BARRIERS TO ASSET RECOVERY STUDY CONCEPT NOTE

Transcription

1 BARRIERS TO ASSET RECOVERY STUDY CONCEPT NOTE March 10, 2009

2 A. CONTEXT 1. Past stolen asset recovery cases have demonstrated that some or most of the assets plundered from developing countries end up in traditional financial centers located in developed countries. 1 The appeal of a secure, stable and safe environment to deposit one s wealth is an attractive proposition to corrupt leaders and politicians. Recovering stolen assets from these financial centers is typically an arduous and time consuming process that often requires the dedication of substantial resources which is particularly difficult for developing countries. Navigating the various laws, policies and procedures of financial centers is a great challenge, often beset by barriers which can fatigue the most dedicated and experienced practitioner. Many requesting countries face serious difficulties due to the limited legal, investigative, and judicial capacity and inadequate financial resources. Beyond these resource and capacity issues, once requesting countries are conducting investigations and submitting requests for mutual legal assistance to foreign jurisdictions, they often encounter an additional burden: the foreign financial centers in which the stolen assets are located often do not respond to formal or informal requests for assistance or mutual legal assistance. This lack of cooperation extends to both formal and informal cooperation, including direct requests from police to police, FIU (Financial Intelligence Unit) to FIU, or among regulatory agencies. 2. Barriers, both on the requesting and the requested country s side, not only take a toll on the credibility of governments attempting to retrieve stolen assets and afford kleptocrats the opportunity to evade prosecution and enjoy the fruits of their corrupt activities but also give the kleptocrats the opportunities to claim victim status and rally their supporters against the asset recovery efforts. Therefore, such barriers must be eliminated and asset recovery efforts be strengthened through a speedy and aggressive response by jurisdictions where stolen assets are maintained, typically financial centers. This response should include a clear and predictable process for requesting jurisdictions. 3. The United Nations Convention against Corruption (UNCAC) is a big step forward in addressing many of the complications and difficulties associated with asset recovery, including completing investigations in two different jurisdictions, legal differences between common law and civil law countries, complying with confiscation procedures in the law, burden of proof, and dual criminality conditions. UNCAC identifies the return of assets as a fundamental principle requiring States Parties to afford 2 one another the widest measure of cooperation and assistance in this regard. Further, UNCAC provides a comprehensive and innovative legal framework for international collaboration in recovering proceeds of corruption. The Convention entered in force in December 2005 and has been ratified by 132 countries. Asset recovery is a relatively recent field in international law and cooperation. 4. The Stolen Asset Recovery (StAR) initiative, launched in September 2007 by the World Bank and the United Nations Office on Drugs and Crime (UNODC), is a collaborative arrangement promoting the ratification, domestication and implementation 1 Article The Philippine Experience Prof. Leonor Briones, April 25, UNCAC, Article 51. 2

