Open-Ended Intergovernmental Working Group on Asset Recovery. Asset Tracing & Recovery A Case Study. 17 December 2010 Vienna

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1 Open-Ended Intergovernmental Working Group on Asset Recovery Asset Tracing & Recovery A Case Study 17 December 2010 Vienna

2 Asset Tracing & Recovery: Challenges Challenges for Asset Tracing & Recovery Bank secrecy laws and the lack of developed treaties and legislation in some jurisdictions mean there is still ample scope for criminals to conceal the proceeds of crime. Criminals may have substantial resources available with which to hide their assets and protect themselves vigorously against legal action. Assets will often be 'parked' in the names of nominee individuals or companies. Proof of the ultimate beneficial ownership trail or evidence that assets represent the proceeds of a fraud or other crime are fundamental to successful asset recovery. The impact of cost benefit considerations on the selection of legal strategy. 1

3 Asset Tracing & Recovery: Evidence Collecting Evidence What evidence will be required? When will the evidence be obtained? How will the evidence be obtained? What type of evidence will be obtained? 2

4 Asset Tracing & Recovery: Recovery Process Suggested Investigative/Recovery Process Initial Planning Phase - Collect and interpret available evidence Secure the Asset - If possible, consider injunctive relief (Freezing Order) against original asset OR the perpetrator s assets in jurisdictions favourable for offensive action Gather Evidence from Hostile Parties - Consider using pre-trial discovery remedies 3

5 Case Study 4

6 Strategies to recover UK Commercial Property Syed Ziauddin Ali Akbar Former Head of BCCI Central Treasury ( ) Oct 88: Charged and convicted of laundering drug money at UK Trading House Sep 91: Charged and convicted of false accounting at BCCI Nov 94: Declared Bankrupt Nov 96: Attempted extradition to the USA fails. Jun 99: Liquidators obtain $423.5m judgment in USA 5

7 Position after Criminal Proceedings The prosecution are unable to identify any funds in respect of which I could make even the most modest compensation order. Any question of compensation will therefore be left to [the] civil process. Take him down. Mr. Justice Scott Baker, Central Criminal Court [Case No. T930727] 28 September

8 Strategies to recover UK Commercial Property Initial Planning Phase Review of BCCI Records Mortgage documentation secured UK Commercial Property against 3 loans from BCCI affiliate to Akbar-controlled nominee company Investigations showed loans were inappropriately credited with misappropriated funds and had not been repaid by the borrower Cooperation with Criminal Investigative Authorities Documents subpoenaed from: Serious Fraud Office and HM Customs & Excise, the prosecuting authorities in Akbar s criminal convictions Commodities Futures Trading Commission as due diligence around alleged derivative losses 7

9 Strategies to recover UK Commercial Property UK Commercial Property Located in London Sole asset of, and nominally owned by, a Vanuatu registered company Nov 86: Purchased for cash by UK Brokerage owned by Akbar Nov 87: 3 loans for $10m raised from BCCI affiliate in Kuwait secured on property Aug 88: Ownership transferred to Vanuatu registered company Jan 89: Bearer shares of Vanuatu company transferred to Akbar s brother Jan 01: Receiver appointed by BCCI Liquidators 8

10 Tracing the Misuse of BCCI Funds UK Commercial Property Vanuatu Company Broker Formed: April 1985 UK Trading House Formed: April 1984 Account #1 Account #2 Panama Company Mortgage US Trading House Formed: July

11 Strategies to recover UK Commercial Property $ $ $$ London Pakistan UAE Vanuatu. 10

12 Strategies to recover UK Commercial Property Gathering Evidence from Hostile Parties Court Appointed Fiduciaries of BCCI (s.236 IA 86) Nominee Director (Swiss Lawyer) of Panamanian Company Previous Management Companies of the UK Property Lawyer/Business Associate of Akbar (Vanuatu Company) London branch of Overseas Bank (Accounts of Akbar s brother) Court Appointed Fiduciaries of BCCI (Post Judgment Discovery) Deposition of Akbar Trustee in Bankruptcy for Akbar (s.366 IA 86) Examination of Directors of Management Company (Akbar s Children) 11

13 Strategies to recover UK Commercial Property Asset Recovery - Summary Appointment of receivers froze asset in place and prevented sale of the UK Commercial Property Suit filed in London by Trustee in Bankruptcy for Akbar against the Vanuatu company, Akbar and Akbar s brother alleging that Akbar was the true owner of the UK Commercial Property and that his brother was merely his nominee Faced with the strength of evidence, Akbar s legal advisers made arrangements for the property to be transferred to the Trustee Property sold for several million dollars and the net proceeds were shared between the creditors of the bankrupt s estate including the Liquidators of BCCI 12

14 Contact Details John Gilkes Principal Deloitte FAS LLP Office: Washington DC, USA Tel: John Gilkes has more than twenty years experience in asset tracing and recovery and in the management and conduct of financial/fraud investigations involving wire transfer fraud, bribery/corruption, and extortion. From 2003 to 2006, John co-led an ongoing effort at the Audit & Assurance Services National Office of Deloitte & Touche LLP to enhance audit quality throughout Deloitte & Touche LLP. Specifically, John provided subject matter experience in the areas of fraud detection, prevention, and deterrence and participated in the development of new processes, tools, and training designed to enhance the consideration of fraud throughout the audit process. In 2009, John joined the expert group of the Stolen Asset Recovery (StAR) initiative to consult on matters relating to asset tracing and recovery. StAR was launched in September 2007 by the World Bank and the United Nations Office on Drugs and Crime (UNODC) as a collaborative arrangement to promote the ratification, domestication, and implementation of the United Nations Convention against Corruption (UNCAC) which in turn provides the legal framework for international collaboration in asset recovery of proceeds of corruption. 13