A Call for Collective Action NO SAFE HAVENS. A Global Forum on Stolen Asset Recovery and Development PARIS, FRANCE. June 8 9, 2010

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized NO SAFE HAVENS A Global Forum on Stolen Asset Recovery and Development June 8 9, 2010 PARIS, FRANCE A Call for Collective Action

2 No Safe Havens: A Global Forum on Stolen Asset Recovery and Development was convened on June 8 9, 2010 in Paris, France by Ngozi Okonjo-Iweala, World Bank Group Managing Director and Micheline Calmy-Rey, Federal Councillor, Head of the Swiss Federal Department of Foreign Affairs (FDFA). The event was jointly sponsored by the FDFA and the Stolen Asset Recovery Initiative (StAR), a partnership between the World Bank Group and the United Nations Office on Drugs and Crime (UNODC). StAR The Stolen Asset Recovery Initiative (StAR) is a partnership between the World Bank Group and the UNODC that supports international efforts to end safe havens for corrupt funds. StAR works with developing countries and financial centers to prevent the laundering of the proceeds of corruption and to facilitate more systematic and timely return of stolen assets. For more information visit: In these tough economic times when developing countries are struggling for funds there s simply no excuse for allowing billions of dollars to be stashed in havens abroad, lost to the people who are most in need. Controlling this epidemic requires concerted action. Ngozi Okonjo-Iweala World Bank Group Managing Director Swiss Confederation, FDFA The Federal Department of Foreign Affairs (FDFA) formulates and coordinates Swiss foreign policy on the instructions of the Federal Council. The activity of the FDFA is based on the 5 foreign-policy objectives defined in the Federal Constitution: peaceful coexistence among peoples respect for human rights and the promotion of democracy safeguarding the interests of the Swiss economy abroad relieving need and poverty in the world preserving the natural environment. Switzerland s long-standing endeavors in recovering and restituting stolen assets are in line with this overarching political framework. For more information visit: We cannot and must not continue to tolerate the fact that billions of stolen dollars are being transferred to private accounts abroad every year with impunity. Micheline Calmy-Rey Federal Councillor, Head of the Swiss Federal Department of Foreign Affairs ii No Safe Havens: A Global Forum on Stolen Asset Recovery and Development

3 NO SAFE HAVENS A Global Forum on Stolen Asset Recovery and Development A Call for Collective Action Introduction Corruption is a global epidemic. Its impact can be particularly devastating on developing countries, which lose billions of dollars every year through corrupt acts such as bribery and embezzlement. Stolen assets are often laundered through the global financial system and find safe haven in the world s financial centers. The scale of the problem is vast, and solutions are made more complicated by the diverse range of stakeholders involved, including: government officials in developing countries and financial centers, banks, private companies, development organizations, law enforcement officials, civil society and the media. Over the past decade, international bodies have recognized that preventing and detecting the theft of public assets, and supporting attempts to recover them, must be integral to broader development efforts to improve governance and fight corruption, and are an important contribution to the fight against poverty. Economic development is at stake, where there is corruption, where there are assets that are hidden, where there are black holes that are used for fraud, clearly economic development is being stymied. Christine Lagarde Minister for Economy, Industry and Employment, France A Call for Collective Action 1