3 of the UNCAC, and in particular its chapter on asset recovery. The StAR initiative has recognized that one way to assist developing countries in recovering stolen assets is to lower the hurdles characteristically ingrained in financial centers. 3 The financial centers on which the study will focus are Canada, France, Germany, Italy, Japan, United Kingdom, United States of America, Switzerland, Liechtenstein, Singapore, Hong Kong, Spain, Cayman Islands, Channel Islands (Guernsey), and the United Arab Emirates. 4 The study will focus on these financial centers because their inclusion permits the most credibility as most of the centers are likely destinations for kleptocrats to store and conceal their stolen wealth. 5 Moreover, StAR policy analysis seeks to strengthen financial centers support for developing countries asset recovery efforts. The StAR initiative has also called upon the G-8 countries and the Organisation for Economic Co- Operation and Development (OECD) countries to lead by example - in essence lead by action. Therefore, the G-8 and OECD should play a strong advocacy role in the global arena of stolen asset recovery and, assist in lowering and eventually eliminating barriers to stolen asset recovery. 5. Despite the progress under UNCAC and the StAR initiative, requesting jurisdictions still face barriers in recovering stolen assets from financial centers. To effectively combat these barriers, it is necessary to objectively identify them, analyze how they impact asset recovery efforts, and define the means to diminish if not eliminate them. B. OBJECTIVES 6. The overall objective of this study is to identify and analyze the barriers operational and practical that impede the recovery of stolen assets located within 6 financial centers. As part of this process, the study will likely require the need to identify and mention obtrusive legal barriers that significantly impede stolen asset recovery. Other possible barriers, such as the lack of political will, trust issues, or strategic interests will be discussed, but will not be the focus of the study. 7. The study is aimed at achieving three objectives: a) Provide analytical work to inform the design and implementation of policies and action plans by financial centers aimed at lowering the barriers to asset recovery: The findings of the study will be presented to the G-8 countries, OECD countries and to other relevant stakeholders. It is hoped that upon review of the study and recommendations, the G-8 countries, OECD countries and other 3 Stolen Asset Recovery (StAR) Initiative: Challenges, Opportunities, and Action Plan, June It should be noted that not all financial centers to be studied have ratified UNCAC. 5 StAR should appropriate the necessary funds to include all 15 financial centers. The Core Team recognizes that this list may get shorter as a result of non-cooperation. Any disengagement of a financial center will be the decision of the Core Team, in consultation with StAR Management, after persistent efforts to solicit cooperation are unsuccessful. Should the Core Team be forced to cut the list, Spain and Singapore are considered the first choices. 6 This study will address asset recovery not asset return, thus the focus is to determine what the barriers to actual asset recovery are after a victim country provides a request to a financial center. 3

4 relevant stakeholders (financial centers) may decide to develop action plans in an effort to diminish if not eliminate the barriers to stolen asset recovery. b) Assist practitioners in requesting jurisdictions. By reviewing the study, practitioners in requesting countries will likely gain a better understanding of the challenges facing all practitioners. Hopefully, this better understanding will lead to high quality requests from requesting countries. c) The study will be published. Also, the study will be available on-line as an e- book on the StAR website, and on the websites of libraries (EXT process). Publication of the study is intended to high light barriers to stolen asset recovery in financial centers, advance recommendations to eliminate these barriers, and bring such barriers in public view. 8. Furthermore, the study will contribute to the elements outlined in the StAR Work Plan 2008/2009 as a tool for developing global knowledge of the barriers in asset recovery in financial centers. The study s analysis and conclusions can be used as an advocacy tool reducing barriers in key financial centers. Finally, the study s identification of the barriers and possible solutions will be a helpful tool in the training of practitioners in requesting jurisdictions; which in turn assist StAR s efforts to build national capacity based on country engagement. C. AUDIENCE 9. The study is intended to expose barriers to stolen asset recovery that exist in financial centers; therefore, the primary target audience will be the financial centers themselves, namely most of the G-8 countries, OECD countries and other significant financial hubs. 10. The secondary audience will include emerging financial centers, stolen asset recovery practitioners, and policy makers in requesting countries. The goal is to produce results that can be used as a tool in their advocacy efforts or policy development. Moreover, the study will help promote the implementation of StAR s Work Plan, providing an advocacy tool for StAR s work with financial centers and a global knowledge tool for StAR s technical assistance workshops in requesting countries. D. PROCESS AND PARTICIPATION 11. The study will involve three phases. Phase One (March May 2009): a) Constitution of the Core Team and hiring temporary consultant(s). The principal research, identifying and contacting practitioners, meeting and interviewing practitioners, and compiling the report will be undertaken by the five members of the Core Team including the TTL & Senior Financial Specialist (Law Enforcement), a Public Sector Specialist, an Extended Term Consultant (Legal, 4

