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Recovering Assets By Cracking Down On Corruption Proceeds

Posted in Asset Forfeiture, Asset Search/Fraud Investigation, Money Laundering, Public Corruption, White-Collar Crime Generally

The ACAMS / MoneyLaundering.com article “FATF’s Focus on Asset Forfeiture Could Challenge Some Nations”, especially raises the issue of recovering corruption proceeds.  Near the end of this article, I am mentioned as saying that as part of their effort to crack down on corruption, Financial Action Task Force examiners may expect jurisdictions to track bribes paid by local companies to foreign governments:

FATF’s Focus on Asset Forfeitures Could Challenge Some Nations¹

October 31, 2012, By Brian Monroe

An intergovernmental group’s revised expectations of how countries should seize looted assets may prove difficult to meet, and could lower the mutual evaluation scores nations receive for their anti-money laundering controls.

Earlier this month, the Paris-based Financial Action Task Force (FATF) outlined in guidance how jurisdictions should best assist one another with asset forfeitures, calling for the implementation of formal and informal mutual legal assistance arrangements and the creation of specialized units to expedite responses to intergovernmental inquiries.

How willingly nations cooperate with one another will be an important factor in how FATF evaluates their anti-money laundering (AML) and counterterrorism financing regimes going forward, according to an individual familiar with high-level discussions within the intergovernmental group.

“Asset confiscation and recovery is a very important objective and an indicator of the success of the overall regime,” said the person, who asked not to be named. The issue is linked to FATF’s increased focus on fighting corruption, the individual said.

In February, individuals involved in FATF talks told ACAMS MoneyLaundering.com that the group was revising how it scored regimes to emphasize efficacy, and would consider forfeiture sizes, conviction rates and other factors. The shift follows FATF’s decision to streamline its AML and counterterrorism financing standards earlier this year.

As part of that effort, the group plans to grade countries on both technical compliance and how effectively they implement financial crime controls, including asset forfeitures, sources said this month. The two separate grades will be combined in an overall score included as part of each mutual evaluation.

But meeting FATF’s asset forfeiture standard, as outlined in its Oct. 19 best practices, will be challenging for nations of all stripes, according to Tom Lasich, a former head of training at the Switzerland-based International Centre for Asset Recovery and a former Internal Revenue Service criminal investigator.

Most developing countries lack laws for tracing and freezing assets, and those that do generally don’t understand or use them, said Lasich. Developing countries also don’t know how to effectively make requests of large financial center countries, like the United States or United Kingdom, or follow a money trail overseas, he said.

Developed nations, where looted assets may be banked, tend to have stringent prerequisites for asset freeze requests, often asking to review evidence for the seizure before obliging, Lasich said. The countries want to avoid asking financial institutions to expend resources on complex and expensive investigations that can take over five years to complete, he said.

The reticence on the part of financial centers to move quickly on such requests is likely to hurt them in FATF mutual evaluations, Lasich said.

Many jurisdictions may grapple with how to share sensitive bank information with their foreign counterparts, particularly when few nations have the legal structure for doing so, said Lasich. FATF’s call for specialized asset forfeiture teams is another challenge, particularly for developing nations that don’t have the in-country expertise to form effective groups, he said.

In its best practices, FATF said the teams should be “adequately resourced and trained” to work on asset forfeiture investigations. The guidance also asked that governments create a central register of bank accounts to facilitate asset freezes.

FATF examiners may also expect jurisdictions to track the bribes paid by local companies to foreign governments, as part of their effort to crack down on corruption, according to Fred Abrams, a New York-based attorney specializing in asset recovery.

The Organisation for Economic Co-operation and Development (OECD) last week asked France to more aggressively try to repatriate bribes paid by French firms, noting that the country has only secured five related convictions in the 12 years since the intergovernmental group introduced its anti-bribery convention.

“The fundamental issues are not being addressed,” said Abrams, who describes FATF’s standards going forward as “a lot higher than before.”

FATF’s expected focus on asset recovery follows efforts by other nations to better repatriate lost money.

In July 2010, the U.S. Justice Department formed the Kleptocracy Asset Recovery Initiative to investigate high-ranking foreign officials accused of looting money. The group’s formation roughly coincided with a change in Swiss law allowing countries to request that suspect assets be frozen for up to five years even when no mutual legal assistance treaty exists between the nations.

In the case of international blacklists, some jurisdictions “don’t have the mechanism on the ground for blocking or complying with the sanctions they signed on to and agreed to enforce,” said William Hoffman, a former chief counsel at the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC).

The international patchwork of laws has resulted in “very uneven and mixed enforcement of sanctions” and related asset freezes, even among European Union members, said Cari Stinebower, a former attorney-advisor for the general counsel’s office assigned to OFAC.

The United States has been “very frustrated” with how some nations have complied with United Nations or U.S. measures, she said, adding that American officials have significant sway at FATF meetings.

Calls to spokespersons of FATF and the U.S. Treasury Department were not immediately returned.

¹“FATF’s Focus on Asset Forfeitures Could Challenge Some Nations”, Copyright 2012 Alert Global Media, reprinted with permission.