4 Everyone is looking at this issue from their own prism of national interest. We need to know that our collective interest is to combat corruption and to combat illicit financial flows... The whole budget of the IMF and the World Bank is dwarfed by illicit financial flows. Where is the police force chasing after this? Where are the blaring sirens? This is more serious than terrorism. This is why people are dying of hunger. Mo Ibrahim Founder, Mo Ibrahim Foundation The Global Forum A Call for Collective Action On June 8 9, 2010, the Swiss Federal Department of Foreign Affairs and the Joint World Bank/UNODC Stolen Asset Recovery Initiative (StAR) co-hosted a global forum, the first of its kind, gathering senior-level representatives of the various stakeholders involved in preventing and reversing the flow of the proceeds of corruption. More than 120 senior representatives from these groups met in Paris to discuss their specific roles in preventing the laundering of the proceeds of corruption in the global financial system, and in detecting and recovering assets stolen from developing countries. They determined that this would require leaders of the diverse stakeholder groups involved to take initiative in their individual areas of influence while improving cooperation with each other in both domestic and international arenas. Participants stressed the importance of effective cooperation between financial centers and developing countries, the financial industry and government, and government and civil society. Consensus at the Forum was that stakeholders must act collectively and monitor progress towards shared goals. The two-day discussion covered a range of opinions and ideas, from which emerged several key messages and recommended priority actions, which are summarized on the following pages. The point here is this, our success or failure will be judged by one thing and one thing alone, and that is whether we make the whole question of stolen assets less of a problem tomorrow than it is today. The reduction of harm in this area is what we are all about and the transformation into action of the concepts, the words, the great ideas. Paul Evans Serious Organized Crime Agency, Director of Intervention 2 No Safe Havens: A Global Forum on Stolen Asset Recovery and Development

5 Key Messages Key Messages from Participants of the No Safe Havens Global Forum 1. Eliminating safe havens for corrupt funds is an urgent development issue 2. International commitments are essential but implementation will require leadership by national authorities in both developing countries and financial centers 3. Both the prevention of theft and the recovery of stolen assets must be treated as integral parts of the solution Message 1: Eliminating safe havens for corrupt funds is an urgent development issue Background: By conservative estimates, US$ billion is stolen from developing countries every year through acts of corruption. Asset theft hinders economic development, undermines the delivery of basic services, and erodes confidence in governments and the rule of law, thereby perpetuating poverty. The international development community has focused attention on the prevention of corruption rather than the detection and recovery of its proceeds. Asset recovery is a significant challenge for many countries since they may lack the effective legal tools and skills needed to pursue complex international corruption cases, particularly where these involve tracing assets and legal proceedings in multiple jurisdictions. broader development efforts in the areas of governance and anti-corruption. Participants agreed that the international development community could make an important contribution to this agenda by supporting asset recovery programs in developing countries, facilitating cooperation between law enforcement agencies, and focusing attention on preventing financial centers from becoming safe havens for the proceeds of corruption. Forum discussion: There was consensus that the prevention of asset theft and asset recovery should be addressed as part of There is a total disconnect between the act of corruption... and the effect on those who bear the consequences. I think many financial centers and many people in the west don t make the connection between the vast sums of money and the effect on people in developing countries Akere Muna Vice Chair, Transparency International. A Call for Collective Action 3

6 Nigeria believes that the fight against corruption can no longer be regarded as a domestic issue. It is a shared responsibility requiring the support and cooperation of all countries, both developed and developing. A high percentage of stolen money finds its way to safe havens abroad. Our experience also shows that perpetrators are usually assisted by foreign accomplices, be they individuals or corporate organizations. Jalal Arabi State House Counsel, Nigeria Message 2: International commitments are essential but implementation will require leadership by national authorities in both developing countries and financial centers Background: In recent years, global leaders have begun to address the issue of detecting, preventing and recovering stolen assets as a collective international responsibility. The 2003 United Nations Convention against Corruption (UNCAC) is the first international anti-corruption agreement to recognize asset recovery as a fundamental principle and as an essential part of an effective anti-corruption regime. Asset recovery also features in a number of other global and regional agreements on standards, such as the recommendations against money laundering made by the Financial Action Task Force. Although these agreements provide a sound framework for stakeholders to take action, they are only gradually delivering results in terms of the number of cases and the successful recovery of the proceeds of corruption. Forum discussion: Participants agreed that international standards and commitments in support of asset recovery are critical, but stressed that more attention has to be given to effective implementation. This will require developing countries and financial centers to take action. Participants argued that further work is needed to build a global consensus and a consistent approach for tackling the problem of kleptocratic regimes and uncooperative states. 4 No Safe Havens: A Global Forum on Stolen Asset Recovery and Development