5 Common Law), and Short Term Consultant (expertise in Legal and Other Research), and an Expert Practitioner from UNODC. b) Constitution of practitioners from the target financial centers and from requesting countries. The Core Team, with the assistance of the StAR Secretariat, UNODC, OECD, FPDFI (Financial Market Integrity Unit of the Financial and Private Sector Development Network World Bank) and others, will assemble a group of stolen asset recovery practitioners from a target group of the aforementioned fifteen financial centers 7 as well as from a select group of requesting jurisdictions. 8 Involving practitioners from both requesting and requested jurisdictions will allow the study to incorporate different perspectives; from those that are working within the centers to those that are submitting requests from foreign jurisdictions. To ensure that the study considers barriers across the various avenues for cooperation, practitioners will represent police, FIUs, prosecutors, the judiciary, and financial supervisors. The practitioners will be invited as experts and not as representatives of their governments. However, practitioners serving in their official capacity will not be excluded from participation. For practitioners serving in an individual capacity, funding for travel or accommodations (or both) may be required and the Core Team will accommodate this within the budget. The practitioners will be contacted by the Core Team through personal relationships, intermediaries and through similar avenues. c) Initial Desk Review and communications with practitioners from target financial centers and requesting countries by Core Team. The Core Team will undertake a desk review drawing from available published, on-line and 9 unpublished resources, as well as from past and ongoing asset recovery cases. The focus of the desk review will be on the operational and practical barriers of stolen asset recovery, but glaring legal barriers will also be analyzed. In parallel, the Core Team will attempt to solicit candid responses from the practitioners concerning their views on the existence of barriers in financial centers. The Core Team will attempt to have these practitioners fully identify and explain the barriers and develop recommendations on how to diminish, if not eliminate them. The Core Team will attempt to conduct its work by utilizing the most cost efficient manners of communication, including and telephone. 7 Since many jurisdictions have various authorities involved in stolen asset recovery, more than one practitioner from financial centers and requesting countries will likely need to participate in workshop(s) and/or country visits. 8 The requesting jurisdictions that will be approached for feedback on their experiences include Nigeria, Indonesia, the Philippines, Haiti, Russia, Colombia, Mexico and Cameroon. 9 This will include, but is not limited to, legislation, international conventions, court decisions and other international resources will be obtained in Washington, using the facilities that LEG can offer through its library, the internet, and the Library of Congress. It will also include internet research, including legal databases, ICAR (International Centre for Asset Recovery), OECD, ADB (Asian Development Bank), FATF (Financial Action Task Force), UN (United Nations), CoE (Council of Europe, EU (European Union), and UNODC. 5

6 During this stage the Core Team will devise a basic checklist to be used for its discussion with financial centers and as a basic outline by which to compare financial centers; however, the overall approach will be to remain open and flexible to the possible barriers. Based on consultations with the practitioners and the findings of the desk review, the Core Team will identify some of the key barriers that exist in the various avenues for cooperation (i.e., formal and informal). This will be the starting point for subsequent discussions and the workshop or country visits in Phase Two. Phase Two (May November 2009): d) Practitioner s Workshop - Identification of Barriers. This three-day workshop for the practitioners identified in Phase One will be a key component to identifying the real operational and practical barriers faced by practitioners. The Core Team will present the results of the desk review and consultations from Phase One and record the responses, comments, statements and observations made during this workshop for further analysis. Participation will be limited to practitioners with actual asset recovery experience and sessions will be formatted to enable candid discussions amongst the participants. In addition, there will be an opportunity for one-on-one discussions with practitioners on some of the more sensitive issues. Past experience has demonstrated that bringing practitioners together in a workshop format is effective: not only do the candid discussions among practitioners help to test preliminary findings; they also serve to introduce other relevant issues and to test good practices in resolving these issues. Efforts will be made to ensure the event is cost effective (see Budget section). This workshop will serve as a pilot for possible additional workshops. Based on the success of this workshop, the Core Team will consider conducting specific country visits (in addition to, or in lieu of, additional workshops) which may lead to an increase in costs. e) Compilation of findings by Core Team in draft report. The Core Team will conduct follow-up analysis of the issues raised during the initial workshop, assessing commonalities, as well as identification of indicators, good practices, barriers that are specific to certain financial centers, and areas for further development. The report will also focus on recommendations to eliminating barriers to stolen asset recovery. Together with the information obtained during the desk review and meetings with practitioners, the analysis will be compiled into a draft study. It is expected that a paper on this study will be available for distribution at the Doha meetings in November following a mid-point peer review consultation in October Phase Three (November 2009 February 2010): f) Follow-up Workshop with Practitioners (Confirmation of Findings, Discussion on Proposed Recommendations and Good Practices). A two-day 6

