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Cross-border corruption: It’s high time to return the assets and compensate the victims

Multilateral agreement needed to speed up slow progress

18 December 2019: Eighth session of the Conference of the States Parties to the United Nations Convention against Corruption in Abu Dhabi.

Photo: UNIS Vienna on Flickr

Gillian Dell

Head of Conventions Unit, Transparency International

It may not make headlines around the world, but it's a big week for international asset recovery at the United Nations – and for the victims of corruption.

Country representatives are discussing the obstacles to compensating victims of corruption as part of the dedicated Working Group on Asset Recovery of the states signed on to the United Nations Convention against Corruption (UNCAC), and during a preparatory meeting for the UN General Assembly Special Session (UNGASS) against Corruption in 2021.

These back-to-back meetings offer a key opportunity to break through the barriers to countries recovering illicitly taken assets.

Both meetings should recognise the links between asset recovery and the realisation of human rights as enshrined in the 2030 Agenda for Sustainable Development.

Slow asset recovery progress

According to rough estimates, developing countries have been robbed of approximately US$400 billion in proceeds of corruption in the last ten years. If we count the uncompensated consequential damage done by that corruption, the amount is much higher. It is in the trillions if we add other illicit financial outflows such as tax evasion. These are funds missing for the financing of the Sustainable Development Goals.

The Stolen Asset Recovery (StAR) Initiative of the United Nations Office on Drugs and Crime (UNODC) and the World Bank, has just released the preliminary results of a multi-country survey that investigates challenges and barriers to asset recovery. The responses from national governments so far show that over the last ten years, fifty countries were involved in asset recovery processes with a total of 286 reported cases and 92 completed returns amounting US$2.4 billion. The largest amount went to Malaysia in connection with the 1MDB case, involving a total of US$740 million.

Compared to the estimated amount of proceeds, the rate of return is disturbingly low.

Proposal for a multilateral agreement on asset recovery

In light of this excruciatingly slow progress, Transparency International and the UNCAC Coalition have proposed that the UNGASS 2021 set in motion negotiations for a multilateral agreement on asset recovery to address the problems that are holding up the return of badly needed assets. This could take the form of a protocol to the UNCAC and should cover all illicit financial flows.

To be effective, the following elements must be included in such a multilateral agreement.

1. Measures to overcome key barriers

An agreement should include measures to overcome key barriers to asset recovery. StAR’s recent survey identifies the execution of confiscation orders, including non-conviction-based confiscation, as a key problem area. This should be addressed.

The StAR survey also finds that identification and verification of the beneficial ownership of suspected corruption proceeds is another key barrier. In our Exporting Corruption 2020 report, we likewise identified the lack of beneficial ownership transparency as a key obstacle to cross-border foreign bribery enforcement. The same is true for cross-border enforcement against organised crime and tax evasion.

More than 20 years after the OECD Anti-Bribery Convention was adopted, our research shows nearly half of world exports come from countries that fail to punish foreign bribery.

Exporting Corruption 2020

This too should be covered in the proposed agreement. There should be a common agenda across institutions to eliminate the secrecy that hinders achieving justice for cross-border crimes. Central public registers of beneficial ownership of companies and trusts should be adopted as the global standard to be used by the UN, OECD and the Financial Action Task Force (FATF) and implemented by countries. A Global Asset Registry covering tangible and intangible assets could also be established by the new agreement.

2. Compensation of victims of corruption

A new multilateral agreement should also address compensation for the harm caused to state and non-state victims of corruption. Under current arrangements, that harm is not considered in cases of embezzled funds laundered across borders and in foreign bribery enforcement proceedings. The recent Interim Report from the High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) highlights some of the challenges in this area. So does our Exporting Corruption 2020 report.

The new agreement should take into account that – as the Office of the High Commissioner for Human Rights states in its recent draft asset recovery guidelines – in some instances, acts of corruption may cause social damage such as damage to the credibility of institutions and, in many instances, acts of corruption harm the public.

In grand corruption cases, non-state actors may be the most appropriate party to bring claims for compensation and this should be recognised in a new international agreement.

3. Transparent and accountable return

An international agreement could also cement emerging international standards for the transparent and accountable return of assets such as are outlined in the Global Forum on Asset Recovery Principles and the Common African Position on Asset Recovery.

Moreover, special measures are needed in cases of grand corruption – high-level, large-scale – to deal with the situation when those in power do not claim or are disqualified from claiming proceeds of crime and compensation for victims.

4. International coordination, oversight and dispute mediation

Last but not least, a new agreement should provide a role for regional or international institutions in coordination of investigations, oversight of asset recovery processes and dispute mediation. Multi-country asset recovery investigations are complex and sometime contentious. By pooling resources, an international coordination function would yield better results, and an international dispute resolution mechanism could resolve differences of views between states involved in asset recovery processes.

Transparency International's Gillian Dell addressed the eighth session of the Conference of the States Parties to the United Nations Convention against Corruption in Abu Dhabi, 19 December 2019

Photo: UNIS Vienna on Flickr

The prospects for UNGASS 2021

The negotiations on the UNGASS 2021 political declaration are in full swing and it remains to be seen whether this crucial opportunity for breakthroughs will be seized or missed.

There are strong efforts underway by a mixture of countries to remove some of the most promising draft provisions calling for the creation of:

  • mechanisms to address transnational corruption;
  • a dispute resolution mechanism;
  • a UN Special Committee on Asset Repatriation; and
  • an open-ended working group to address gaps in the Convention.

We may see only very small steps forward. Or none at all. Either outcome would be a betrayal of those who are most harmed by corruption and will undermine international efforts to achieve our collective 2030 vision.