7 We must all work together to make sure that the asset recovery provisions of the UNCAC are implemented consistently, in full and in good faith, and used by practitioners. Success will equally depend on the cooperation of the corporate world, especially the banking and financial sectors. Through its StAR partnership with the World Bank, UNODC stands ready to bring its experience and expertise to bear on the achievement of the common goal of effective, prompt and unconditional asset recovery. Dimitri Vlassis Chief, Corruption and Economic Crime Branch of UNODC and Secretary of the Conference of the States Parties to the United Nations Convention against Corruption Message 3: Both the prevention of theft and the recovery of stolen assets must be treated as integral parts of the solution Background: While billions of dollars continue to be stolen every year through corrupt acts, to date only around $5 billion has been recovered from financial centers and returned to the countries of origin. Several successful high-profile cases have proven that asset recovery is possible, however such cases have typically taken years to be resolved. been removed from the country. There was consensus that both preventive and punitive measures were required, and that each country must determine the balance of resources devoted to each area. It was agreed that pro-activity and cooperation by the financial sector was an essential ingredient in both prevention and recovery. Forum Discussion: Participants agreed that successful asset recovery, and legal action against corrupt officials send a strong, and necessary, message that such crimes can and do have consequences. Many participants asserted, however, that preventing asset theft in the first place was more cost effective than going after funds that have already The recovery of stolen assets represents one of the final steps in a long road against corruption. A road that is expensive resource and time consuming and often leads to a dead end. Initiatives to prevent assets beings stolen in the first place certainly deserve more attention. Jorge Hage Minister of State, Comptroller General, Brazil A Call for Collective Action 5

8 Additional Participa Every financial services provider should be required to know whose money they are handling, as reflected in the FATF recommendations on due diligence. That means the flesh and blood owner, not the first or second layer of a disguised entity. The majority of jurisdictions are noncompliant with these recommendations. Ingrid Fiskaa State Secretary, Ministry of Foreign Affairs, Norway Transparency, accountability, and information sharing Corruption and development We must endeavor to eradicate corruption if we truly we want to support development and make it possible for the largest possible number of people to achieve well being, and sometimes just to achieve decent living conditions. Christine Lagarde Minister for Economy, Industry and Employment, France International Standards and Global Coordination An issue which I feel strongly about is that there could be much more intelligence information made available to supervisors and financial institutions which could be used to advantage. Much useful information is held by law enforcement agencies, including FIUs, which is not made available as intelligence in the normal course of events. Geoffrey Colin Powell Chairman, Offshore Group of Banking Supervisors Even though you have the standards in place, there are many difficulties to overcome to build successful cases of asset recovery. It is not enough to have some nice norms in your statute books and think all is fine. The Swiss experience shows that you need the political will to act and implement the rules proactively to successfully recover stolen assets. Valentin Zellweger Director, Directorate of Public International Law, Swiss Confederation, FDFA 6 No Safe Havens: A Global Forum on Stolen Asset Recovery and Development

9 nt Quotes On My only hope, frankly, is not in you ladies and gentlemen, with all respect, but it is in civil society. Unless we find methods, innovative ways of forcing people to do the right things, I don t think they have the moral backbone to do it on their own. Mo Ibrahim Founder, Mo Ibrahim Foundation The strategic role of credible civil society in the war against corruption cannot be overemphasized. By their unique mandate they can galvanize popular support for anticorruption measures and the required pressure needed to ensure that governments and other operators remain irrevocably committed to the war against corruption. Jalal Arabi State House Counsel, Nigeria Civil Society Capacity Building The real support for politically expensive, or politically risky measures like those required for openness and transparency which are not cheap, not simple measures- is public support; credibility with civil society.... Political will ultimately relies on social pressure. Jorge Hage Minister of State, Comptroller General, Brazil We face three challenges: The three Cs : capacity, cooperation and case work. This is what makes the Stolen Asset Recovery Initiative so important as a driving force behind the asset recovery agenda, strengthening partnerships among developed and developing countries as well as other bilateral and multilateral agencies. Alan Duncan Minister of State for International Development, UK We have to have a strategy focusing on how civil society and the media can participate in making sure that those who are corrupt cannot continue to be corrupt. I would like to see, for example, the civil society movement and the media in Africa become able to discuss things openly and make their leaders accountable. Edward Hoseah Director General, Prevention and Combating of Corruption Bureau, Tanzania A Call for Collective Action 7