7 follow-up workshop will be held to discuss the findings and analysis produced following the initial workshop. This workshop will follow the open-discussion workshop format and will be important for two reasons. First, it will allow the Core Team to test the list of barriers identified by the practitioners; provide a forum for the practitioners to add more information, identify proposed solutions, and to make critical comments. Secondly, it will allow for focused discussions on the proposed recommendations for diminishing or eliminating the barriers. Efforts will be taken to ensure the event is cost effective (see Budget section). g) Country Visits in Lieu of Follow-up Workshop. If the initial workshop is not as productive as desired, the Core Team will consider abandoning a second workshop in favor of specific country visits. The Core Team will identify the financial centers to be visited. The country visits will focus on open-discussions with and provide an opportunity for practitioners to put forward comments, explanations and recommendations. h) Peer Review. The Core Team will submit the draft study to the Peer Review Committee for comments and review. The Core Team will analyze the Peer Committee s conclusions and incorporate relevant aspects and comments into the final version of the study. E. KEY DELIVERABLE 12. The key deliverable will be the study, providing an objective analysis of barriers to stolen asset recovery efforts that exist within financial centers and recommendations on how to overcome them. The study will be published and distributed to learning institutions and information centers through EXT channels, to practitioners through StAR and FPDFI workshops, and to target countries through the G-8 countries and OECD. The study will also be available to CSOs and other interested parties in connection with the StAR Initiative. The study will be available on-line as an e-book on the StAR website, as well on the websites of libraries (EXT process). It is expected that the study will lead to the initiation and implementation of action plans in financial centers that will diminish if not eliminate barriers to stolen asset recovery efforts. The Core Team will engage OECD and perhaps FATF 10 (Financial Action Task Force) in an effort to push for implementation of the recommendations. 13. A secondary deliverable will be a preliminary paper based on the first practitioner s workshop outlining key issues discovered from reviews, workshops, meetings and interviews with practitioners. The preliminary paper will be available for distribution at the Doha COSP Conference in November This will not cover any issues beyond the key deliverable but will act as an interim account of the progress of the study. F. RISKS & CONSTRAINTS 10 The Core Team will consult with Mr. Jean Pesme, Manager FPDFI, World Bank concerning engagement with FATF. 7

8 14. The study is not without risks, both operational and reputational. Operationally, governments from financial centers may not authorize practitioners to cooperate with StAR. Also, case examples may be outdated or incomplete. The Core Team will attempt to mitigate these risks through the process and participation. Participants will be asked to speak about their experience as practitioners, not on behalf of their governments. The workshops will be formatted to encourage open discussions among the participants and one-on-one discussions will take place as necessary. While the notes from the discussions will form a basis for the analysis; comments or observations will not be attributed to specific practitioners. Cases will be redacted where necessary. 15. In terms of a reputational risk, the study may be criticized for not going far enough in exposing the barriers, or alternatively, going too far, particularly where the findings expose a financial center s constant failure to cooperate in stolen asset recovery and possible violations of UNCAC. This risk will also be mitigated through the design of the process and participation. By holding two separate workshops with practitioners, there will be an opportunity to identify barriers at the first workshop in a group discussion format, then a subsequent opportunity to confirm the barriers once they have been further analyzed and developed as part of the study as well as identify good practices and recommendations for eliminating barriers. Moreover, if the first workshop is not as productive as desired, the second workshop may be canceled in favor of country visits. During these country visits, practitioners will have the opportunity to provide comments and submit recommendations. To ensure the study incorporates the experience and perspectives of the barriers from both the requested and requesting jurisdictions, practitioners from financial centers and from jurisdictions with experience requesting formal or informal assistance from the financial centers will be consulted. Practitioners will represent the various regions as well as the various avenues for cooperation. 16. The time-frame for the study might be somewhat ambitious, especially since it hinges on the cooperation of experts, practitioners, and officials in other countries, each with their own individual work-loads and professional demands. Therefore, it is possible that the study will require and additional six months for completion, and that the preliminary paper, due in November 2009, may be in the form of an outline only. It has been recognized that the study is a high risk activity which could possibly impact the preparation schedule. G. TEAM 17. The Core Team will include three experts from the World Bank, one expert from UNODC and one consultant. The Core Team will be involved in identifying the barriers to stolen asset recovery in financial centers by reviewing existing data through workshops, meetings and interviews with appropriate practitioners, and a thorough analysis of the all the information compiled. It will be composed of: - Kevin M. Stephenson, Senior Financial Sector Specialist and Team Leader, (Law Enforcement) has worked as a Director of an FIU, a Criminal Investigator 8

