt is a good example of this, is we have a lot of accusations. There has been regime change followed by regime change and we have people where clearly law enforcement cannot reach the evidential threshold. For a government that has been in power for so long, how do you prove the assets are the proceeds of corruption?” Commenting on the attitude of the BBA, she noted that whilst there is “a lot of frustration with the banks”, when it comes to regime change and the Arab Spring “it highlights very very specific issues”. She noted that in Libya “the sanctions were put in place very very quickly…when the list of names was actually circulated to the banks, within a weekend those assets were frozen”.

In identifying the proceeds of corruption, she noted that historically “there clearly has been failings”, and highlighted the need to look specifically at where the identification process is and is not working, encouraging IADs, and the need to find a “better way for the public and private sector to share information on particular entities”. She noted that the BBA had conducted analysis to learn from key cases, for example, the James Ibori case.

Jeremy Carver emphasised the role of civil society organisations in pursuing change in asset recovery: “If we want to be taken seriously, we really do have to be very serious and very responsible about what we do…we need to push. Government tends to respond best to the larger number of people”.
Antonio Suarez-Martinez concluded the debate by highlighting that encouragement of debate amongst all stakeholders and interested parties is imperative to find the right solutions and improve the currently inadequate framework in place for asset recovery of the proceeds of corruption in the UK: “we are not winning the fight; we need to turn the tables on the corrupt and stop them acting with impunity”.