10 Priority Actions Priority Actions Recommended by Participants at the No Safe Havens Global Forum 1. Strengthen international standard setting and review 2. Improve performance on the prevention, detection, and recovery of stolen assets 3. Tighten the financial sector s oversight of politically exposed persons 4. Facilitate cooperation and information sharing, particularly channels for informal communication 5. Improve the gathering and global sharing of information on asset theft and recovery 6. Build capacity in developing countries to accelerate asset recovery cases and strengthen prevention Action 1. Strengthen international standard setting and review Key actors: UNCAC (UNODC), OECD, FATF, G20 members, development agencies, and civil society Background: The United Nations Convention against Corruption (UNCAC) outlines a framework for international cooperation, identifying the key instruments to support the process of asset recovery, in both civil and criminal law, through the tracing, freezing, forfeiting and returning of funds obtained through corrupt activities. Other international agreements complement UNCAC, focusing on distinct elements and constituencies within the global framework. Two instruments stand out in particular: the anti-money laundering and counter-terrorism financing standards of the Financial Action Task Force; and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Forum Discussion: Participants agreed that the provisions of UNCAC should constitute a minimum standard for all member states. The 2010 launch of a review mechanism to measure implementation of UNCAC recommendations was roundly welcomed, and it was suggested that some of the provisions of UNCAC should be articulated in more detail, in the form of tools and guidelines for policy makers and practitioners. Participants called on world leaders to strengthen and do more to encourage, enable, and monitor compliance with international standards, recommending the following: World leaders, who have already given weight to this agenda, should continue to provide momentum, and to lead by example. Development agencies should continue to use their position to advocate at the international level for increased prominence of stolen assets as a critical development issue. Countries that have not ratified the UNCAC should do so. Participants recommended specifically that G20 member countries should: Take the lead in mobilizing assistance to support law enforcement efforts and capacity building in developing countries to trace, freeze, confiscate, and repatriate assets. Enact and implement whistleblower protection programs that protect public sector employees who report corrupt practices. Work to combat corruption in specific sectors, such as extractive industries. 8 No Safe Havens: A Global Forum on Stolen Asset Recovery and Development

11 We need to have uniform rules and standards across the world, so that all these difficulties in execution of this matter can come to an end. I believe that if all our leaders can do these things, we can ensure that there is no place for criminals to hide in the world, and also there is no place to hide assets in the countries of this world. Jeff Radebe Minister of Justice and Constitutional Development, South Africa Engage with the financial sector to foster more effective implementation of existing international standards and prevent corrupt officials from accessing the global financial system. Establish mechanisms to track progress against commitments made by G20 leaders and signatories to the Accra Agenda for Action. Participants noted that civil society organizations, such as the UNCAC Coalition, play an important role in tracking compliance with international standards. Action 2. Improve performance on the prevention, detection, and recovery of stolen assets Key actors: government officials in developing countries and financial centers, banks, banking supervisory authorities, and civil society Background: UNCAC guides the design of the international asset recovery regime. However, the international framework can only be implemented and put to work by national authorities. In September 2008, through the Accra Agenda for Action on Aid Effectiveness, both donors and developing countries agreed to change the nature of collaboration on corruption and, specifically, asset recovery. Commitments by developing countries recognized the role of enforcement, while commitments by donors acknowledged their own need to push the anti-corruption agenda at home: Donors will take steps in their own countries to combat corruption by individuals or corporations and to track, freeze, and recover illegally acquired assets. Forum Discussion: Participants agreed that national authorities should take the initiative in shaping legislation to harmonize domestic systems with UNCAC and in facilitating cooperation and information sharing with other jurisdictions. National authorities were urged to strengthen institutions, policies and legal procedures, and increase resources for the prevention and recovery of stolen assets. The Global Forum called on national authorities in financial centers to take the following initiatives: Formulate clear policies on handling international corruption, fulfilling commitments made by the Accra Agenda for Action. A Call for Collective Action 9