9 specializing on money laundering, terrorism financing, fraud, cyber-crimes, smuggling, asset recovery and other criminal offenses. Anti-corruption advisor involved in developing agency, action plans and budgets. - Larissa Gray, Consultant, (Legal Common Law) has worked as a criminal prosecutor in Canada and brings experience as one of the authors of another StAR publication, the Good Practices Guide to Non-Conviction Based Asset Recovery. - Ric Power, UNODC, Global Programme against Money Laundering, Proceeds of Crime and the Financing of Terrorism (GPML) has worked in AML/CFT field for 20 years, was Deputy Director of Australia s FIU and worked as AML/CFT mentor in the Caribbean and Southeast Asia. - Gabriele Dunker, Consultant, (Legal, Policy and Procedures Research) previously a Consulting Counsel with the IMF's Legal Department, Financial Integrity Group, worked on the formulation of practical solutions to help countries develop their AML/CFT strategies, served as a Deputy Counsel to the Independent Inquiry Committee into the UN Oil-for-Food Program (IIC). - Mark Vlasic, Public Sector Specialist (PRMPS/StAR), has served as a prosecution attorney at the UN War Crimes Tribunal in The Hague, as an attorney in private practice, where he conducted foreign corruption, securities fraud and cartel investigations, and faculty member at Georgetown University Law Center, where he taught international criminal law. 18. The peer review team will be composed of Mr. Giovanni Gallo, UNODC, Ms. Heba Shams, FPDFI, Mr. Stephen Zimmerman, Inter American Development Bank (IDB), Mr. Frank Fariello, Legal Department of the World Bank, and the Honorable Barry O Keefe, Consultant, Clayton Utz. H. DISSEMINATION STRATEGY 19. The study will be made available to the G-8 countries and OECD members immediately after publication. The StAR Secretariat, in coordination and cooperation with the OECD, will identify an appropriate political event to disseminate the results of the study in an effort to reap the full benefits of the study s findings. Moreover, the study will be made available on the StAR website. The study will be available in French, Spanish, Arabic, Russian, and English. The study will be made available to the same target audience of the Asset Recovery Handbook and will be distributed to stakeholders at opportune moments, i.e., conferences, meetings, workshops, etc. The dissemination strategy will be discussed at the mid-term review. I. BUDGET AND TIMETABLE 20. The overall budget and schedule of disbursements from the StAR Multi-Donor Trust Fund timetable are presented in Table 1 and table 2. The timeline for deliverables is presented in Table 3. In an effort to reduce costs, the Core Team will attempt to coordinate workshops with other events attended by these practitioners, possibly the COSP meetings or other StAR, UNODC, Bank related initiatives. In addition, efforts 9