12 Provide resources for investigations in asset recovery cases and encourage law enforcement to actively pursue corruption cases where they have jurisdiction. Link asset recovery to other mechanisms, such as visa denials for corrupt officials. The Global Forum called on national authorities in developing countries, to take the following initiatives: Prioritize investigations and the formalization of corruption charges. Enact legal reforms to establish all corruption offenses as predicates for money laundering and put in place procedures for non-conviction-based asset forfeiture. Encourage and support investigators and prosecutors in their pursuit of corruption cases, including cases that are politically sensitive. Provide adequate protection for witnesses and whistleblowers. Put in place effective income and asset declaration regimes for all senior public officials and encourage financial institutions to use this information in monitoring politically exposed persons. Participants also urged banking supervisory authorities to play a stronger role in providing guidance to banks, and applying sanctions for non-compliance with standards. We recognize that tackling corruption is a two-way street. Developing countries need stronger action to stop corruption, but developed countries need to play their part too and not be a repository for funds stolen from poor countries. When such ill gained assets find their way into our systems, we will freeze, seize, and return them. Alan Duncan Minister of State for International Development, UK 10 No Safe Havens: A Global Forum on Stolen Asset Recovery and Development

13 Global Forum participants also called on civil society to play a watchdog and advocacy role in monitoring the actions of governments in both financial centers and developing countries and in advocating for stronger supervision and more stringent regulation of banks. Action 3. Tighten the financial sector s oversight of politically exposed persons Key actors: Banks, banking groups, and financial services agencies Background: Progress has been made in establishing anti-money laundering regimes, thereby improving the protection of the financial system as a whole against the laundering of the proceeds of corruption and other criminal activity. However, there has been poor compliance with the Financial Action Task Force recommendations that financial institutions and those that act as intermediaries should identify and undertake enhanced due-diligence in relation to politically exposed persons (senior government officials and their family members and close associates). Forum Discussion: Participants urged the financial sector to take voluntary actions to comply with international standards. They urged banks to follow the know your customer principle, improve their identification and monitoring of politically exposed persons, and address the issue of beneficial ownership where the true identity of the beneficiary is hidden. They urged senior management in banks to send clear signals that the proceeds of corruption would not find haven in their institutions. This could be done through policies, procedures, and incentive structures that reward compliance, and through greater authority for compliance officers in decision-making regarding customer relationships. Participants also called for more cooperation within the financial industry, such as through the sharing of information on risk assessments and the methods used to hide the proceeds of corruption. Financial institutions must be able to show that they have in place clear policies and procedures for determining whether a customer, beneficial owner, or a third party for whom a customer is acting, is a politically exposed person. And there must be specific and adequate measures to establish the source of wealth of those persons and the source of funds involved in the business relationship. There must be enhanced scrutiny in regular oversight of the relationship. Geoffrey Colin Powell Chairman, Offshore Group of Banking Supervisors A Call for Collective Action 11

14 The opportunity to directly talk to banks at a senior level on a secure and confidential basis, on investigation assistance, and compliance with asset recovery international best practice, is something the Maldivian government and my ministry in particular welcomes. This will go a long way to ensuring that the Maldives and the banks can build up trust and maintain a sound public and private fiduciary for now and for generations to come. Ali Hashim Minister of Finance and Treasury, Republic of Maldives Action 4. Facilitate cooperation and information sharing, particularly channels for informal communication Key actors: Government officials in financial centers and developing countries, law enforcement officials, judicial cooperation bodies, and practitioner networks Background: Under UNCAC, national authorities have a responsibility to share information that may alert law enforcement in another country to suspected corrupt activities or the laundering of the proceeds of corruption. National authorities are also encouraged to use informal channels of communications to share information, make inquiries and get advice before seeking formal legal assistance. These informal exchanges can be particularly valuable during the early stages of investigations and in helping countries trace the location of the proceeds of corruption. Informal cooperation requires an environment of trust and willingness to reciprocate. Networks of practitioners can facilitate contacts and help build these relationships. We should all probably learn how criminals do it. I think there is relatively little knowledge about it. We are currently undertaking analysis of all indictments, court decisions, and plea bargaining agreements of international asset recovery cases. Part of the job has already been done by listing them, that s important, and by describing them. But what we want to do is extract typologies from that to understand how it is actually done. Daniel Thelesklaf Co-executive Director, International Centre for Asset Recovery Forum Discussion: Participants called on government officials to take steps to improve the environment for spontaneous and informal information exchanges and encouraged international law enforcement and judicial cooperation bodies to increase their efforts in this area. They agreed that international information exchange networks such as CARIN (the Camden Asset Recovery Inter-Agency Network), ARINSA (the Asset Recovery Inter-Agency Network of Southern Africa), the Egmont Group of Financial Intelligence Units, and Red Iberoamericana de Cooperación Jurídica Internacional (IBERRED) were identified as particularly helpful to practitioners and should be encouraged. 12 No Safe Havens: A Global Forum on Stolen Asset Recovery and Development

15 Action 5. Improve the gathering and global sharing of information on asset theft and recovery Key actors: Civil society, development agencies, law enforcement agencies, financial intelligence units, and banks Background: Billions of dollars derived from corruption circulate in the international financial system each year. The international community does not have effective mechanisms to monitor and share information on these flows, monitor progress on the tracing and recovery of funds, or measure the positive development impacts realized when funds are restored. Forum Discussion: Participants noted that better information sharing in all of the above areas could bolster support for bringing new cases. Information exchange and analysis of emerging trends would help law enforcement keep pace with those involved in laundering the proceeds of corruption as they seek new methods to elude detection and avoid conviction. Participants agreed that exchange of information on good practices and developments in the field are equally important, both through reports and guides and the consolidation of information on asset recovery cases. They noted that political support for efforts to pursue international corruption cases and asset recovery could also be strengthened with a better understanding of the development impacts of recovered funds when they are invested in the country of origin. Action 6. Build capacity in developing countries to accelerate asset recovery cases and strengthen prevention Key actors: development agencies Background: It is only recently that development agencies have become directly involved in the prevention, detection and recovery of stolen assets. This has been done through partnerships like the World Bank/UNODC Stolen Asset Recovery Initiative, and bilateral and regional development agencies. Their experience demonstrates that development agencies, working with partners such as the Basel Institute on Governance, International Centre for Asset Recovery, can play a useful role in helping national authorities develop capacity to recover stolen assets and facilitate asset recovery in specific cases. Forum Discussion: Participants highlighted development agencies role in improving the capacity of developing countries to prevent theft and recover stolen funds by helping share knowledge and international good practices, providing resources and training, and acting as an honest broker between developing countries and financial centers. Participants called on development agencies to: Help countries develop the legal framework and institutions required to trace and recover the proceeds of corruption. Support countries in developing the skills needed to pursue asset recovery cases by sharing knowledge and providing training. Facilitate contacts and cooperation between requesting countries and the appropriate agencies in requested countries. Provide short-term technical assistance to countries in specific asset recovery cases, in partnership with international judicial cooperation and law enforcement bodies, and other specialist organizations. Build civil society capacity by sharing knowledge on the technical aspects of asset theft and recovery and identifying where civil society could be most effective, building on existing networks and supporting key groups which have become active in this area in the past decade. Mainstream asset recovery in their support to anti-corruption programs and institutions. A Call for Collective Action 13

16 NO SAFE HAVENS A Global Forum on Stolen Asset Recovery and Development Corruption is a global epidemic. Its impact can be particularly devastating on developing countries, which lose billions of dollars every year through corrupt acts such as bribery and embezzlement. Stolen assets are often laundered through the global financial system and find safe haven in the world s financial centers. On June 8 9, 2010, the Government of Switzerland s Federal Department of Foreign Affairs and the Joint World Bank/UNODC Stolen Asset Recovery Initiative (StAR) co-hosted a global forum, the first of its kind, gathering senior-level representatives to discuss their individual and collective responsibility for solving this problem