10 will be taken to have the practitioners from developed countries self-fund their participation in the workshop, although this may not be possible in all cases. 21. Expenditures covered by the World Bank: staff costs for one Senior Financial Sector Specialist including the Task Team Leader, one Public Sector Specialist, and one Extended Term Consultant. 22. Expenditures covered by UNODC: staff cost for one expert as part of the Core Team, fifteen (15) weeks. 23. Expenditures from StAR Multi-Donor Trust Fund: the cost of one extended-term consultant 11, and one short-term consultant 12 assigned to the Core Team; other short term consultant(s), if deemed necessary during the course of the project, travel costs for Bank staff, consultants and practitioners from developing countries 13 ; practitioners workshops costs; and dissemination costs. Table 1: Overall Budget Expenses/ Source of financing World Bank UNODC StAR MDTF Units USD Units USD Units USD Staff (weeks) , ,500 Consultants (weeks) 18 30,000 +Travel expenses ( trips) ,000 Practitioners Workshops (2) 3 150,000 CSO Workshop (1) Printing, Editing (books) ,000 Translation 30,000 Total expenses $315,000 $94,500 $340, Consultant will be involved in conducting relevant research; assisting team leader coordinate workshops and meetings; assist in publication and dissemination; and, other matters related to meeting the objectives of this project. 12 Consultant will be involved in conducting research of stolen asset recovery cases focusing on identifying barriers within financial centers and will be actively involved in recording the statements, comments, observations, etc., of practitioners during workshops and other meetings, and assist in the compilation of the outline and final report. This is based on the presumption that the research will be desk based; however, this could be inaccurate, the research might require more travel and one-on-one meetings, which could result in an increase in costs. 13 Anticipate that practitioners from financial centers will self-fund travel to the workshops. However, should be prepared to pay travel costs of practitioners if they are unable to self-fund. 10

11 Table 2: Scheduled Disbursements from the StAR MDTF Expenses/Schedule StAR MDTF I II I II Units USD Consultants (weeks) 8,000 12,000 10,000 30,000 Travel expenses ( trips) 20,000 60,000 20, ,000 Practitioners Workshops 60,000 90, ,000 ( participants at each) Printing, Editing (books) 30, ,000 Translation 30,000 30,000 Total expenses $150,000 $190,000 $340,000 Table 3: Preparation and Dissemination Timeline Concept Review Meeting February, 2009 Identification of Practitioners March-April, 2009 Compose Peer Review Members March-April, 2009 Commencement of Initial Desk Review March-April, 2009 First Practitioners Workshop May 2009 Interviews/Discussions with Practitioners April-December, 2009 Compilation of findings into draft report June November, 2009 Preliminary Paper presented to Peer Reviewers October 2009 Preliminary Paper Mid-Term Review November, 2009 Drafting of Final Report October, 2009-January, 2010 Second Practitioners Workshop November January, 2010 Report submitted to Peer Review Team February, 2010 Approved Final Draft Submitted for Publication April, 2010 Study Published June, 2010 Launched at an OECD Political Event

12 Appendix 1 Table 1: Results Framework INDICATORS OF SUCCESS MEANS OF VERIFICATION PROCESS AND OUTPUTS Study discovers barriers to stolen asset recovery via Responses received from financial centers that research, interviews, workshops and meetings with recognize the existence of barriers and agree to stolen asset recovery practitioners. discuss recommendations to diminish if not eliminate barriers. Study meets quality standards. Peer reviewers comments on final product. Study is timely. Completed and released in Study s draft findings are discussed at second workshop of practitioners. INTERMEDIATE-OUTCOMES Study is reviewed by intended audience and is utilized to initiate discussions about barriers at high levels of government. OUTCOMES The study identifies barriers to stolen asset recovery in financial centers and identifies some best practices, and makes effective recommendations. Financial centers recognize the barriers identified by the study and review best practices and the study s recommendations and consider implementation. Study results in the implementation of action plans in financial centers to diminish if not eliminate barriers to stolen asset recovery. Study helps World Bank and UNODC assistance to asset recovery actions Practitioners review, discuss, and respond to initial findings and provide concrete ideas for improvement. Telephone/ follow-up with policy makers and leading practitioners in key jurisdictions and international organizations Telephone/ follow-up with policy makers and leading practitioners in key jurisdictions Telephone/ follow-up with policy makers and leading practitioners in key jurisdictions Telephone/ follow-up with policy makers and leading practitioners in key jurisdictions Follow up with World Bank and UNODC experts involved in assistance to asset recovery 12